21-1

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ACCOUNTING SERVICES,
ATTEST ENGAGEMENTS AND
ASSURANCE

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Part Eight

21-2

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CHAPTER 21
ACCOUNTING SERVICES,
ATTEST ENGAGEMENTS, AND
ASSURANCE

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Chapter 21

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21-4

ACCOUNTING AND REVIEW SERVICES

Many entities do not need an audit of their financial
statements.
Factors make an audit unnecessary include:
there is no debt or regulations requiring an audit,
an audit may be too costly for the entity.
However, these same entities may employ a CA to assist
with preparation of their financial statements, tax returns,
or other financial documents.
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21-5

TYPES OF ACCOUNTING AND

REVIEW SERVICES

Review of financial statements.

Compilation of financial statements.

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21-6

REVIEW OF FINANCIAL STATEMENTS

A review consists of enquiry, analytical procedures and
discussions in order to provide the accountant with a
reasonable basis for expressing negative assurance.
i.e., nothing has come to our attention that causes us to
believe that these financial statements are not, in all
material respects, in accordance with generally accepted
accounting principles.

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21-7

STANDARDS APPLICABLE TO REVIEW

ENGAGEMENTS

In conducting a review, the accountant must comply

with generally accepted review standards (GARS).
The general standards are similar to GAAS
The performance standards are similar but differ as
follows:
The objective is to assess whether the information is
plausible in the circumstances.
There is no requirement to study internal control.
The procedures are limited to enquiry, analytical
procedures and discussion.

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21-8

STANDARDS APPLICABLE TO REVIEW

ENGAGEMENTS
Continued
The reporting standards are different:
Explicitly states that no audit was performed.
No opinion is expressed.

See Table 21-1.

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21-9

REVIEW ENGAGEMENT REPORT

A standard review engagement report assumes that the
financial statements are in accordance with GAAP or
another appropriately disclosed basis of accounting.
This includes all necessary disclosures.
The review report should be dated as of the completion of
the accountant's procedures.
Each page of the financial statements should be clearly
marked Unaudited.

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21-10

CONDITIONS THAT MAY RESULT IN

MODIFICATIONS OF A REVIEW
ENGAGEMENT REPORT

Departure from GAAP.

An inability of the accountant to complete the
review. (Scope)

Example provided in Exhibit 21-1.

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21-11

COMPILATIONS

Compilations are accounting services.

The accountant provides assistance to the client in

preparing the financial statements.

The accountant does not express any assurance on

these statements.

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21-12

STANDARDS FOR COMPILATIONS

Performed by persons having adequate technical training

and proficiency in accounting.
Due care.
Adequately planned, executed and supervised.

See Table 21-3.

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21-13

STANDARDS FOR COMPILATIONS

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No requirement for independence.

No examination or review procedures completed.

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21-14

COMMUNICATION

Notice

to Reader is attached.
This communications states:
The financial statements were compiled from
information supplied by management.
The accountant did not in any way verify the
information.
A caution to readers that the information may not meet
their needs.

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See Exhibit 21-2

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21-15

ATTEST ENGAGEMENTS
An attest engagement is one where a practitioners
conclusion will be on a written assertion
prepared by an accountable party.
Examples:
Audit or review of financial statements.
Reporting on an Entities Internal Controls over
Financial Reporting.
USER RESPONSIBLE PARTY - CA

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21-16

REPORTING ON AN ENTITY'S INTERNAL

CONTROLS OVER FINANCIAL
REPORTING
Accountants are often asked to provide reports on
management's assertion about the effectiveness of an
entity's internal control over financial reporting.
See Exhibit 21-3 for a sample report.

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21-17

AUDIT OPINION ON FINANCIAL

INFORMATION OTHER THAN
FINANCIAL STATEMENTS

S. 5805 the auditor must comply with the general

and examination standards of GAAS.
The report is very similar to the standard audit
report. See Exhibit 21-4 for a report on gross sales.
Materiality should be reduced.
The auditor must consider the inter-relationship of
financial statement items.

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21-18

REPORT ON COMPLIANCE WITH

CONTRACTUAL AGREEMENTS ETC.

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S. 5815 the auditor must comply with the general

and examination standards of GAAS.
See Exhibit 21-5 for a report on compliance with a
loan agreement.

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REPORT ON CONTROL PROCEDURES

AT A SERVICE ORGANIZATON

S. 5900 the auditor must comply with the general

standard and examination standards (i) and (ii).
See Exhibit 21-6 for a sample report of an opinion
on the design and and existence of control
procedures at a specific date.
The second type of report would provide assurance
on the design, existence, and continuity of control
procedures throughout a specified period. See
Exhibit 21-7.

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21-20

PROSPECTUSES

To make a public offering of either debt or equity

an entity must provide both financial and nonfinancial information to prospective investors.
The document is called a prospectus.
Audit report is addressed to Directors and applies
to multiple years of information included in the
prospectus.

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21-21

PROSPECTUSES

Auditor is involved in numerous activities attached

to the prospectus and the process of filing
regulatory requirements.
Consent letter a letter from the auditor to the
securities authorities consenting to the used on the
audit report in the prospectus. See Exhibit 21-8.
Comfort letter a letter from the auditor to the
securities authorities providing negative assurance
on any interim financial statements included in the
prospectus. See Exhibit 21-9.

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21-22

FUTURE ORIENTED FINANCIAL

INFORMATION

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S. 4250 sets out the GAAP for future oriented

information.

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TYPES OF PROSPECTIVE
FINANCIAL STATEMENTS

Financial forecast future oriented financial

statements that represents the results of managements
planned course of action and the most likely economic
conditions.
Financial projection future oriented financial
statements that represents managements planned
course of action and most likely economic conditions
given one or more hypothetical assumptions.

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21-24

TYPES OF PROSPECTIVE
FINANCIAL STATEMENTS

Examination of FOFI AuG-6 provides guidance if the

information is included in a prospectus and must have
an audit report attached. See Exhibit 21-10.

Compilation of FOFI AuG-16 provides guidance

when the public accountant is involved in the
compilation of the FOFI and does not express any
assurance. See Exhibit 21-11.

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21-25

ASSURANCE
In recent years, auditors have been asked to perform
a variety of services beyond the audit of historical
financial statements.
Assurance services are independent professional
services that improve the quality of information, or is
context, for decision makers.

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21-26

THE RELATIONSHIP BETWEEN

AUDITING, ATTESTATION, AND
ASSURANCE SERVICES

Auditing

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Attest

Assurance

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THE DEMAND FOR ASSURANCE SERVICES

The context in which a CA provides services is

changing due to the following:
Information technology.
Increased competition.
Globalization.
Increased accountability of corporate managers.
Aging of population.

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21-28

STANDARDS FOR ASSURANCE SERVICES

Standards were needed to encompass a broad range of

assurance services.
S. 5025 sets those standards but the format parallels
GAAS in a more general way.
See Table 21-4.

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21-29

AUDITING, ATTESTATION, AND ASSURANCE

SERVICES

Examples:
Risk assessment.
Business performance measurement.
Information system reliability.
Electronic commerce.
Health care performance measurement.
ElderCare.

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21-30

CA WebTrustSM ASSURANCE
Electronic commerce involves individuals and
organizations conducting business transactions,
without paper documents, using computer and
telecommunications networks.
Includes electronic data interchange (EDI) and
Internet commerce.

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CA WebTrustSM ASSURANCE
The risks of electronic commerce
business practices.
transaction integrity.
information protection.
WebTrustSM Principles. (See Table 21-5)
WebTrustSM Criteria. (See Table 21-6)
The assurance process for WebTrust SM.

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21-32

CA SysTrustSM ASSURANCE
Provide assurance to management, customers and
business partners regarding the the system.
SysTrustSM Principles.
Availability
Security
Integrity
Maintainability
SysTrustSM Criteria. (See Table 21-14)

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21-33

CA SysTrustSM REPORTING
Different types of reports include:
Reporting on the effectiveness of controls.
Reporting on managements assertions about
effectiveness of controls.
Reporting on managements assertions about the
suitability of the design of controls in the preimplementation phase.
See Exhibit 21-15 for an example.

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21-34

CA ElderCare
With an aging population and other demographic
changes, many elderly individuals need assistance.
ElderCare builds on the CAs reputation for
independence, objectivity, and integrity to provide a
service that is in the public interest.
ElderCare service is designed to assure family members
that proper care is provided to elderly family members
who are no longer totally independent.

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21-35

CA ElderCare

Types of ElderCare services

Consulting/facilitating services.
Direct services.
Assurance services.

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21-36

OTHER ASSURANCE SERVICES

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Environmental auditing.
Forensic auditing.
Business valuations.
Business performance reporting.

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