Additional Assurance Services: Historical Financial Information

Chapter 19, Additional Assurance Services: Historical Financial Information

1. Contrast the expression of an opinion with expression of negative assurance.

a. Negative assurance is an assertion by CPAs that after applying limited investigative techniques to certain information, they are not aware of the need to modify the presentation of the information. The expression of opinion reports as to whether the statements fairly present what they purport to present.

2. What are “special reports?” What do they have in common?

a. Special reports provides guidance to auditors in the issuance of these reports. The auditors describe the scope of the engagement and clearly report their findings.

b. Five types: 1) Financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP. 2) Specified elements, accounts, or items of financial statements. 3) Compliance with aspects of contractual agreements or regulatory requirements related to audited financial statements. 4) Special-purpose financial presentations to comply with contractual agreements or regulatory provisions. 5) Audited financial information presented in prescribed forms or schedules that require a prescribed form of auditors’ report.

3. Regarding special reports, it is possible for a client to prepare its financial statements to present fairly on that basis. In such an instance, how does the auditor’s report differ from a standard audit report issued in relation to GAAP-based financial statements?

a. The report must describe the basis of accounting being used or refer to a financial statement note that provides such a description. The auditor’s report must state that the financial statements follow a comprehensive bases of accounting other than GAAP. The auditors should title the financial statements with more descriptive titles for statements that are presented on some other basis.

4. Accountants may perform reviews of the interim financial information of public companies and the annual financial statements of nonpublic companies. Which of these engagements is performed in addition to the annual audit and which is performed in lieu of the annual audit? In general, what activities constitute a review?

a. The interim financial information of public companies is in lieu of the annual audit.

b. The review of the annual financial statements of nonpublic companies is in lieu of the annual audit.

c. Analytical procedures, inquiries, and certain other procedures.

5. Review reports, whether for IFI of a public company or the annual financial statements of a nonpublic company, should (a) express negative assurance (if appropriate) and (b) what other type of statement related to attestation?