[shawn in VA]

Hi Everyone,

My exam is on 12/10 and doing some review . I have a couple questions that I need clarification on. I have NO AUDITING experience (I am a tax person in a CPA Firm) so please excuse if these are basic.

1) is the CPA required to give an opinion on internal control for:
a) financial statement audit of a non issuer
b) attestation engagement on internal control
c) PCAOB audit for an issuer.

2) Please correct me if I am wrong:
a) GAAS are standards (measure of quality of work) under GAAP which are the rules (?)
b) Therefore, how does SSARS and SSAE fit in? are these under GAAP or some other framework? I am familiar with other comprehensive basis of accounting (OCBOA) which is special purpose framework and includes tax basis, cash basis, etc..

3) I am using roger CPA as my review course.
a) should i focus on the IT Chapter (ch 9) I am running out of time
b) what about CH 7 – compilation and reviews -SSARS
c) How heavily tested is Internal Control and Audit Evidence? CH 3 and CH 4

4) Are the SIMS reasonable on the actual AUD exam? I took REG and they were a nightmare. I passed but still…wow.

Thanks for reading!!

[Anonymous]

1) The auditor is only required to report on Internal Control that pertains to a PCAOB client (issuer/public company).

For non-issuers, the auditor must evaluate internal control for the sake of assessing Control Risk and Risk of Material Misstatement (RMM = IR x CR).

The evaluation of Internal Control allows the auditor to set detection risk, and ultimately the level of substantive testing that is required to come to a conclusion.

2) GAAP = reporting standards, think for the Entity. GAAS = professional standards for the auditor.
The auditor must comply with GAAS while assessing the company's compliance with GAAP.

3) SSARS = Statements on Standards for Accounting and Review Services. They cover the following engagements:
– Preparation of Financial Statements (think Quick Books) – No assurance/opinion – No need to be independent. No report.
– Compilations – More involved preparation of financial statements. No assurance/opinion. No need to be independent, but if not, must disclose. Short report.
– Reviews – More in depth than compilations, but substantially less in depth than an audit. Must be independent. Negative (limited) assurance offered.

[shawn in VA]

DB–thanks for your reply. Does SSARS and SSAE fall under GAAP then?

you said auditor is “required to report on internal control” for PCAOB / issuers. Does that mean the CPA gives an opinion on internal control?

thanks

[Anonymous]

Think of GAAP as an “Applicable Financial Reporting Framework.” This means it is the set of rules and procedures a company produces their financial data in accordance with.

GAAS, SSARS and SSAE are for the auditor/accountant – they are the set of rules the auditor/accountant must adhere to when conducting specific engagements.

SSAE = Statements on Standards for Attestation Engagements. Think of attestation as the act of giving an opinion on something that doesn't fall into the SSARS category or an audit. Agreed upon Procedures is an example of an SSAE engagement.

So. GAAP = Applicable Financial Reporting Framework for the company.

GAAS/SSARS/SSAE = Guidelines and rules the accountant must follow, depending on the type of engagement.

[Author]

Replies