[Lost1]

Hello fellow CPA candidates,

I am using Wiley CPAtestbank to study for AUD and found inconsistency regarding engagement letter.

a question about review engagement says ” This answer is incorrect because, while an engagement letter is desirable, it is not required.”

another question’s answer says this: “This answer is correct because a review requires the obtaining of both an engagement letter and a representation letter.”

can someone please clarify whether or not engagement letter is REQUIRED for review?

and one more question;

what is examination in AUD? does it provide any assurance? if so, is the assurance level higher than review and lower than audit? please drop some knowledge on this!

Thanks!

"If you can do it, I can do it better."

[Lost1]

okay, as I was studying through the material, it seems like examination means examination of evidence.. which can lower attestation risk. But I remember seeing a question during my last exam that goes something like this..

which of the following provide a high level of assurance?

a. examination

b. review

c. compilation

d. analytical procedure

what's the answer here?

"If you can do it, I can do it better."

[Futile]

1 – Auditors should obtain an understanding with the client and should document that understanding through a written communication with the client. This is typically done with something called an “engagement letter.” According to CPAexcel, written “engagement letters” are now required for audits, reviews, and compilations (and presumably for examinations as well).

The first question may be outdated, or may be trying to say that technically an “engagement letter”, per se, is not required–written communication is.

2 – Audits are a type of examination. Examination engagements provide positive (high level) assurance and opinions, just like audits. You also may examine evidence, but that is different–that is a procedure, not an engagement.

Thus, the answer is a. 🙂

CPA exam: Done!

Thank You, Lord.

[SeattleAccountant]

examination is always an audit, is it?

plain audit scope para reads the following “An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.”

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Futile]

@SeattleAccountant – It's the other way around. 🙂 An audit is an examination engagement (a type of attestation engagement). An examination is not restricted to only audits.

CPA exam: Done!

Thank You, Lord.

[Lost1]

Hi Futile, Thanks for your answer regarding engagement letter. So IT IS REQUIRED huh? that was confusing.. 🙂

regarding examination – so..examination is a procedure that can be performed for any type of attestation services – audit is an examination but examination is not necessarily an audit, . then how could (a) be an answer to the question above? it is only correct when it applies to audit but when it comes to other type of engagements it does not provide “high” assurance..

Can you please comment?

"If you can do it, I can do it better."

[Futile]

Engagement letters are rather confusing, yes. Written communication is presumptively mandatory, so like everything else that is presumptively mandatory, yes, they're basically required.

An examination engagement is the (only) type of attestation engagement that provides high level assurance–for audits (which are examinations of historical financial statements) and for every other examination engagement (such as compliance examinations or examinations of forecasted financial statements).

An examination procedure is a thorough inspection, and you will most likely see the word inspection used in connection with procedures (for example, “inspecting documents”) rather than the word examination.

Try not to get the two uses of the word confused. You can generally tell by the context.

CPA exam: Done!

Thank You, Lord.

[SeattleAccountant]

@Futile, you are absolutely correct! I stand corrected

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Lost1]

Thank you Futile!

"If you can do it, I can do it better."

[Author]

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