Since 1977
AUDITING THEORY
AT.2820—Performing Related Services Engagements
Suggested Readings:
1. PSRS 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information
2. PSRS 4410, Compilation Engagements
3. Chapter 21, Auditing: A Risk-Based Approach, Part 1-Theory 2019 Issue—1st Edition by Cabarles/Ocampo/Valdez
DISCUSSION QUESTIONS
Agreed-upon Procedures Engagements
1. The objective of an agreed upon-procedures
engagement is for the auditor to:
a. Carry out procedures of an audit nature to which
the auditor and the entity and any appropriate
third parties have agreed and to report on factual
findings.
b. Carry out procedures of a review nature to which
the auditor and the entity and any appropriate
third parries have agreed and to report on factual
findings.
c. Carry out procedures of a review nature and to
express limited assurance based on those agreed
procedures.
d. Carry out procedures of an audit nature and is
express limited assurance.
2. Which of the following is incorrect about agreed-upon
procedures engagement?
a. An engagement to perform agreed-upon
procedures may involve the auditor in performing
certain procedures concerning individual items of
financial data.
b. Users of the agreed-upon procedures report assess
for themselves the procedures and findings
reported by the auditor and draw their conclusion
from the auditor’s work.
c. The auditor should be independent of the financial
data or financial statements where agreed
procedures have to be applied.
d. The report is restricted to those parties that have
agreed to the procedures to be preformed.
3. Matters to be agreed in an agreed-upon procedures
engagement include the following, except:
a. Stated purpose of the engagement
b. Limitations on distribution of the report of factual
findings.
c. Anticipated form of the report and the level of
assurance to be provided
d. Nature, timing and extent of the specific
procedures to be applied.
4. An accountant may accept an engagement to apply
agreed-upon procedures that are not sufficient to
express an opinion on one or more specified accounts
or items of a financial statement provided that
a. The accountant’s report does not enumerate the
procedures performed
b. The financial statements are prepared in
accordance with a comprehensive basis of
accounting other than PFRSs
c. Distribution of the accountant’s report is restricted
d. The accountant is also the entity’s continuing
auditor
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L. R. CABARLES/J.M. D. MAGLINAO
MAY 2020
Compilation Engagements
5. The objective of a compilation engagement
a. Is to enable the auditor to express an opinion
whether the financial statements are prepared in
all material respects, in accordance with an
identified financial reporting framework
b. Is to enable the auditor to state whether, on the
basis of procedures which do not provide all the
evidence that would be required in an audit,
anything has come to the auditor’s attention that
causes the auditor to believe that the financial
statements are not prepared in all material
respects, in accordance with an identified financial
reporting framework.
c. Is to carry out those procedures of an audit nature
to which the auditor and the entity and any
appropriate third parties have agreed and to report
on factual findings.
d. Is to use accounting expertise as opposed to
auditing expertise to collect, classify and
summarize financial information.
6. When associated with financial statements of a
nonpublic entity, the procedures and report issued
differ based on whether an auditor has performed a
compilation, a review, or an audit. Which of following
statements normally relate to compilation?
a. Includes inquiry of client’s legal counsel.
b. The auditor who lacks independence may perform
this service.
c. Includes obtaining an understanding of internal
control.
d. Includes assessing control risk.
7. Which of the following procedures does an auditor in a
compilation engagement of a nonpublic entity
ordinarily perform?
a. Reading the financial statements to consider
whether they are free of obvious mistakes in the
application of accounting principles.
b. Obtaining written representations from
management indicating that the compiled financial
statements will not be used to obtain credit.
c. Making inquiries of management concerning
actions taken at meetings of the stockholders and
the board of directors.
d. Applying analytical procedures designed to
corroborate management's assertions that are
embodied in the financial statement components.
AT.2820
EXCEL PROFESSIONAL SERVICES, INC.
8. An accountant’s compilation report should be dated as
of the date of
a. Completion of field work
b. Completion of compilation
c. Transmittal of the compilation report
DO-IT-YOURSELF (DIY) DRILL
1. Francois, a CPA, has agreed to a compilation 3.
engagement for a client and is preparing the financial
statements based on the client’s information. If
Francois feels that the financial statements will be
misleading based on information provided by the
client, how should he proceed?
a. Francois should not be concerned about whether
the financial statements are misleading, since this
is only a compilation engagement.
b. Francois should correct the financial statements
even if the client does not agree to the necessary
changes.
c. Francois should issue an adverse opinion. 4.
d. Francois should resign from the engagement.
2. A CPA has been engaged to compile financial
statements for a nonpublic client. Which of the
following statements best describes this engagement?
a. The CPA must perform the basic accepted auditing 5.
procedures necessary to determine that the
statements are in conformity with GAAP.
b. The CPA is performing an accounting service rather
than an examination of financial statements.
c. The financial statements are representations of
both management and the CPA.
d. The CPA may prepare the statements from the
books but may not assist in adjusting and closing
the books.
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d. The latest subsequent event referred to in the
notes to financial statements
- now do the DIY drill -
Which of the following is not correct concerning
"specified parties" of an agreed-upon procedures
report under either the auditing or attestation
standards?
a. They must agree on the procedures to be
performed.
b. They must take responsibility for the adequacy of
the procedures performed.
c. They must sign an engagement letter.
d. After completion of the engagement, another party
may be added as a specified user.
Which of the following provides a “notice to reader”?
a. A review engagement
b. A compilation engagement
c. Any assurance engagement
d. An external audit
The objective of a review engagement
a. Is to enable the auditor to express an opinion
whether the financial statements are prepared in
all material respects, in accordance with an
identified financial reporting framework
b. Is to enable the auditor to state whether, on the
basis of procedures which do not provide all the
evidence that would be required in an audit,
anything has come to the auditor’s attention that
causes the auditor to believe that the financial
statements are not prepared in all material
respects, in accordance with an identified financial
reporting framework.
c. Is to carry out those procedures of an audit nature
to which the auditor and the entity and any
appropriate third parties have agreed and to report
on factual findings.
d. Is to use accounting expertise as opposed to
auditing expertise to collect, classify and
summarize financial information.
J - end of AT.2820 - J
AT.2820