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ACCTG 403W TEXT HIGHLIGHTS 1. 3 Forms of Attest Engagements: Examination, Review, Agreed-Upon Procedures engagement 2. Examination: An audit when it involves historical financial statements, provides the highest form of assurance that CPAs can offer 3. Review: Substantially lesser in scope of procedures than an examination and is designed to lend only a limited degree of assurance – a moderate risk of misstatement remains. 4. Agreed-upon Procedures Engage: If an examination or review does not meet the client’s needs, the CPAs negotiate a custom procedure. The report describes those procedures and their findings. 5. Attest Engagement: a practicitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject or an assertion about subject matter that is the responsibility of another party (e.g., management) What Creates the Demand for Audits? A primary goal is to allocate limited capital resources to the production of those goods and services for which demand is great. Efficient accounting reveals the truth, while inadequate accounting and reporting conceals waste and inefficiency, thereby preventing an efficient allocation of economic resources. Independent auditors provide credibility, which means this information can be believed by outsiders, such as stockholders, creditors, government regulators, customers and other interested 3 rd Parties. Credibility also reduces the overall risk of economic decisions. Auditors’ opinions are obviously impartial and free from bias. Bank’s risk relating to loan to client 1. Business Risk: the risk associated with a company’s survival and profitability. Ability for client to pay interest and principal of the loan.
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