Chapter 25 Solutions Manual

Chapter 25 Solutions Manual - 1 Chapter 25 Other Assurance...

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Unformatted text preview: 1 Chapter 25 Other Assurance Services and Nonassurance Services Review Questions 25-1 Levels of assurance represent the degree of certainty the practitioner has attained, and wishes to convey, that the conclusions stated in his or her report are correct. Audits of historical financial statements prepared in accordance with generally accepted accounting principles are one type of examination. They are governed by auditing standards. An audit results in a conclusion that is in a positive form. In this type of report, the practitioner makes a direct statement as to whether the presentation of the assertions, taken as a whole, conforms to the applicable criteria. The level of assurance is high. In a review, the practitioner provides a conclusion in the form of a negative assurance. In this form, the practitioner's report states whether any information came to the practitioner's attention to indicate that the assertions are not presented in all material respects in conformity with the applicable criteria. The level of assurance is moderate. A compilation is defined in SSARS as presenting, in the form of financial statements, information that is the representation of management without undertaking to express any assurance on the statements. 25-2 A negative assurance states, along with factual statements, that nothing came to the auditor's attention that would lead the auditor to believe that the financial statements were not prepared in accordance with GAAP or other comprehensive basis of accounting. The reason for including such a statement in a review report is to provide financial statement users with some level of assurance that the financial statements are fairly stated. The level of assurance is less than that for an audit of historical financial statements, but more than the zero-level assurance for a compilation. 25-3 Compilation is defined in SSARS No. 1 as presenting in the form of financial statements information that is the representation of management, without undertaking to express any assurance on the statements. Review is defined by SSARS No. 1 as performing inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statements in order for them to be in conformity with GAAP. There is no level of assurance provided by a compilation. Reviews provide limited assurance, but considerably less than a typical audit. 25.4 One of three forms of compilation can be provided to clients: 25-1 25-4 (continued) Compilation With Full Disclosure Compilation of this type requires disclosures in accordance with generally accepted accounting principles, the same as for audited statements....
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This note was uploaded on 10/07/2011 for the course ACCOUNTING 4220 taught by Professor Brown during the Spring '11 term at UMBC.

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Chapter 25 Solutions Manual - 1 Chapter 25 Other Assurance...

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