There are a variety of non-audit services that CPAs perform for companies. Understanding what these services entail helps to ensure you are in compliance for any type of client engagement.
Melissa O’Neil, CPA, has been engaged by a non-public company, Caldwell, Inc., to review the financial statements of the most recently completed fiscal year.
Just do response each posted # 1 to 3 down below only.
Posted 1
When O’Neil prepares to review the financial statements for Caldwell, he should review the companies policies and procedures along with inquiring if another CPA has completed the same task in the past. A previous review would be very beneficial to O’Neil because it would serve as a template for her own review plus it would highlight any past issue there were. A flowchart of the business would also be beneficial because she would be able to understand how data and information flows through the company. O’Neil will need to perform procedures on items deemed material and analyze those records. She will also need to follow up with management on any inconsistencies found. The report will review company procedures and detail any deficiencies that were found. This report will be used as a tool for the company to correct any procedures O’Neil feels are not within proper boundaries. Any material departure from GAAP would be documented in the report.
Posted 2
Hello Class,
It is different from publicly traded companies, nonpublic companies may or may not require having an annual audit; it depends on the size of the company. Nonpublic companies that do not have an annual audit may engage CPAs to review their annual or interim financial statements under Statements on Standards for Accounting and Review Services (SSARS) (Whittington & Pany, 2016, p. 747). There are several sources O’Neil should consult the company in order to prepare for the review. First, O’Neil should make inquiries to take a look over the Caldwell Inc.’s policies and standards to understand the management’s honesty and integrity including any disagreement over accounting principles. Next, provide engagement letter to establish a clear understanding with the managers and specifying the objectives and limitations of engagements, management’s and accountant’s responsibilities. Ensure the client is willing to provide necessary accounting information. In addition, understanding the company’s industry, including its operations and organization structure are important to help O’Neil design review procedures.
According to Whittington & Pany, the required procedures include four steps: “(1) perform analytical procedures, (2) make inquiries of management and others within the organization (3) perform other procedures considered necessary, and (4) obtain representations from management relating to the financial statements†(2013, p. 748).
The review report information should contain any misstatements that O’Neil may have found during the review and whether the material modifications should be made to the financial statements. Also, any significant deficiencies, unusual matters, and the review procedures performed should be included in the report. The responsibilities of both client and accountant and the accountant’s conclusion of her review should include in the report as well (Whittington & Pany, 2016, p. 749).
If O’Neil found a material departure from GAAP, a modification report to address the issue must be taken place. She also needs to communicate to the audit committee regarding any adjustments made during the review (Whittington & Pany, 2016, p. 751).
Posted 3
Good morning classmates,
Melissa O’Neil, CPA, has been engaged by a non-public company, Caldwell, Inc., to review the financial statements of the most recently completed fiscal year.