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1. Agreed-Upon Procedures Engagements
1. Agreed-Upon Procedures Engagements
An agreed-upon procedures engagement is a type of attestation engagement in which a practitioner is engaged by a client ("engaging party") and performs specific procedures on underlying subject matter or subject matter information (such as an assertion) and reports the findings. The client and the practitioner agree to the procedures that will be performed to meet the intended purpose of the engagement.
2. Prospective Finandal Statements
2. Prospective Finandal Statements
In contrast to historical financial statements, which are the subject of audit engagements, prospective financial statements are forward-looking and based on projections rather than past events.
Prospective financial statements may cover a period that has partially expired.
Statements for periods that have completely expired are not considered to be prospective.
Pro forma financial statements and partial presentations are not prospective financial statements.
🧮 Practice Problem: LO5-04-01, MCQ-02450
🧮 Practice Problem: LO5-04-01, MCQ-02450
Mill, CPA, was engaged by a group of royalty recipients to apply agreed-upon procedures to financial data supplied by Modern Co. regarding Modem's written assertion about its compliance with contractual requirements to pay royalties. Mill's report on these agreed-upon procedures should contain a (an):
Disclaimer of opinion about the fair presentation of Modem's financial statements.
List of the procedures performed (or reference thereto) and Mill's findings.
Opinion about the effectiveness of Modem's internal control activities concerning royalty payments.
Acknowledgment that the sufficiency of the procedures is solely Mill's responsibility.
🧮 Practice Problem: LO5-04-02, MCQ-02514
🧮 Practice Problem: LO5-04-02, MCQ-02514
Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:
🧮 Practice Problem: LO5-04-03, MCQ-02436
🧮 Practice Problem: LO5-04-03, MCQ-02436
When a CPA examines a client's projected financial statements, the CPA's report should:
Explain the principal differences between historical and projected financial statements.
State that the CPA performed procedures to evaluate management's assumptions.
Refer to the CPA's auditor's report on the historical financial statements.
Include the CPA's opinion on the client's ability to continue as a going concern.
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