Attestation engagements are when a certified public accountant (CPA) is engaged by a business to issue a written report or other type of communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party, usually the management of the business. Assertions can run the gamut from whether the financial statements are materially correct to verifying that an account balance such as accounts receivable is carried on the balance sheet for the correct amount.
Attestation engagements can have three parties. However, many times, there will be only two parties to an attestation engagement because the responsible party and the user will be the same.
- CPA engaged to issue the report or communication.
- Responsible party who prepares the documents about which the CPA issues the report - quite often the management of the business.
- The user who hires the CPA to perform the work.
To follow is information about three different types of attestation engagements:
Examinations
Examinations take place when the CPA issues an opinion if the subject of the examination conforms in all materially regards to whatever criteria the CPA is using. For example, a CPA may be engaged by a company to see if it maintains a effective system of internal controls. Internal controls are policies and procedures a business sets in place to provide guidelines for how employees of the business do their jobs.
The CPA issues their examination opinion in their Independent Accountant's Report. The scope of this report makes note of the fact that the CPA conducts their examination in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA).
Reviewing Financial Statements
Reviews take place when the CPA performs certain analytical procedures, and expresses limited (negative) assurance and a disclaimer opinion. Negative assurance means that nothing came to your attention that wasn't in conformity with generally accepted accounting principles (GAAP) or wasn't fairly stated in all material regards.
Review procedures include the following:
- Inquiries on accounting procedures, methods, changes, or the work of internal auditors.
- Analytical procedures with emphasis on major accounts and finding unusual matters, practices or procedures. Analytical procedures compare what a CPA sees on the document at hand with what they expect to see.
When conducting a review, unlike an examination, the CPA does not issue an opinion in a report. The CPA conveys the results of their review to the board of the directors of the business in a letter stating what they documents they looked at and which standards they used while reviewing the documents.
Agreed-upon Procedures
CPAs can also issue reports only on agreed-upon procedures (AUD). In this case, the company asks the CPA to issue a report on some sort of measurable criteria such evaluating the rate of return for any investments the company holds. In this case, the CPA would verify their figures reconcile with any schedule the business keeps on the same topic. In other words, if the business tells it's shareholders company investments are earning a return of nine percent, the CPA verifies this figure is correct.
The report the CPA firm issues for an AUD does not contain an opinion. It merely contains information about what specific procedures were conducted and what measurable criteria were used.
For more information about these standards, please visit the following websites:
Financial Accounting Standards Board
American Institute of Certified Public Accountants
Maire Loughran - Maire Loughran was born and raised in Rhode Island, the costume jewelry capital of the world. She learned the art of jewelry making at the ...
