Financial statements of a nonpublic company

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Reference no: EM131155595

In an engagement to review the financial statements of a nonpublic company, SSARS require the accountant to obtain review evidence that is primarily based on inquiries and analytical procedures. The nature of the accountant's inquiries is a matter of judgment. For example, the accountant may consider the nature and materiality of the items, likelihood of misstatement, how the items may be affected by management's judgment, qualifications of client personnel, among other matters.

Below are several inquiry procedures for the sales and collection cycle:

Revenu

1. Are revenues from the sale of major products and services recognized in the appropriate period?Receivables
1. Has an adequate allowance been made for doubtful accounts?
2. Have receivables considered uncollectible been written off?
3. If appropriate, has interest been reflected?
4. Has a proper cutoff of sales transactions been made?
5. Are there any receivables from employees and related parties?
6. Are any receivables pledged, discounted, or factored?
7. Have receivables been correctly classified between current and noncurrent?

Required

a. What other information about accounts receivable and revenue, besides the items listed, will the accountant have to obtain?
b. Compare the illustrative procedures for review services and those commonly performed for audits. What are the major differences?
c. Of whom should the accountant make inquiries in a small, closely-held company?
d. Under what circumstances will procedures beyond those illustrated likely be performed? Be specific.
e. Compare the levels of achieved assurance for review services and audits. Is the achieved level much higher for audits, somewhat higher, or approximately the same? Give reasons for your answer.

Reference no: EM131155595

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