ACCT 417 (Fall 2026) - Chapter 21 Lecture
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Overview
Michael Barnes explains Chapter 21’s assurance and attestation services, distinguishing examinations, reviews, and agreed-upon procedures by their assurance level, risk, reporting, and distribution. He maps six attestation services to the engagements that can perform them, compares SSARS preparation, compilation, and review services, and closes with how external auditors may use internal audit work after evaluating objectivity, competence, and systematic discipline.
Key takeaways
- Examinations provide reasonable assurance and an opinion, reviews provide limited assurance and a conclusion, and agreed-upon procedures provide findings without an assurance conclusion.
- Agreed-upon procedures reports are always restricted in distribution; Barnes characterizes their typical assurance as none to very low and their attestation risk as high.
- Preparation requires no independence, report, or opinion; compilation requires a report and disclosure if the CPA is not independent, but neither service provides assurance.
- A SSARS review requires independence and uses inquiries and analytical procedures, but excludes tests of controls and fraud-risk assessment.
- A review report needs explanatory language for a GAAP departure or substantial doubt about the client’s ability to continue as a going concern.
- External auditors can rely on internal audit work only after evaluating objectivity, competence, and the internal auditors’ systematic and disciplined approach.
Chapters
- Exam 2 is scheduled for the following week and covers Chapters 6, 7, 8, 9, 17, 18, and 21, plus relevant material identified on the first page of the study guide.
- Barnes recommends completing the practice exam and reviewing the full study guide before the Monday preparation session.
- The Excel assignment is due November 6; students should start early, coordinate group presentation topics and dates, and consider upcoming professional interaction events.
- Students with tax or accounting assembly experience can complete a survey for a $5 Amazon gift card or join 30-minute focus groups for $15 each.
- Attestation is a CPA engagement to examine, review, or perform agreed-upon procedures on a subject matter or assertion that another party is responsible for.
- Assurance services are broader: independent professional services that improve information quality or its context for decision-makers, including areas beyond financial reporting.
- The AICPA Auditing Standards Board issues Statements on Auditing Standards; attestation engagements follow SSAEs, while preparation, compilation, and certain reviews follow SSARS.
- Barnes says Chapter 21 is a minor part of Exam 2, likely one or two multiple-choice questions and possibly part of a problem.
- An attestation engagement links a responsible party, which supplies subject-matter information, a user, and a CPA who reports a conclusion; the parties can vary by engagement.
- An examination resembles an audit: it provides reasonable assurance, has low attestation risk, and results in an opinion; distribution may be general or restricted.
- A review provides limited or moderate assurance, uses negative assurance, and reports a conclusion rather than an opinion.
- Agreed-upon procedures generally provide no or very low assurance, have high attestation risk, report only a summary of findings, and always have limited distribution.
- Barnes distinguishes an engagement, the general assurance level and report type, from a service, the specific work performed; for example, an examination of pro forma statements combines both.
- The six services are agreed-upon procedures, prospective financial statements, pro forma financial statements, compliance, management’s discussion and analysis (MD&A), and service organization control (SOC) reports.
- Prospective statements look forward rather than relying on historical costs; pro forma statements project the effects of a specific event and can receive examination or review, but not agreed-upon procedures.
- Compliance engagements can be examinations or agreed-upon procedures; MD&A can be examined or reviewed; SOC engagements are examinations because external auditors and other parties rely on them.
- Preparation and compilation of prospective or pro forma statements fall under SSARS, and a CPA must not both prepare or compile statements and evaluate that same work.
- Attestation risk is modeled as AR = IR × CR × DR, paralleling the audit risk model, although attestation risk can vary by engagement.
- Examination reports provide an opinion associated with high assurance; review reports provide a conclusion associated with limited or moderate assurance.
- Agreed-upon procedures reports contain findings but no opinion or conclusion, matching their lack of assurance.
- Attestation reports commonly include a title, introductory paragraph, scope description, and conclusion or findings, with report form varying by engagement.
- Preparation means creating client financial statements under a specified reporting framework, such as GAAP, cash basis, or tax basis; independence is not required and no report or opinion is issued.
- Compilation presents statements based on management’s representations and judgments, including estimates such as a 2% bad-debt rate; independence is not required, but lack of independence must be disclosed in the report.
- A compilation includes a report but provides no assurance or opinion, while a review provides limited negative assurance and requires independence.
- SSARS reviews apply to financial-statement reviews in the relevant setting; interim reviews for previously audited entities follow the applicable auditing standards instead.
- A review provides limited assurance that financial statements conform to the specified reporting framework, and its report expresses negative assurance.
- Reviews share features with audits, including an engagement letter, understanding the client, evaluating results, communicating findings, and obtaining a management representation letter.
- The only audit procedures Barnes identifies as part of a review are inquiries and analytical procedures; reviews do not require predecessor communication, fraud-risk assessment, or tests of controls.
- Barnes presents the mnemonic “You Liar CPA” for review characteristics: understanding, learning, inquiries, analytical procedures, review, client, and professional accountant.
- A review report states that its scope is substantially less than an audit and identifies inquiries and analytical procedures as the procedures performed.
- The report identifies SSARS as the governing standards and expresses negative assurance that the accountant is unaware of material modifications needed for conformity with the reporting framework.
- A GAAP departure requires explanatory language in the review report.
- A going-concern issue requires an explanatory paragraph describing substantial doubt about the entity’s ability to continue operating.
- Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve organizational operations.
- Internal auditors may evaluate risks, controls, financial reporting, compliance, and operations, offering broader work than financial-statement auditing alone.
- External auditors may use internal audit work, but must assess the internal auditors’ objectivity, competence, and use of a systematic, disciplined approach.
- Barnes closes by assigning homework for Chapters 17, 18, and 21.
Transcript excerpt
0:01 How are we doing, folks? Everybody have a good break? It's over a little bit too soon. I will be honest, this was one of those breaks that I was just like, oh, I hope this gets over soon. You know, not because I didn't have a good break. It was a great break. For those of you who didn't know, I went to the Texas-OU game. I'm OU graduate from my bachelor's and master's, and I had made the comment that OU was going to get crushed, and they did not. They actually pulled off a last-minute, last-second victory. Like it was not even last minute, it was like last second victory. Kicked kicked a field goal at the very end of the game. There's a picture of me with seven other guys who are roughly around my age, all just cheering and applauding. I stayed in a house with eight guys, eight other guys including myself, so nine guys in a house, like a Airbnb for 5 days, which is not an experience I get to enjoy very frequently, but it was it was pretty crazy. Not any alcohol involved,
0:49 but we're just really, really old, you know, and just that's kind of that was the whole exhaustion thing. We got back from the game, and if we had stayed stayed there for an hour or two after the game, and then kind of came back, and we were all just like going to sleep at 9:00 p.m. And that's that's that's what happens when you hit your 40s and 50s, you know, the excitement is goes away. I was telling one of my I was telling telling my GTA today, saying, yeah, once once I get to the point where I'm in my 50s, if I don't have 8 hours
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Summary, takeaways, and chapters were generated by AI from the video's transcript and may contain errors. The video belongs to its creator, Michael Barnes.