Engagement Engagement** Engagement
1. Level of Assurance
No assurance as to GAAP
Limited assurance as to
GAAP Statements are
presented in accordance
2. Entities Covered Nonpublic only Nonpublic only Public or Nonpublic
3. Knowledge of Client's
Knowledge of the
accounting Knowledge same as
Extensive knowledge of the
Industry principles and practices of the tion plus an increased under- economy, the relevant indus-
industry and general under- standing of the client's business. try, and the client's business.
standing of the client's business. (SAS No.22)
4. Inquiry procedures
Inquiries not required unless
Inquiry and analytical
procedures Inquiry, analytical
required information supplied by the required plus additional proce- (SAS No.56), and other audit
client is questionable. dures if the information appears procedures.
5. GAAP disclosures
disclosures required by GAAP Inadequate
omitted required by GAAP may be must be included or report must qualified or adverse opinion.
omitted, without restriction be modified to include the dis-
on use (Exception, see closures.
SSARS No. 3)
6. Known departures from
Disclosure required in modi-
Disclosure required in
from GAAP requires
GAAP measurement fied compilation report (Ex- review report. qualified or adverse opinion.
ception, see SSARS No. 3)
Accountant does not have
Nonpublic company - comp-
independence to be independent issuing review report ilation report (SSARS No.1) if
Public company- nonindepen-
dence disclaimer (SAS No. 26)
if not independent.
8. Obtain an understand-
Required by SAS No. 55
ing of the control struc-
ture and assess control
9. Engagement Letter Recommended Recommended Not discussed in SAS
10. Representation Letter No mention May wish to obtain Must obtain (SAS No. 19)
*Adapted from Dan M. Guy, "Disclosure Needs in Financial
Reporting for Closely Held Businesses," University of Alabama,
1978 Accounting Research Convocation
** Excludes interim reviews of public companies. See SAS No.
36. (However, Paragraph 140.03 describes a proposed ammendment to SSARS No. 1
to discuss situations when a SSARS review report may be applicable to public entities.
Steven L. Jager, CPA, An Accountancy Corporation