CPA Exam — AUDForming Conclusions and ReportingMedium
A practitioner is engaged to report on an entity's compliance with specified requirements. This type of engagement is known as a(n):
- ACompliance engagement.
- BAgreed-upon procedures engagement.
- CFinancial statement audit.
- DReview engagement.
Show answer & explanationAnswer & explanation
Correct answer: A. Compliance engagement.
A compliance engagement is specifically designed for a practitioner to report on an entity's compliance with aspects of contractual agreements or regulatory requirements. It falls under the attestation standards.
Why the other options are wrong
- B. An agreed-upon procedures engagement involves performing procedures agreed upon with the engaging party and reporting findings, but it doesn't necessarily involve expressing an opinion or conclusion on compliance unless specifically agreed upon.
- C. A financial statement audit expresses an opinion on the fairness of financial statements, not compliance with specific requirements.
- D. A review engagement provides limited assurance on financial statements, not compliance.
Compliance Engagement
A compliance engagement is an attestation engagement in which a practitioner reports on whether an entity has complied with specific aspects of laws, regulations, rules, contracts, or grants.
- Focuses on adherence to specific requirements.
- Can be either an examination or review level engagement.
- Requires criteria for compliance to be established.
Memory trick: Attest to the A-C-E of engagements.