Definition
An examination under AT-C 205 is the attestation counterpart of an audit. It applies to subject matter other than historical financial statements, or to an assertion about that subject matter, evaluated against suitable criteria. The practitioner obtains sufficient appropriate evidence and expresses an opinion with reasonable assurance. A review engagement under AT-C 210 offers limited assurance instead.
Why it matters in an audit or review
Examinations cover things like compliance with laws, key performance indicators, greenhouse gas statements, and controls at a service organization. Criteria must be suitable and available to users, or the practitioner cannot accept the engagement. The practitioner reports on the subject matter or on management's assertion, and the report states which one.
Example
Illustrative: a company asserts that it complied with the reporting covenants in a loan agreement during the year. The practitioner examines the covenant calculations against the loan terms and opines on whether management's assertion of compliance is fairly stated in all material respects. Compliance engagements also draw on AT-C 315.
Common mistakes
Accepting an engagement with criteria that exist only in management's head. If users cannot see how the subject matter was measured, the criteria are not suitable.
FAQ
Is an examination an audit?
No. An audit covers historical financial statements under AU-C. An examination covers other subject matter under AT-C.
Sources
- AICPA, AT-C Section 105, Concepts Common to All Attestation Engagements (suitable criteria)
- AICPA, AT-C Section 205, Assertion-Based Examination Engagements
- AICPA, AT-C Section 210, Review Engagements
- AICPA, AT-C Section 315, Compliance Attestation
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error