$18-1$ Proposing on an Assurance Service Engagement

VAN Technologies, a value$-$added network service provider, links subscribing electronic data integration $($EDI$)$ networks, receives network transmissions from trading partners, translates transmissions into an ANSI X$12$ format, and functions as an electronic post office by transmitting and acknowledging orders electronically. Owing to widespread reports of data security problems in EDI networks, several subscribers have approached management, questioning VAN$$s controls over hacker attacks, transmission failures, identification authentication, and infiltration of confidential data files. In response, management asks an engagement partner in Settles & Weick LLP to propose on offering assurances that would quiet subscribers$$ fears.

Required:

$1.$ Is the engagement an assurance service engagement or an attestation service engagement? Explain.

$2.$ Discuss the barriers the engagement partner should consider before proposing on the engagement.

$18-2$ Compilation of Financial Statements

A compilation of financial statements involves presenting management's assertions in the form of financial statements without expressing any degree of assurance. Nevertheless, even though no assurance is expressed, an independent accountant must comply with the provisions of SSARS No$.1,$Compilation and Review of Financial Statements.$$

Required:

$1.$ Identify the type of knowledge and understanding that an independent accountant should obtain in a compilation engagement.

$2.$ How does an accountant inform users of the nature and limitations of a compilation?

$3.$ What actions should an independent accountant take when he or she becomes aware of a material departure from GAAP in financial statements compiled?