Engagements to Review Financial Statements

PSRE 2400

Inquiry

Analytical Procedur

es

Reasonable basis Negative Assurance

Objective of a Review Engagement

To enable an auditor to state whether anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with PFRS

General Principles of a Review Engagement

independence

integrity

objectivity

professional competence and due care

confidentiality

professional behavior

technical standards

Code of Ethics

Scope of a ReviewPSRE 2400

relevant professional bodies

regulation

terms of the review engagement

reporting requirements

Bases in determining the scope of a review

Compilation Report

Review of Financial Statements

Audit Report

Assurance Provided: Negative Assurance

Terms of Engagement• The objective of the service being performed.

• Management's responsibility for the financial statements.

• The scope of the review, including reference to PSRE

• Unrestricted access to whatever records, documentation and other information requested in connection with the review.

• A sample of the report expected to be rendered.

• The fact that the engagement cannot be relied upon to disclose errors, illegal acts or other irregularities, for example, fraud or defalcations that may exist.

• A statement that an audit is not being performed and that an audit opinion will not be expressed.

Objective

Management’s Responsibility

The fact that the engagement cannot be relied upon to disclose errors, etc.

A statement that an audit is not being performed

Scope

Planning and Using the Work of Others

• In planning a review of financial statements, the auditor should obtain or update the knowledge of the business including consideration of the entity's organization, accounting systems, operating characteristics and the nature of its assets, liabilities, revenues and expenses.

• When using work performed by another auditor or an expert, the auditor should be satisfied that such work is adequate for the purposes of the review.

Procedures and Evidence

Obtaining an Understanding of the Entity’s Business and the Industry

Inquiries

Accounting principles and practices, material assertions, Actions taken at meetings

Analytical procedures

Comparison of the FS with prior periods and anticipated results; relationship of the elements of the FS

Reading the Financial Statements

Other auditors and responsible persons

Conclusions and Reporting

TitleThe AddresseeIntroductory paragraphScope paragraphStatement of a Negative AssuranceAuditor’s signatureDate of reportAuditor’s Address

Report Issued

When to be Issued

Unmodified Review Report (Negative Assurance)

The auditor believes that there are no material modifications that should be made to the financial statements so these will conform to the PFRS

Modified Review Report

Material Misstatements• Express a qualification of the negative assurance• When the effect of the matter is material and pervasive to the financial statements

that the auditor concludes that a qualification is not adequate to disclose the misleading or incomplete nature of the FS, an adverse statement is issued.

Scope Limitation – If there has been a material scope limitation, the report should describe the limitation and either:• Express a qualification of the negative assurance• When the possible effect is material and pervasive, no assurance is provided.