Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures...

45
Interim Financial Information 1541 AU-C Section 930 Interim Financial Information Source: SAS No. 122; SAS No. 132. Effective for reviews of interim financial information for interim pe- riods of fiscal years beginning on or after December 15, 2012. NOTE In May 2019, the Auditing Standards Board issued SAS No. 135, Omnibus Statement on Auditing Standards — 2019, which contains amendments to this section. The amendments are effective for reviews of interim financial information for interim periods of fiscal years ending on or after December 15, 2020, and can be viewed in appendix B of section 700 until the effective date, when they will be applied to this section. Introduction Scope of This Section .01 This section addresses the auditor's responsibilities when engaged to review interim financial information under the conditions specified in this sec- tion. The term auditor is used throughout this section, not because the auditor is performing an audit but because the scope of this section is limited to a re- view of interim financial information performed by an auditor of the financial statements of the entity. .02 This section applies to a review of interim financial information when a. the entity's latest annual financial statements have been audited by the auditor or a predecessor auditor; b. the auditor either i. has been engaged to audit the entity's current year finan- cial statements or ii. audited the entity's latest annual financial statements, and in situations in which it is expected that the current year financial statements will be audited, the engagement of another auditor to audit the current year financial state- ments is not effective prior to the beginning of the period covered by the review; (Ref: par. .A1) c. the entity prepares its interim financial information in accor- dance with the same financial reporting framework as that used to prepare the annual financial statements; and d. all of the following conditions are met if the interim financial in- formation is condensed: i. The condensed interim financial information purports to be prepared in accordance with an appropriate financial reporting framework, which includes appropriate form and content of interim financial information. (Ref: par. .A2) ©2019, AICPA AU-C §930.02

Transcript of Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures...

Page 1: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1541

AU-C Section 930

Interim Financial InformationSource: SAS No. 122; SAS No. 132.

Effective for reviews of interim financial information for interim pe-riods of fiscal years beginning on or after December 15, 2012.

NOTE

In May 2019, the Auditing Standards Board issued SAS No. 135, OmnibusStatement on Auditing Standards — 2019, which contains amendments tothis section.

The amendments are effective for reviews of interim financial information forinterim periods of fiscal years ending on or after December 15, 2020, and canbe viewed in appendix B of section 700 until the effective date, when they willbe applied to this section.

Introduction

Scope of This Section.01 This section addresses the auditor's responsibilities when engaged to

review interim financial information under the conditions specified in this sec-tion. The term auditor is used throughout this section, not because the auditoris performing an audit but because the scope of this section is limited to a re-view of interim financial information performed by an auditor of the financialstatements of the entity.

.02 This section applies to a review of interim financial information when

a. the entity's latest annual financial statements have been auditedby the auditor or a predecessor auditor;

b. the auditor eitheri. has been engaged to audit the entity's current year finan-

cial statements orii. audited the entity's latest annual financial statements,

and in situations in which it is expected that the currentyear financial statements will be audited, the engagementof another auditor to audit the current year financial state-ments is not effective prior to the beginning of the periodcovered by the review; (Ref: par. .A1)

c. the entity prepares its interim financial information in accor-dance with the same financial reporting framework as that usedto prepare the annual financial statements; and

d. all of the following conditions are met if the interim financial in-formation is condensed:

i. The condensed interim financial information purports tobe prepared in accordance with an appropriate financialreporting framework, which includes appropriate formand content of interim financial information. (Ref: par. .A2)

©2019, AICPA AU-C §930.02

Page 2: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1542 Special Considerations in the United States

ii. The condensed interim financial information includes anote that the financial information does not represent com-plete financial statements and is to be read in conjunc-tion with the entity's latest audited annual financial state-ments.

iii. The condensed interim financial information accompaniesthe entity's latest audited annual financial statements, orsuch audited annual financial statements are made read-ily available by the entity. (Ref: par. .A3)

Statements on Standards for Accounting and Review Services provide guidancefor review engagements for which this section is not applicable.

.03 An auditor may find this section, adapted as necessary in the circum-stances, useful when that auditor has not been engaged to perform a review ofinterim financial information but has nonetheless decided to perform reviewprocedures on such financial information (for example, in connection with theinclusion of the auditor's report on the annual financial statements in an un-registered securities offering document).

Effective Date.04 This section is effective for reviews of interim financial information for

interim periods of fiscal years beginning on or after December 15, 2012.

Objective.05 The objective of the auditor when performing an engagement to review

interim financial information is to obtain a basis for reporting whether the au-ditor is aware of any material modifications that should be made to the interimfinancial information for it to be in accordance with the applicable financial re-porting framework through performing limited procedures. (Ref: par. .A4–.A5)

Definition.06 For purposes of this section, the following term has the meaning at-

tributed as follows:

Interim financial information. Financial information preparedand presented in accordance with an applicable financial report-ing framework that comprises either a complete or condensed setof financial statements covering a period or periods less than onefull year or covering a 12-month period ending on a date otherthan the entity's fiscal year end.

Requirements

Acceptance.07 Before accepting an engagement to review an entity's interim financial

information for a new client, the auditor should follow the procedures for initialengagements required by section 210, Terms of Engagement.1

.08 Before accepting an engagement to perform a review of interim finan-cial information, the auditor should

1 Paragraphs .11–.12 of section 210, Terms of Engagement.

AU-C §930.03 ©2019, AICPA

Page 3: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1543

a. determine whether the financial reporting framework to be ap-plied in the preparation of the interim financial information isacceptable and

b. obtain the agreement of management that it acknowledges andunderstands its responsibility

i. for the preparation and fair presentation of the interimfinancial information in accordance with the applicable fi-nancial reporting framework;

ii. for the design, implementation, and maintenance of inter-nal control sufficient to provide a reasonable basis for thepreparation and fair presentation of interim financial in-formation in accordance with the applicable financial re-porting framework;

iii. to provide the auditor with(1) access to all information of which management is

aware that is relevant to the preparation and fairpresentation of the interim financial information,such as records, documentation, and other mat-ters;

(2) additional information that the auditor may re-quest from management for the purpose of the re-view; and

(3) unrestricted access to persons within the entityof whom the auditor determines it necessary tomake inquiries;2 and

iv. to include the auditor's review report in any document con-taining interim financial information that indicates thatsuch information has been reviewed by the entity's audi-tor.

.09 The auditor should not accept an engagement to review interim finan-cial information if

a. the auditor has determined that the financial reporting frame-work to be applied in the preparation of the interim financial in-formation is unacceptable.

b. the agreement referred to in paragraph .08b has not been ob-tained.

Agreement on Engagement Terms.10 The auditor should agree upon the terms of the engagement with man-

agement or those charged with governance, as appropriate. The agreed-uponterms of the engagement should be recorded in an engagement letter or othersuitable form of written agreement and should include the following: (Ref: par..A6)

a. The objectives and scope of the engagementb. The responsibilities of management set forth in paragraph .08bc. The responsibilities of the auditord. The limitations of a review engagemente. Identification of the applicable financial reporting framework for

the preparation of the interim financial information

2 Paragraph .06 of section 210.

©2019, AICPA AU-C §930.10

Page 4: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1544 Special Considerations in the United States

Procedures for a Review of Interim Financial Information

Understanding the Entity and Its Environment, Including Its Internal Control.11 To plan and conduct the engagement, the auditor should have an un-

derstanding of the entity and its environment, including its internal control asit relates to the preparation and fair presentation of both annual and interimfinancial information, sufficient to be able to

a. identify the types of potential material misstatements in the in-terim financial information and consider the likelihood of theiroccurrence.

b. select the inquiries and analytical procedures that will providethe auditor with a basis for reporting whether the auditor isaware of any material modifications that should be made to theinterim financial information for it to be in accordance with theapplicable financial reporting framework.

.12 To update or, in the case of an auditor who has not yet performed anaudit of the entity's annual financial statements, obtain the understanding re-quired by paragraph .11, the auditor should perform the following procedures:(Ref: par. .A7–.A8)

a. Read available documentation of the preceding year's audit and ofreviews of the prior interim period(s) of the current year and thecorresponding interim period(s) of the prior year to the extent nec-essary, based on the auditor's judgment, to enable the auditor toidentify matters that may affect the current period interim finan-cial information. In reading such documents, the auditor shouldspecifically consider the nature of any (Ref: par. .A9–.A10)

i. corrected material misstatements;

ii. matters identified in any summary of uncorrected mis-statements;

iii. identified risks of material misstatement due to fraud, in-cluding the risk of management override of controls; and

iv. significant financial accounting and reporting mattersthat may be of continuing significance, such as significantdeficiencies and material weaknesses.

b. Read the most recent annual and comparable prior interim periodfinancial information.

c. Consider the results of any audit procedures performed with re-spect to the current year's financial statements.

d. Inquire of management about changes in the entity's business ac-tivities.

e. Inquire of management about the identity of, and nature of trans-actions with, related parties.

f. Inquire of management about whether significant changes in in-ternal control, as it relates to the preparation and fair presenta-tion of interim financial information, have occurred subsequent tothe preceding annual audit or prior review of interim financial in-formation, including changes in the entity's policies, procedures,and personnel, as well as the nature and extent of such changes.

AU-C §930.11 ©2019, AICPA

Page 5: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1545

Analytical Procedures, Inquiries, and Other Review Procedures

Analytical Procedures.13 The auditor should apply analytical procedures to the interim financial

information to identify and provide a basis for inquiry about the relationshipsand individual items that appear to be unusual and that may indicate a ma-terial misstatement. Such analytical procedures should include the following:(Ref: par. .A11–.A13)

a. Comparing the interim financial information with comparable in-formation for the immediately preceding interim period, if appli-cable, and with the corresponding period(s) in the previous year,giving consideration to knowledge about changes in the entity'sbusiness and specific transactions

b. Considering plausible relationships among both financial and,when relevant, nonfinancial information (Ref: par. .A14)

c. Comparing recorded amounts or ratios developed from recordedamounts to expectations developed by the auditor through iden-tifying and using relationships that are reasonably expected toexist, based on the auditor's understanding of the entity and theindustry in which the entity operates

d. Comparing disaggregated revenue data (Ref: par. .A15)Inquiries and Other Review Procedures

.14 The auditor should make the following inquiries and perform the fol-lowing other review procedures when conducting a review of interim financialinformation:

a. Read the available minutes of meetings of stockholders, directors,and appropriate committees and inquire about matters dealt withat meetings for which minutes are not available to identify mat-ters that may affect the interim financial information. (Ref: par..A16)

b. Obtain reports from component auditors, if any, related to reviewsperformed of the interim financial information of significant com-ponents of the reporting entity, including its investees, or inquireof those auditors if reports have not been issued. (Ref: par. .A17)

c. Inquire of management abouti. whether the interim financial information has been pre-

pared and fairly presented in accordance with the applica-ble financial reporting framework consistently applied.

ii. unusual or complex situations that may have an effect onthe interim financial information. (Ref: par. .A18)

iii. significant transactions occurring or recognized in the in-terim period, particularly those in the last several days ofthe interim period.

iv. the status of uncorrected misstatements identified duringthe previous audit and interim review (that is, whetheradjustments had been recorded subsequent to the periodscovered by the prior audit or interim review and, if so, theamounts recorded and period in which such adjustmentswere recorded).

v. matters about which questions have arisen in the courseof applying the review procedures.

©2019, AICPA AU-C §930.14

Page 6: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1546 Special Considerations in the United States

vi. events subsequent to the date of the interim financial in-formation that could have a material effect on the fair pre-sentation of such information.

vii. its knowledge of any fraud or suspected fraud affecting theentity involving (1) management, (2) employees who havesignificant roles in internal control, or (3) others when thefraud could have a material effect on the financial infor-mation.

viii. whether management is aware of allegations of fraud orsuspected fraud affecting the entity communicated by em-ployees, former employees, regulators, or others.

ix. significant journal entries and other adjustments.x. communications from regulatory agencies.

xi. significant deficiencies and material weaknesses in the de-sign or operation of internal control as it relates to thepreparation and fair presentation of both annual and in-terim financial information.

xii. changes in related parties or significant new related partytransactions.

d. Obtain evidence that the interim financial information agrees orreconciles with the accounting records. In addition, the auditorshould inquire of management about the reliability of the recordsto which the interim financial information was compared or rec-onciled. (Ref: par. .A19)

e. Read the interim financial information to consider whether, basedon the results of the review procedures performed and other infor-mation that has come to the auditor's attention, the informationto be reported is in accordance with the applicable financial re-porting framework.

f. Read other information in documents containing the interim fi-nancial information to consider whether such information or themanner of its presentation is materially inconsistent with the in-terim financial information. If the auditor concludes that a ma-terial inconsistency exists or becomes aware of information thatthe auditor believes is a material misstatement of fact, the auditorshould take action based on the auditor's professional judgment.(Ref: par. .A20–.A21)

Inquiry Concerning Litigation, Claims, and Assessments.15 If information comes to the auditor's attention regarding litigation,

claims, or assessments that leads the auditor to question whether the interimfinancial information has been prepared, in all material respects, in accordancewith the applicable financial reporting framework, and the auditor believesthat the entity's internal or external legal counsel may have relevant infor-mation, the auditor should inquire of such legal counsel concerning litigation,claims, and assessments. (Ref: par. .A22)

Inquiry Concerning an Entity's Ability to Continue as a Going Concern.16 If the applicable financial reporting framework includes requirements

for management to evaluate the entity's ability to continue as a going concernfor a reasonable period of time in preparing interim financial information, theauditor should perform interim review procedures related to (a) whether thegoing concern basis of accounting is appropriate; (b) management's evaluationof whether there are conditions or events that raised substantial doubt about

AU-C §930.15 ©2019, AICPA

Page 7: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1547

the entity's ability to continue as a going concern; (c) if there are conditionsor events that raised substantial doubt about the entity's ability to continueas a going concern, management's plans to mitigate those matters; and (d) theadequacy of the related disclosures in the interim financial information. (Ref:par. .A23–.A24) [Paragraph added, effective for audits of financial statementsfor periods ending on or after December 15, 2017, by SAS No. 132.]

.17 If the applicable financial reporting framework does not include a re-quirement for management to evaluate the entity's ability to continue as a go-ing concern for a reasonable period of time in preparing interim financial in-formation and (a) conditions or events that raise substantial doubt about anentity's ability to continue as a going concern for a reasonable period of timeexisted at the date of prior period financial statements, regardless of whetherthe substantial doubt was alleviated by the auditor's consideration of manage-ment's plans, or (b) in the course of performing review procedures on the currentperiod interim financial information, the auditor becomes aware of conditionsor events that raise substantial doubt about the entity's ability to continue asa going concern, the auditor should

a. inquire of management whether the going concern basis of ac-counting is appropriate,

b. inquire of management about its plans for dealing with the ad-verse effects of the conditions and events, and (Ref: par. .A25)

c. consider the adequacy of the disclosure about such matters in theinterim financial information. (Ref: par. .A26)

[Paragraph renumbered and amended, effective for audits of financial state-ments for periods ending on or after December 15, 2017, by SAS No. 132.]Consideration of Management's Responses and Extension of Interim ReviewProcedures

.18 The auditor should consider the reasonableness and consistency ofmanagement's responses in light of the results of other review procedures andthe auditor's knowledge of the entity's business and its internal control. How-ever, the auditor is not required to corroborate management's responses withother evidence. [Paragraph renumbered by the issuance of SAS No. 132, Febru-ary 2017.]

.19 When a matter comes to the auditor's attention that leads the audi-tor to question whether the interim financial information has been preparedin accordance with the applicable financial reporting framework in all mate-rial respects, the auditor should make additional inquiries of management orothers or perform other procedures to provide a basis for reporting whetherthe auditor is aware of any material modifications that should be made to theinterim financial information. (Ref: par. .A27) [Paragraph renumbered by theissuance of SAS No. 132, February 2017.]

Evaluating the Results of Interim Review Procedures.20 The auditor should accumulate misstatements, including inadequate

disclosure, identified by the auditor in performing the review procedures orbrought to the auditor's attention during the performance of the review. (Ref:par. .A28) [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.21 The auditor should evaluate, individually and in the aggregate, mis-statements, including inadequate disclosure, accumulated in accordance withparagraph .20 to determine whether material modification should be made tothe interim financial information for it to be in accordance with the applicable

©2019, AICPA AU-C §930.21

Page 8: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1548 Special Considerations in the United States

financial reporting framework. (Ref: par. .A29–.A30) [Paragraph renumberedby the issuance of SAS No. 132, February 2017.]

Written Representations From Management.22 For all interim financial information presented and for all periods cov-

ered by the review, the auditor should request management to provide writtenrepresentations, as of the date of the auditor's review report (Ref: par. .A31–.A32)

a. that management has fulfilled its responsibility for the prepara-tion and fair presentation of the interim financial information, inaccordance with the applicable financial reporting framework, asset out in the terms of the engagement.

b. that management acknowledges its responsibility for designing,implementing, and maintaining internal control relevant to thepreparation and fair presentation of interim financial statements,including its responsibility to prevent and detect fraud.

c. that management has disclosed to the auditor all significant de-ficiencies and material weaknesses in the design or operation ofinternal control of which management is aware as it relates tothe preparation and fair presentation of both annual and interimfinancial information.

d. that management has provided the auditor with all relevant in-formation and access, as agreed upon in the terms of the engage-ment.

e. that all transactions have been recorded and are reflected in theinterim financial information.

f. that management has disclosed to the auditor the results of itsassessment of the risk that the interim financial information maybe materially misstated as a result of fraud.

g. that management has disclosed to the auditor its knowledge offraud or suspected fraud affecting the entity involving

i. management,ii. employees who have significant roles in internal control,

oriii. others when the fraud could have a material effect on the

interim financial information.h. that management has disclosed to the auditor its knowledge of

any allegations of fraud or suspected fraud affecting the entity'sinterim financial information communicated by employees, for-mer employees, regulators, or others.

i. that management has disclosed to the auditor all known in-stances of noncompliance or suspected noncompliance with lawsand regulations whose effects should be considered when prepar-ing interim financial information.

j. about whether management believes that the effects of uncor-rected misstatements are immaterial, individually and in the ag-gregate, to the interim financial information as a whole. A sum-mary of such items should be included in, or attached to, the writ-ten representation. (Ref: par. .A33)

k. that management has disclosed to the auditor all known actual orpossible litigation and claims whose effects should be considered

AU-C §930.22 ©2019, AICPA

Page 9: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1549

when preparing the interim financial information, and it has ap-propriately accounted for and disclosed such litigation and claimsin accordance with the applicable financial reporting framework.

l. about whether management believes that significant assump-tions used by it in making accounting estimates are reasonable.

m. that management has disclosed to the auditor the identity of theentity's related parties and all the related party relationships andtransactions of which it is aware, and it has appropriately ac-counted for and disclosed such relationships and transactions.

n. that all events occurring subsequent to the date of the interimfinancial information and for which the applicable financial re-porting framework requires adjustment or disclosure have beenadjusted or disclosed.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].23 If the auditor has concerns about the reliability of the representations

or if management does not provide the requested written representations, theauditor should take appropriate action. When management does not providethe written representations described in paragraph .22a–e, the auditor shouldwithdraw from the engagement to review the interim financial information.(Ref: par. .A34) [Paragraph renumbered by the issuance of SAS No. 132, Febru-ary 2017.]

Communications With Management and Those ChargedWith Governance

Matters Affecting the Completion of the Review.24 If the auditor cannot complete the review, the auditor should commu-

nicate to the appropriate level of management and those charged with gover-nance

a. the reason why the review cannot be completed;b. that an incomplete review does not provide a basis for reporting

and, accordingly, that the auditor is precluded from issuing a re-view report; and

c. any material modifications of which the auditor has become awarethat should be made to the interim financial information for it tobe in accordance with the applicable financial reporting frame-work, in accordance with paragraphs .25–.27. (Ref: par. .A35)

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].25 The auditor should communicate to the appropriate level of manage-

ment, as soon as practicable, matters that come to the auditor's attention duringthe conduct of the review that cause the auditor to believe that

a. material modification should be made to the interim financial in-formation for it to be in accordance with the applicable financialreporting framework, or

b. the entity issued the interim financial information before the com-pletion of the review.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].26 If, in the auditor's judgment, management does not respond appropri-

ately to the auditor's communication within a reasonable period of time, theauditor should inform those charged with governance of the matters as soon as

©2019, AICPA AU-C §930.26

Page 10: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1550 Special Considerations in the United States

practicable. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.27 If, in the auditor's judgment, those charged with governance do not re-spond appropriately to the auditor's communication within a reasonable periodof time, the auditor should consider whether to withdraw (a) from the engage-ment to review the interim financial information and (b) if applicable, fromserving as the entity's auditor. (Ref: par. .A36) [Paragraph renumbered by theissuance of SAS No. 132, February 2017.]

Other Matters.28 If the auditor becomes aware that fraud may have occurred, the audi-

tor should communicate the matter as soon as practicable to the appropriatelevel of management. If the fraud involves senior management or results in amaterial misstatement of the interim financial information, the auditor shouldcommunicate the matter directly to those charged with governance. If the audi-tor becomes aware of matters involving identified or suspected noncompliancewith laws and regulations whose effects should be considered when preparinginterim financial information, the auditor should communicate the matters tothose charged with governance, other than when the matters are clearly incon-sequential. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.29 The auditor should communicate relevant matters of governance in-terest arising from the review of interim financial information to those chargedwith governance, including the following:

a. Significant deficiencies or material weaknesses in internal controlas it relates to the preparation and fair presentation of annualand interim financial information (Ref: par. .A37)

b. Any of the matters described in section 260, The Auditor's Com-munication With Those Charged With Governance, that have beenidentified, as they relate to the interim financial information (Ref:par. .A38–.A40)

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

The Auditor’s Report on a Review of Interim FinancialInformation

Form of the Auditor’s Review Report.30 The auditor's review report should be in writing. (Ref: par. .A41) [Para-

graph renumbered by the issuance of SAS No. 132, February 2017.]

.31 The written review report should include the following: (Ref: par. .A42–.A43)

a. A title that includes the word independent to clearly indicate thatit is the report of an independent auditor.

b. An addressee as appropriate for the circumstances of the engage-ment.

c. An introductory paragraph thati. identifies the entity whose interim financial information

has been reviewed,ii. states that the interim financial information identified in

the report was reviewed,

AU-C §930.27 ©2019, AICPA

Page 11: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1551

iii. identifies the interim financial information, andiv. specifies the date or period covered by each financial state-

ment comprising the interim financial information.d. A section with the heading "Management's Responsibility for the

Financial Statements" that includes an explanation that manage-ment is responsible for the preparation and fair presentation ofthe interim financial information in accordance with the appli-cable financial reporting framework; this responsibility includesthe design, implementation, and maintenance of internal controlsufficient to provide a reasonable basis for the preparation andfair presentation of interim financial information in accordancewith the applicable financial reporting framework.

e. A section with the heading "Auditor's Responsibility" that in-cludes the following statements:

i. The auditor's responsibility is to conduct the review ofinterim financial information in accordance with audit-ing standards generally accepted in the United States ofAmerica applicable to reviews of interim financial infor-mation.

ii. A review of interim financial information consists prin-cipally of applying analytical procedures and making in-quiries of persons responsible for financial and accountingmatters.

iii. A review of interim financial information is substan-tially less in scope than an audit conducted in accordancewith auditing standards generally accepted in the UnitedStates of America, the objective of which is an expression ofan opinion regarding the financial information as a whole,and accordingly, no such opinion is expressed.

f. A concluding section with an appropriate heading that includesa statement about whether the auditor is aware of any materialmodifications that should be made to the accompanying interimfinancial information for it to be in accordance with the applicablefinancial reporting framework and that identifies the country oforigin of those accounting principles, if applicable.

g. The manual or printed signature of the auditor's firm.h. The city and state where the auditor practices.i. The date of the review report, which should be dated as of the date

of completion of the review procedures.[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

.32 The auditor should determine that management has clearly marked asunaudited each page of the interim financial information accompanying the re-view report. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

Comparative Interim Financial Information That Has Not Been ReviewedPresented With Reviewed Interim Financial Information

.33 If an auditor is engaged to perform a review of the most recent interimperiod in accordance with this section, and such financial information will bepresented in comparative form with interim financial information of a priorperiod that has not been reviewed, such interim financial information shouldbe accompanied by an indication in the auditor's review report that the auditor

©2019, AICPA AU-C §930.33

Page 12: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1552 Special Considerations in the United States

has not reviewed the prior period interim financial information and that theauditor assumes no responsibility for it. (Ref: par. .A44) [Paragraph renumberedby the issuance of SAS No. 132, February 2017.]

Interim Financial Information Presented With Condensed Balance SheetInformation for the Most Recent Year End

.34 When a condensed balance sheet derived from audited financial state-ments is presented on a comparative basis with the interim financial informa-tion, the auditor should report on the condensed balance sheet only when theauditor audited the financial statements from which the condensed balancesheet was derived. The auditor should compare the condensed balance sheetwith the related information in the audited financial statements to determinewhether the condensed balance sheet agrees with, or can be recalculated from,the related information in the audited financial statements. The auditor's re-port on the interim financial information should include a paragraph address-ing the condensed balance sheet that

a. identifies the condensed balance sheet on which the auditor isreporting.

b. identifies the audited financial statements from which the con-densed balance sheet was derived and indicates that such finan-cial statements are not separately presented.

c. refers to the auditor's report on the audited financial statements,the date of that report, and the type of opinion expressed and, ifthe opinion is modified, the basis for the modification.

d. describes the nature of any emphasis-of-matter paragraph orother-matter paragraph included in the auditor's report.

e. includes an opinion about whether the condensed balance sheetis consistent, in all material respects, in relation to the auditedfinancial statements from which it has been derived. (Ref: par..A45)

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

Modification of the Auditor’s Review Report.35 When the interim financial information has not been prepared in ac-

cordance with the applicable financial reporting framework in all material re-spects, the auditor should consider whether modification of the auditor's reviewreport on the interim financial information is sufficient to address the depar-ture from the applicable financial reporting framework. (Ref: par. .A46–.A49)[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

.36 If the auditor concludes that modification of the standard review reportis sufficient to address the departure, the auditor should modify the reviewreport. The modification should describe the nature of the departure and, ifpracticable, should state the effects on the interim financial information. If thedeparture is due to inadequate disclosure, the auditor should, if practicable,include the information in the report that the auditor believes is necessaryfor adequate disclosure in accordance with the applicable financial reportingframework. (Ref: par. .A50) [Paragraph renumbered by the issuance of SAS No.132, February 2017.]

.37 If the auditor believes that modification of the review report is notsufficient to address the deficiencies in the interim financial information, theauditor should withdraw from the review engagement and provide no further

AU-C §930.34 ©2019, AICPA

Page 13: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1553

services with respect to such interim financial information. [Paragraph renum-bered by the issuance of SAS No. 132, February 2017.]

Emphasis-of-Matter in the Auditor’s Review Report.38 The auditor should include an emphasis-of-matter paragraph in the

auditor's review report in any of the following circumstances, regardless ofwhether the entity is required under the applicable financial reporting frame-work to include a statement in the notes to the interim financial informationthat substantial doubt exists: (Ref :par. .A51–.A52)

a. A going concern emphasis-of-matter paragraph was included inthe prior year's auditor's report and

i. the conditions or events giving rise to the emphasis-of-matter paragraph continue to exist and

ii. those conditions or events raise substantial doubt aboutthe entity's ability to continue as a going concern for a rea-sonable period of time and management's plans do not al-leviate them.

b. A going concern emphasis-of-matter paragraph was not includedin the prior year's auditor's report and

i. management is required under the applicable financial re-porting framework to include a statement in the notes tothe interim financial information that substantial doubtexists and

ii. management has included such statement in the notes tothe interim financial information.

[Paragraph added, effective for audits of financial statements for periods endingon or after December 15, 2017, by SAS No. 132.]

Subsequent Discovery of Facts Existing at the Date of theAuditor’s Review Report

.39 If, subsequent to the date of the auditor's review report, the auditor be-comes aware that facts existed at the date of the review report that might haveaffected the auditor's review report had the auditor then been aware of thosematters, the auditor should apply the requirements and guidance, adaptedas necessary, in section 560, Subsequent Events and Subsequently DiscoveredFacts. [Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

Other Considerations.40 If management does not include the auditor's review report in a report,

document, or written communication containing the reviewed interim financialinformation that indicates that such information has been reviewed by the en-tity's auditor, despite having agreed in the terms of the engagement to do so,the auditor should perform the following procedures:

• Request that management amend the report, document, or writ-ten communication to include the auditor's review report and reis-sue the report, document, or written communication

• If management does not comply with the request to amend andreissue the report, document, or written communication, request

©2019, AICPA AU-C §930.40

Page 14: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1554 Special Considerations in the United States

that the auditor's name not be associated with the interim finan-cial information or referred to in the report, document, or writtencommunication because the auditor will not permit either the useof the auditor's name or reference to the auditor unless the audi-tor's review report is included with the reviewed interim financialinformation in these circumstances

• Communicate management's noncompliance with the requests tothose charged with governance

• When appropriate, recommend that the entity consult with its le-gal counsel about the application of relevant laws and regulationsto the circumstances

• Consider what other actions might be appropriate (Ref: par. .A53)

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].41 If the auditor has issued a modified review report due to a departure

from the applicable financial reporting framework, and management issues theinterim financial information without including the review report in the doc-ument containing the interim financial information, the auditor should deter-mine the appropriate course of action in the circumstances, including whetherto withdraw from the engagement to audit the annual financial statements.[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

Interim Financial Information Accompanying AuditedFinancial Statements

.42 The auditor should include an other-matter paragraph in the auditor'sreport on the audited financial statements when all the following conditionsexist:

a. The interim financial information that has been reviewed in ac-cordance with this section is included in a document containingaudited financial statements.

b. The interim financial information accompanying audited finan-cial statements does not appear to be presented in accordancewith the applicable financial reporting framework.

c. The auditor's separate review report, which refers to the depar-ture from the applicable financial reporting framework, is not pre-sented with the interim financial information.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].43 The auditor is required by section 700A, Forming an Opinion and Re-

porting on Financial Statements, to address in the auditor's report on the au-dited financial statements information that is not required by the applicablefinancial reporting framework but is nevertheless presented as part of the ba-sic financial statements if it cannot be clearly differentiated. 3 When the interimfinancial information included in a note to the financial statements, includinginformation that has been reviewed in accordance with this section, is not ap-propriately marked as unaudited, the auditor should, in the auditor's report onthe audited financial statements, disclaim an opinion on the interim financialinformation. (Ref: par. .A54–.A55) [Paragraph renumbered by the issuance ofSAS No. 132, February 2017.]

3 Paragraph .59 of section 700A, Forming an Opinion and Reporting on Financial Statements.[Revised, July 2017, to reflect conforming changes necessary due to the issuance of SAS No. 131.]

AU-C §930.41 ©2019, AICPA

Page 15: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1555

Documentation.44 The auditor should prepare documentation in connection with a review

of interim financial information that will enable an experienced auditor, havingno previous connection to the review, to understand

a. the nature, timing, and extent of the review procedures per-formed;

b. the results of the review procedures performed and the evidenceobtained; and

c. significant findings or issues arising during the review, the con-clusions reached thereon, and significant professional judgmentsmade in reaching those conclusions.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].45 The documentation should include the communications required by

this section, whether written or oral. (Ref: par. .A56–.A57) [Paragraph renum-bered by the issuance of SAS No. 132, February 2017.]

Application and Other Explanatory Material

Scope of This Section (Ref: par. .02).A1 The ability to apply this section even when the auditor does not ex-

pect to be engaged to audit the current year financial statements provides forappropriate transitions between the predecessor auditor and the auditor of thecurrent year financial statements.

.A2 Appropriate financial reporting frameworks for condensed interim fi-nancial information may include, for example, Financial Accounting StandardsBoard (FASB) Accounting Standards Codification (ASC) 270, Interim Report-ing, and Article 10 of Securities and Exchange Commission (SEC) Regulation S-X, with respect to accounting principles generally accepted in the United Statesof America, or International Accounting Standard 34, Interim Financial Report-ing, with respect to International Financial Reporting Standards issued by theInternational Accounting Standards Board. FASB ASC 270 outlines the appli-cation of U.S. generally accepted accounting principles (GAAP) to the determi-nation of income when interim financial information is presented, provides forthe use of estimated effective income tax rates, and specifies certain disclosurerequirements for condensed interim financial information issued by public com-panies and may be adapted by nonissuers as a fair presentation framework forcondensed interim financial information. In addition to FASB ASC 270, otherFASB ASC topics also include disclosure requirements for interim financial in-formation.

The Meaning of Readily Available (Ref: par. .02d(iii)).A3 Audited financial statements are deemed to be readily available if a

third-party user can obtain the financial statements without any further actionby the entity (for example, financial statements on an entity's website may beconsidered readily available, but being available upon request is not consideredreadily available).

Objective (Ref: par. .05).A4 The objective of a review of interim financial information differs

significantly from that of an audit conducted in accordance with auditing

©2019, AICPA AU-C §930.A4

Page 16: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1556 Special Considerations in the United States

standards generally accepted in the United States of America. A review of in-terim financial information does not provide a basis for expressing an opinionabout whether the interim financial information is presented fairly, in all mate-rial respects, in accordance with the applicable financial reporting framework.

.A5 A review, in contrast to an audit, is not designed to provide the audi-tor with a basis for obtaining reasonable assurance that the interim financialinformation is free from material misstatement. A review consists principallyof performing analytical procedures and making inquiries of persons responsi-ble for financial and accounting matters and does not contemplate (a) tests ofaccounting records through inspection, observation, or confirmation; (b) testsof controls to evaluate their effectiveness; (c) the obtainment of corroboratingevidence in response to inquiries; or (d) the performance of certain other pro-cedures ordinarily performed in an audit. A review may bring to the auditor'sattention significant findings or issues affecting the interim financial informa-tion, but it does not provide assurance that the auditor will become aware of allsignificant findings or issues that would be identified in an audit.

Acceptance

Agreement on Engagement Terms (Ref: par. .10).A6 The engagement letter or other suitable form of written agreement

documenting the agreed-upon terms of the engagement with the entity regard-ing a review of interim financial information may use the following wording toinclude the information necessary to meet the requirements of paragraph .10:

Objectives and scope of the engagement

• The objective of a review of interim financial information is to pro-vide the auditor with a basis for reporting whether the auditor isaware of any material modifications that should be made to theinterim financial information for it to be in accordance with theapplicable financial reporting framework.

• A review includes obtaining sufficient knowledge of the entity'sbusiness and internal control, as it relates to the preparation andfair presentation of both annual and interim financial informa-tion, to enable the auditor to

— identify the types of potential material misstatements inthe interim financial information and consider the likeli-hood of their occurrence.

— select the inquiries and analytical procedures that willprovide the auditor with a basis for reporting whether theauditor is aware of any material modifications that shouldbe made to the interim financial information for it to con-form with the applicable financial reporting framework.

Management's responsibilities

• Management is responsible for the following:

— Preparing and presenting the interim financial informa-tion in accordance with the applicable financial reportingframework.

— Designing, implementing, and maintaining internal con-trol sufficient to provide a reasonable basis for thepreparation and fair presentation of interim financial

AU-C §930.A5 ©2019, AICPA

Page 17: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1557

information in accordance with the applicable financial re-porting framework.

— Providing the auditor with (a) access to all informationof which management is aware that is relevant to thepreparation and fair presentation of the interim financialinformation, such as records, documentation, and othermatters; (b) additional information that the auditor mayrequest from management for the purpose of the review;and (c) unrestricted access to persons within the entityof whom the auditor determines it necessary to makeinquiries.

— Including the auditor's review report in any document con-taining interim financial information that indicates thatsuch information has been reviewed by the entity's audi-tor.

— Identifying and ensuring that the entity complies with thelaws and regulations applicable to its activities.

— Providing the auditor, at the conclusion of the engagement,with a letter confirming certain representations made dur-ing the review.

— Adjusting the interim financial information to correct ma-terial misstatements. Although a review of interim finan-cial information is not designed to provide the auditorwith reasonable assurance that the interim financial infor-mation is free from material misstatement, managementnonetheless is responsible for affirming in its representa-tion letter to the auditor that the effects of any uncorrectedmisstatements aggregated by the auditor during the cur-rent engagement and pertaining to the current year pe-riod(s) under review are immaterial, both individually andin the aggregate, to the interim financial information as awhole.

The auditor's responsibilities

• The auditor is responsible for conducting the review in accordancewith auditing standards generally accepted in the United States ofAmerica applicable to reviews of interim financial information. Areview of interim financial information consists principally of per-forming analytical procedures and making inquiries of persons re-sponsible for financial and accounting matters. It is substantiallyless in scope than an audit conducted in accordance with auditingstandards generally accepted in the United States of America, theobjective of which is the expression of an opinion regarding the fi-nancial information as a whole. Accordingly, the auditor will notexpress an opinion on the interim financial information.

Limitations of the engagement

• A review does not provide a basis for expressing an opinion aboutwhether the interim financial information is presented fairly, inall material respects, in accordance with the applicable financialreporting framework.

• A review does not provide the auditor with a basis for obtainingreasonable assurance that the auditor will become aware of allsignificant findings or issues that would be identified in an audit.

©2019, AICPA AU-C §930.A6

Page 18: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1558 Special Considerations in the United States

• A review is not designed to provide the auditor with a basis forobtaining reasonable assurance on internal control or to identifysignificant deficiencies or material weaknesses in internal control;however, the auditor is responsible for communicating to manage-ment and those charged with governance any significant deficien-cies or material weaknesses in internal control that the auditoridentifies during the performance of review procedures.

Procedures for a Review of Interim Financial InformationUnderstanding the Entity and Its Environment, Including Its Internal Control(Ref: par. .11–.12)

.A7 As required by section 315, Understanding the Entity and Its Environ-ment and Assessing the Risks of Material Misstatement, the auditor who hasaudited the entity's financial statements for one or more annual periods wouldhave obtained an understanding of the entity and its environment, includingits internal control as it relates to the preparation and fair presentation of an-nual financial information, that was sufficient to conduct the audit. Internalcontrol over the preparation and fair presentation of interim financial informa-tion may differ from internal control over the preparation and fair presentationof annual financial statements because certain accounting principles and prac-tices used for interim financial information may differ from those used for thepreparation of annual financial statements (for example, the use of estimatedeffective income tax rates for the preparation of interim financial information).

.A8 The auditor is unable to complete the review if the entity's internalcontrol appears to contain deficiencies so significant that it would be imprac-ticable for the auditor to effectively perform review procedures that wouldachieve the objective stated in paragraph .05. Paragraph .24 addresses the au-ditor's responsibilities when the review cannot be completed.

.A9 In an initial review of interim financial information, when perform-ing the procedures for a new client required by paragraph .07, the auditor alsomay consider requesting access to review the predecessor auditor's documenta-tion related to reviews of an interim period or interim periods in the prior year.However, the inquiries made and analytical procedures performed, or other pro-cedures performed in the initial review, and the conclusions reached are solelythe responsibility of the auditor. Therefore, the auditor is not permitted to makereference to the report or work of the predecessor auditor as the basis, in part,for the auditor's own report.

.A10 If the predecessor auditor does not respond to the auditor's inquiriesor does not allow the auditor to review the predecessor auditor's documenta-tion, the auditor may inquire why and use alternative procedures to obtain theunderstanding required by paragraph .11.

Analytical Procedures, Inquiries, and Other Review Procedures

Analytical Procedures (Ref: par. .13).A11 Procedures for conducting a review of interim financial information

generally are limited to analytical procedures, inquiries, and other proceduresthat address significant accounting and disclosure matters relating to the in-terim financial information. The auditor's understanding of the entity and itsenvironment, including its internal control, the results of the risk assessmentsrelating to the preceding audit, and the auditor's consideration of materiality asit relates to the interim financial information, influences the nature and extentof the inquiries made and analytical procedures performed. For example, if the

AU-C §930.A7 ©2019, AICPA

Page 19: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1559

auditor becomes aware of a significant change in the entity's control activitiesat a particular location, the auditor may consider the following procedures:

• Making additional inquiries, such as whether management moni-tored the changes and considered whether they were operating asintended

• Employing analytical procedures with a more precise expectation

.A12 Examples of analytical procedures that an auditor may consider per-forming when conducting a review of interim financial information are con-tained in appendix A, "Analytical Procedures the Auditor May Consider Per-forming When Conducting a Review of Interim Financial Information." Theauditor also may find the guidance in section 520, Analytical Procedures, use-ful in conducting a review of interim financial information.

.A13 Expectations developed by the auditor in performing analytical pro-cedures in connection with a review of interim financial information ordinarilyare less precise than those developed in an audit. Also, in a review, the auditoris not required to corroborate management's responses with other evidence.

.A14 In considering plausible relationships, the auditor may consider in-formation developed and used by the entity (for example, analyses prepared formanagement or those charged with governance).

.A15 To compare disaggregated revenue data, the auditor may compare,for example, revenue reported by month and product line or operating segmentduring the current interim period with that of comparable prior periods.

Inquiries and Other Review Procedures (Ref: par. .14)

.A16 Many of the inquiries and review procedures can be performed before,or simultaneously with, the entity's preparation of the interim financial infor-mation. For example, the auditor may update the understanding of the entity'sinternal control and begin reading applicable minutes before the end of an in-terim period. Performing some of the review procedures earlier in the interimperiod also permits early identification and consideration of significant findingsand issues affecting the interim financial information. In addition, when the au-ditor performing the review of interim financial information is also engaged toperform an audit of the annual financial statements of the entity, certain au-diting procedures associated with the annual audit of the financial statementsmay be performed concurrently with the review of interim financial informa-tion. For example, information gained from reading the minutes of meetings ofthe board of directors in connection with the review also may be relevant to theannual audit. Also, there may be significant or unusual transactions occurringduring an interim period (for example, business combinations, restructurings,or significant revenue transactions) for which the procedures that would needto be performed for purposes of the audit of the annual financial statementscould be performed, to the extent practicable, at the time of the review of theinterim period in which the transactions are first recorded.

.A17 The auditor may find the guidance in section 600, SpecialConsiderations—Audits of Group Financial Statements (Including the Work ofComponent Auditors), useful in conducting a review of interim financial infor-mation for an entity that prepares group financial statements.

.A18 Examples of unusual or complex situations about which the auditormay inquire of management are contained in appendix B, "Unusual or Com-plex Situations to Be Considered by the Auditor When Conducting a Review ofInterim Financial Information."

©2019, AICPA AU-C §930.A18

Page 20: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1560 Special Considerations in the United States

.A19 To obtain evidence that the interim financial information agrees orreconciles with the accounting records, the auditor may compare the interimfinancial information to (a) the accounting records, such as the general ledger;(b) a consolidating schedule derived from the accounting records; or (c) othersupporting data in the entity's records.

.A20 The auditor may find the guidance in section 720A, Other Informa-tion in Documents Containing Audited Financial Statements, useful in consid-ering other information included in documents containing interim financial in-formation.

.A21 The auditor may request component auditors involved in the engage-ment, if any, to read the other information.

Inquiry Concerning Litigation, Claims, and Assessments (Ref: par. .15).A22 A review of interim financial information does not contemplate ob-

taining corroborating evidence for responses to inquiries, such as those con-cerning litigation, claims, and assessments. Consequently, the auditor is notrequired to send an inquiry letter to an entity's legal counsel concerning litiga-tion, claims, and assessments.

Inquiry Concerning an Entity's Ability to Continue as a Going Concern (Ref:par. .16–.17)

.A23 The nature and extent of the auditor's interim review procedures arematters of the auditor's professional judgment. For example, when a history ofprofitable operations and ready access to financing exists, inquiry alone mightbe sufficient to review the entity's ability to continue as a going concern for areasonable period of time. [Paragraph added, effective for audits of financialstatements for periods ending on or after December 15, 2017, by SAS No. 132.]

.A24 Certain financial reporting frameworks require management to eval-uate the entity's ability to continue as a going concern for a reasonable periodof time in preparing interim financial information.4 For example, FASB ASCrequires management to evaluate whether there are conditions and events,considered in the aggregate, that raise substantial doubt about an entity's abil-ity to continue as a going concern.5 Under FASB ASC, the evaluation periodis within one year after the date that the financial statements are issued (orwithin one year after the date that the financial statements are available tobe issued, when applicable).6 [Paragraph added, effective for audits of financialstatements for periods ending on or after December 15, 2017, by SAS No. 132.]

.A25 A review of interim financial information is not designed to identifyconditions or events that raise substantial doubt about the entity's ability tocontinue as a going concern for a reasonable period of time. However, conditionsor events that raise substantial doubt about the entity's ability to continue as agoing concern for a reasonable period of time may have existed at the date of theprior period financial statements or may be identified as a result of inquiriesof management or in the course of performing other review procedures. [Para-graph renumbered and amended, effective for audits of financial statements forperiods ending on or after December 15, 2017, by SAS No. 132.]

4 See paragraph .11 of section 570, The Auditor's Consideration of an Entity's Ability to Continueas a Going Concern, for the definition of reasonable period of time. [Footnote added, effective for auditsof financial statements for periods ending on or after December 15, 2017, by SAS No. 132.]

5 "Pending Content" in FASB Accounting Standards Codification (ASC) 205-40-50-1. [Footnoteadded, effective for audits of financial statements for periods ending on or after December 15, 2017,by SAS No. 132.]

6 See footnote 5. [Footnote added, effective for audits of financial statements for periods endingon or after December 15, 2017, by SAS No. 132.]

AU-C §930.A19 ©2019, AICPA

Page 21: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1561

.A26 Section 570, The Auditor's Consideration of an Entity's Ability to Con-tinue as a Going Concern, may provide useful guidance to the auditor when con-sidering whether there is adequate and appropriate disclosure in the interimfinancial information about the entity's ability to continue as a going concernfor a reasonable period of time7 when

a. conditions or events have been identified as of the interim report-ing date covered by the review and substantial doubt about theentity's ability to continue as a going concern for a reasonable pe-riod of time exists, or

b. the auditor's report for the prior year end contained an emphasis-of-matter paragraph indicating the existence of substantial doubtabout the entity's ability to continue as a going concern for a rea-sonable period of time, and the conditions that raised such doubtcontinued to exist as of the interim reporting date covered by thereview.

If the auditor determines that the disclosure related to substantial doubt aboutthe entity's ability to continue as a going concern is inadequate, resulting ina departure from the applicable financial reporting framework, the auditor isrequired by paragraph .35 to modify the report. [Paragraph renumbered andamended, effective for audits of financial statements for periods ending on orafter December 15, 2017, by SAS No. 132.]Consideration of Management's Responses and Extension of Interim ReviewProcedures (Ref: par. .19)

.A27 The auditor's interim review procedures may lead the auditor tomake additional inquiries, such as questioning whether, for example, a signif-icant sales transaction is recorded in accordance with the applicable financialreporting framework. Additional procedures that the auditor may perform toresolve such questions include discussing the terms of the transaction with se-nior sales and accounting personnel, reading the sales contract, or both. [Para-graph renumbered by the issuance of SAS No. 132, February 2017.]

Evaluating the Results of Interim Review Procedures(Ref: par. .20–.21)

.A28 The auditor may designate an amount below which misstatementswould be clearly trivial and would not need to be accumulated because the au-ditor expects that the accumulation of such amounts would not have a materialeffect on the interim financial information.8 [Paragraph renumbered by the is-suance of SAS No. 132, February 2017.]

.A29 As noted in paragraph .A2, appropriate financial reporting frame-works for interim financial information may include, for example, FASB ASC270 and Article 10 of SEC Regulation S-X. FASB ASC 270 describes the ap-plicability of GAAP to interim financial information and indicates the types ofdisclosures necessary to report on a meaningful basis for a period of less thanone full year. FASB ASC 270-10-45-16 provides guidance on assessing materi-ality in interim periods. For example, it states that in determining materiality

7 Paragraphs .22–.23 of section 570, The Auditor's Consideration of an Entity's Ability to Continueas a Going Concern. [Footnote revised, August 2012, to reflect conforming changes necessary dueto the issuance of SAS No. 126. Footnote renumbered and amended, effective for audits of financialstatements for periods ending on or after December 15, 2017, by SAS No. 132.]

8 Paragraph .A2 of section 450, Evaluation of Misstatements Identified During the Audit. [Foot-note renumbered by the issuance of SAS No. 132, February 2017.]

©2019, AICPA AU-C §930.A29

Page 22: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1562 Special Considerations in the United States

for the purpose of reporting the correction of an error, amounts shall be relatedto the estimated income for the full fiscal year and also to the effect on thetrend of earnings. Further, Rule 10-01(a)(5) of SEC Regulation S-X states thefollowing:

The interim financial information shall include disclosures either on the face ofthe financial statements or in accompanying footnotes sufficient so as to makethe interim information presented not misleading. Registrants may presumethat users of the interim financial information have read or have access to theaudited financial statements for the preceding fiscal year and that the ade-quacy of additional disclosure needed for a fair presentation, except in regardto material contingencies may be determined in that context. Accordingly, foot-note disclosure which would substantially duplicate the disclosure containedin the most recent annual report to security holders or latest audited financialstatements, such as a statement of significant accounting policies and practices,details of accounts which have not changed significantly in amount or compo-sition since the end of the most recently completed fiscal year, and detaileddisclosures prescribed by Rule 4-08 of this Regulation, may be omitted. How-ever, disclosure shall be provided where events subsequent to the end of themost recent fiscal year have occurred which have a material impact on the reg-istrant. Disclosures should encompass for example, significant changes sincethe end of the most recently completed fiscal year in such items as: accountingprinciples and practices; estimates inherent in the preparation of the financialstatements; status of long-term contracts; capitalization including significantnew borrowings or modification of existing financing arrangements; and the re-porting entity resulting from business combinations or dispositions. Notwith-standing the above, where material contingencies exist, disclosure of such mat-ters shall be provided even though a significant change since year end may nothave occurred.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

.A30 Considerations that may affect the evaluation of whether uncor-rected misstatements, individually or in the aggregate, are material includethe following:

• The nature, cause (if known), and amount of the misstatements

• Whether the misstatements originated in the preceding year orinterim periods of the current year

• Materiality judgments made in conjunction with the current orprior year's annual audit

• The potential effect of the misstatements on future interim or an-nual periods

• The appropriateness of offsetting a misstatement of an estimatedamount with a misstatement of an item capable of precise mea-surement

• Recognition that an accumulation of immaterial misstatements inthe balance sheet could contribute to material misstatements infuture periods

Section 450, Evaluation of Misstatements Identified During the Audit, providesguidance regarding qualitative considerations in evaluating whether misstate-ments are material. [Paragraph renumbered by the issuance of SAS No. 132,February 2017.]

AU-C §930.A30 ©2019, AICPA

Page 23: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1563

Written Representations From Management (Ref: par. .22–.23).A31 Exhibit A, "Illustrative Management Representation Letters for a

Review of Interim Financial Information," contains illustrative representationletters for engagements to review interim financial information. [Paragraphrenumbered by the issuance of SAS No. 132, February 2017.]

.A32 The auditor may request additional representations regarding mat-ters specific to the entity's business or industry. [Paragraph renumbered by theissuance of SAS No. 132, February 2017.]

.A33 If no uncorrected misstatements were identified, the representationregarding uncorrected misstatements is not relevant and, accordingly, is notrequired. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.A34 Appropriate action when management does not provide one or morerequested written representations or when the auditor has concerns about thereliability of the representations may include

• discussing the matter with management and, when relevant,those charged with governance;

• reevaluating the integrity of management and evaluating the ef-fect that this may have on the reliability of representations (oralor written) and evidence in general; and

• considering whether to withdraw from the engagement to reviewthe interim financial information and, if applicable, as the entity'sauditor.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

Communications With Management and Those ChargedWith Governance

Matters Affecting the Completion of the Review (Ref: par. .24–.27).A35 When an auditor is unable to perform the procedures that the audi-

tor considers necessary to achieve the objective of a review of interim finan-cial information, or management does not provide the auditor with the writtenrepresentations that the auditor believes are necessary, the review will be in-complete. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.A36 The auditor may seek legal advice when considering whether to with-draw from the engagement to review the interim financial information and asthe entity's auditor. [Paragraph renumbered by the issuance of SAS No. 132,February 2017.]

Other Matters (Ref: par. .28–.29).A37 Section 265, Communicating Internal Control Related Matters Iden-

tified in an Audit, provides guidance on identifying and communicating defi-ciencies in internal control. [Paragraph renumbered by the issuance of SASNo. 132, February 2017.]

.A38 As a result of performing the review of the interim financial infor-mation, the auditor may become aware of matters that, in the opinion of theauditor, are both significant and relevant to those charged with governance

©2019, AICPA AU-C §930.A38

Page 24: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1564 Special Considerations in the United States

in overseeing the financial reporting and disclosure process. Examples of suchmatters include the following:

• A change in a significant accounting policy affecting the interimfinancial information

• Adjustments that either individually or in the aggregate couldhave a significant effect on the entity's financial reporting process

• Uncorrected misstatements aggregated by the auditor that weredetermined by management to be immaterial, both individuallyand in the aggregate, to the interim financial information as awhole

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.].A39 The objective of a review of interim financial information differs sig-

nificantly from that of an audit. Therefore, any communication that the auditormay make about the quality, not just the acceptability, of the entity's accountingprinciples as applied to its interim financial reporting generally is limited to theeffect of significant events, transactions, and changes in accounting estimatesthat the auditor considered when conducting the review of interim financialinformation. Further, interim review procedures do not provide assurance thatthe auditor will become aware of all matters that might affect the auditor'sjudgments about the quality of the entity's accounting principles that would beidentified as a result of an audit. [Paragraph renumbered by the issuance ofSAS No. 132, February 2017.]

.A40 The communications required by paragraphs .24–.29 may be oral orwritten. The communications are most helpful when made on a sufficientlytimely basis to enable management or those charged with governance to takeappropriate action. [Paragraph renumbered by the issuance of SAS No. 132,February 2017.]

The Auditor’s Report on a Review of InterimFinancial Information

Form of the Auditor’s Review Report (Ref: par. .30–.31).A41 Entities may be required by third parties to engage auditors to per-

form a review of interim financial information, but such third parties maychoose to not require that a written auditor's review report on such informa-tion be provided to users of the entity's interim financial information. For ex-ample, entities that trade unregistered private equity securities on electronictrading platforms, often referred to as private equity exchanges, may be re-quired to provide financial and other information to the qualified investors onthe exchange's website. The ongoing reporting requirements of these exchangesare substantially similar to the reporting required of issuers, wherein entitiestrading securities on such exchanges are required to engage auditors to reviewtheir interim financial information but are not required to include written re-view reports with interim financial information provided to qualified investors.Nonetheless, in accordance with paragraph .30, the auditor's report on the re-view of the interim financial information is required to be in writing. [Para-graph renumbered by the issuance of SAS No. 132, February 2017.]

.A42 Reporting considerations related to the dating of reports or subse-quent events encountered during a review are similar to those encountered inan audit of financial statements. Sections 560 and 700A provide guidance onthese issues. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

AU-C §930.A39 ©2019, AICPA

Page 25: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1565

.A43 Exhibit B, "Illustrations of Auditor's Review Reports on InterimFinancial Information," contains illustrations of review reports. [Paragraphrenumbered by the issuance of SAS No. 132, February 2017.]

Comparative Interim Financial Information That Has Not Been ReviewedPresented With Reviewed Interim Financial Information (Ref: par. .33)

.A44 The indication that the auditor has not reviewed the prior periodinterim financial information and that the auditor assumes no responsibilityfor it may be worded, for example, as follows:

The accompanying [describe the interim financial information or statements] ofABC Company and subsidiaries as of September 30, 20X1, and for the three-month period then ended were not reviewed by us, and accordingly, we do notexpress any form of assurance on it.

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

Interim Financial Information Presented With Condensed Balance SheetInformation for the Most Recent Year End (Ref: par. .34)

.A45 Because interim financial reporting is intended to be an update toyear-end reporting, condensed balance sheet information as of the most recentyear end often is presented for comparative purposes with the correspondinginformation as of the latest interim period. Appendix B includes an illustrationof a review report on comparative interim financial information that includesa condensed balance sheet derived from audited financial statements. [Para-graph renumbered by the issuance of SAS No. 132, February 2017.]

Modification of the Auditor’s Review Report (Ref: par. .35–.36).A46 Departures from the applicable financial reporting framework in-

clude inadequate disclosure and changes in accounting policies that are notin accordance with the applicable financial reporting framework. [Paragraphrenumbered by the issuance of SAS No. 132, February 2017.]

.A47 Section 700A addresses the reporting requirements when the circum-stances contemplated by the "Accounting Principles Rule" (ET sec. 1.320.001) ofthe AICPA Code of Professional Conduct are present. [Revised, January 2015, toreflect conforming changes necessary due to the issuance of the revised AICPACode of Professional Conduct, effective December 15, 2014. Paragraph renum-bered by the issuance of SAS No. 132, February 2017.]

.A48 If the interim financial information adequately discloses a lack of con-sistency in the application of accounting principles affecting the interim finan-cial information, the auditor may, but is not required to, include an emphasis-of-matter paragraph in the auditor's review report. [Paragraph renumbered andamended, effective for audits of financial statements for periods ending on orafter December 15, 2017, by SAS No. 132.]

.A49 Exhibit C, "Illustrations of Example Modifications to the Auditor'sReview Report Due to Departures From the Applicable Financial ReportingFramework," contains illustrative examples of paragraphs modifying the au-ditor's review report. [Paragraph renumbered by the issuance of SAS No. 132,February 2017.]

.A50 The information necessary for adequate disclosure is influenced bythe form and context in which the interim financial information is presented.For example, the disclosures considered necessary for interim financial infor-mation presented in accordance with the minimum disclosure requirements

©2019, AICPA AU-C §930.A50

Page 26: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1566 Special Considerations in the United States

of FASB ASC 270-10-50-1, which is applicable to condensed financial state-ments of public companies, are considerably less extensive than those neces-sary for annual financial statements that present financial position, results ofoperations, and cash flows in accordance with the applicable financial report-ing framework. FASB ASC 270-10-50-3 states that a presumption exists thatusers of summarized interim financial data will have read the latest publishedannual report, including the financial disclosures required by GAAP and man-agement's commentary concerning the annual financial results, and that thesummarized interim data will be viewed in that context. [Paragraph renum-bered by the issuance of SAS No. 132, February 2017.]

Emphasis-of-Matter in the Auditor’s Review Report (Ref: par. .38).A51 See exhibit D, "Illustrations of Emphasis-of-Matter Paragraphs in

the Auditor's Review Report," for illustrative examples of emphasis-of-matterparagraphs. [Paragraph added, effective for audits of financial statements forperiods ending on or after December 15, 2017, by SAS No. 132.]

.A52 If conditions or events have been identified during the interim re-view that raise substantial doubt about the entity's ability to continue as agoing concern for a reasonable period of time, but (a) no statement relatingto substantial doubt is included in the notes to the interim financial informa-tion because management's plans have alleviated the substantial doubt or (b)the applicable financial reporting framework does not require inclusion of suchstatement in the notes to the interim financial information, the auditor may in-clude an emphasis-of-matter paragraph when management has disclosed theconditions or events in the notes to the financial statements but a statementrelated to substantial doubt is not required to be included by the applicable fi-nancial reporting framework. The following is an illustration of an emphasis-of-matter paragraph when no statement relating to substantial doubt is includedin the notes to the interim financial information but conditions or events aredisclosed:

As discussed in Note X to the financial statements, the Company has sufferedrecurring losses from operations and has a net capital deficiency. Management'splans in regards to these matters are also described in Note X.

[Paragraph added, effective for audits of financial statements for periods endingon or after December 15, 2017, by SAS No. 132.]

Other Considerations (Ref: par. .40).A53 The auditor may seek legal advice in considering what actions, if any,

may be appropriate in these circumstances. [Paragraph renumbered by the is-suance of SAS No. 132, February 2017.]

Interim Financial Information Accompanying Audited FinancialStatements (Ref: par. .42–.43)

.A54 Interim financial information may accompany audited financialstatements. If management chooses or is required to present interim finan-cial information in a note to the audited financial statements, management isresponsible for clearly marking the information as unaudited in the note. [Para-graph renumbered by the issuance of SAS No. 132, February 2017.]

.A55 Because the interim financial information has not been audited andis not required for the audited financial statements to be fairly stated in accor-dance with the applicable financial reporting framework, the auditor ordinarily

AU-C §930.A51 ©2019, AICPA

Page 27: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1567

need not modify the auditor's report on the audited financial statements to referto the interim financial information accompanying the audited financial state-ments, including when the auditor has performed a review in accordance withthis section. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

Documentation (Ref: par. .44–.45).A56 The auditor may find the guidance in section 230, Audit Documenta-

tion, useful in determining the form and content of the review documentation,including guidance on the timing of the final assembly of the engagement doc-umentation. [Paragraph renumbered by the issuance of SAS No. 132, February2017.]

.A57 Examples of findings or issues that, in the auditor's judgment, aresignificant include the results of review procedures that indicate that the in-terim financial information could be materially misstated, including actionstaken to address such findings, and the basis for the final conclusions reached.[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

©2019, AICPA AU-C §930.A57

Page 28: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1568 Special Considerations in the United States

.A58

Appendix A—Analytical Procedures the Auditor MayConsider Performing When Conducting a Review ofInterim Financial Information (Ref: par. .A12)Analytical procedures are designed to identify relationships and individualitems that appear to be unusual and that may reflect a material misstatementof the interim financial information. Examples of analytical procedures that anauditor may consider performing in a review of interim financial informationinclude the following:

• Comparing current interim financial information with the interimfinancial information of the immediately preceding interim pe-riod, the interim financial information of the corresponding in-terim period of the preceding financial year, and the most recentaudited annual financial statements.

• Comparing current interim financial information with anticipatedresults, such as budgets or forecasts (for example, comparing taxbalances and the relationship between the provision for incometaxes and pretax income in the current interim financial informa-tion with corresponding information in (a) budgets, using expectedrates, and (b) financial information for prior periods). Caution isnecessary when comparing and evaluating current interim finan-cial information with budgets, forecasts, or other anticipated re-sults because of the inherent lack of precision in estimating thefuture and the susceptibility of such information to manipulationand misstatement by management to reflect desired interim re-sults.

• Comparing current interim financial information with relevantnonfinancial information.

• Comparing ratios and indicators for the current interim periodwith expectations based on prior periods (for example, performinggross profit analysis by product line and operating segment usingelements of the current interim financial information and compar-ing the results with corresponding information for prior periods).Examples of key ratios and indicators are the current ratio, re-ceivable turnover or days sales outstanding, inventory turnover,depreciation to average fixed assets, debt to equity, gross profitpercentage, net income percentage, and plant operating rates.

• Comparing ratios and indicators for the current interim periodwith those of entities in the same industry.

• Comparing relationships among elements in the current interimfinancial information with corresponding relationships in the in-terim financial information of prior periods (for example, expenseby type as a percentage of sales, assets by type as a percentageof total assets, and percentage of change in sales to percentage ofchange in receivables).

• Comparing disaggregated data. The following are examples of howdata may be disaggregated:

AU-C §930.A58 ©2019, AICPA

Page 29: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1569

— By period (for example, interim financial informationitems disaggregated into quarterly, monthly, or weeklyamounts)

— By product line or operating segment

— By location (for example, subsidiary, division, or branch)

Analytical procedures may include such statistical techniques as trend analy-sis or regression analysis and may be performed manually or with the use ofcomputer-assisted techniques.[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

©2019, AICPA AU-C §930.A58

Page 30: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1570 Special Considerations in the United States

.A59

Appendix B—Unusual or Complex Situations to BeConsidered by the Auditor When Conducting a Reviewof Interim Financial Information (Ref: par. .A18)The following are examples of situations about which the auditor may inquireof management:

• Business combinations

• New or complex revenue recognition methods

• Impairment of assets

• Disposal of a segment of a business

• Use of derivative instruments and hedging activities

• Sales and transfers that may call into question the classificationof investments in securities, including management's intent andability with respect to the remaining securities classified as heldto maturity

• Adoption of new stock compensation plans or changes to existingplans

• Restructuring charges taken in the current and prior quarters

• Significant, unusual, or infrequently occurring transactions

• Changes in litigation or contingencies

• Changes in major contracts with customers or suppliers

• Application of new accounting principles

• Changes in accounting principles or the methods of applying them

• Trends and developments affecting accounting estimates, such asallowances for bad debts and excess or obsolete inventories, pro-visions for warranties and employee benefits, and realization ofunearned income and deferred charges

• Compliance with debt covenants

• Changes in related parties or significant new related party trans-actions

• Material off-balance-sheet transactions, special purpose entities,and other equity investments

• Unique terms for debt or capital stock that could affect classifica-tion

[Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

AU-C §930.A59 ©2019, AICPA

Page 31: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1571

.A60

Exhibit A—Illustrative Management RepresentationLetters for a Review of Interim Financial Information(Ref: par. .A31)

The following management representation letters, which relate to a re-view of interim financial information, are presented for illustrative pur-poses only.

Illustration 1—Short Form Representation Letter for a Review of In-terim Financial InformationIllustration 2—Detailed Representation Letter for a Review of InterimFinancial Information

It is assumed in these illustrations that the applicable financial reportingframework is accounting principles generally accepted in the United States ofAmerica, that no conditions or events exist that might be indicative of the en-tity's possible inability to continue as a going concern, and that no exceptionsexist to the requested written representations. If circumstances differ fromthese assumptions, the representations would need to be modified to reflectthe actual circumstances.

Illustration 1—Short Form Representation Letter for a Review ofInterim Financial Information

This representation letter is to be used in conjunction with the representationletter for the audit of the financial statements of the prior year. Managementconfirms the representations made in the representation letter for the audit ofthe financial statements of the prior year end, as they apply to the interim fi-nancial information, and makes additional representations that may be neededfor the interim financial information.

[Date]

To [Independent Auditor]:

This representation letter is provided in connection with your review of the[consolidated] balance sheet as of June 30, 20X1 and the related [consolidated]statements of income, changes in equity, and cash flows for the six-month periodthen ended of ABC Company for the purpose of reporting whether any materialmodifications should be made to the [consolidated] interim financial informa-tion for it to be in accordance with accounting principles generally accepted inthe United States of America (U.S. GAAP) [including, if appropriate, an indi-cation as to the appropriate form and content of interim financial information(for example, Article 10 of SEC Regulation S-X)].

We confirm that [, to the best of our knowledge and belief, having made suchinquiries as we considered necessary for the purpose of appropriately informingourselves] [as of (date of auditor's review report),]:

©2019, AICPA AU-C §930.A60

Page 32: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1572 Special Considerations in the United States

Interim Financial Information1. We have fulfilled our responsibilities, as set out in the terms of

the engagement letter dated [insert date] for the preparation andfair presentation of interim financial information in accordancewith U.S. GAAP; in particular the interim financial informationis presented in accordance therewith.

2. We acknowledge our responsibility for the design, implementa-tion, and maintenance of internal control relevant to the prepa-ration and fair presentation of interim financial information thatis free from material misstatement, whether due to fraud or error.

3. The interim financial information has been adjusted or includesdisclosures for all events subsequent to the date of the interimfinancial information for which U.S. GAAP requires adjustmentor disclosure.

4. The effects of uncorrected misstatements are immaterial, bothindividually and in the aggregate, to the interim financial infor-mation as a whole. A list of the uncorrected misstatements is at-tached to the representation letter.

[Any other matters that the auditor may consider appropriate]

Information Provided5. We have provided you with:

• Access to all information of which we are aware that isrelevant to the preparation and fair presentation of theinterim financial information such as records, documen-tation, and other matters;

• Minutes of the meetings of stockholders, directors, andcommittees of directors, or summaries of actions of recentmeetings for which minutes have not yet been prepared;

• Additional information that you have requested from usfor the purpose of the review; and

• Unrestricted access to persons within the entity of whomyou determined it necessary to make inquiries.

6. We have disclosed to you all significant deficiencies or materialweaknesses in the design or operation of internal control of whichwe are aware, as it relates to the preparation and fair presenta-tion of both annual and interim financial information.

7. We have disclosed to you the results of our assessment of therisk that the interim financial information may be materially mis-stated as a result of fraud.

8. We have [no knowledge of any] [disclosed to you all information ofwhich we are aware in relation to] fraud or suspected fraud thataffects the entity and involves:

• Management;

• Employees who have significant roles in internal control;or

• Others when the fraud could have a material effect on theinterim financial information.

9. We have [no knowledge of any] [disclosed to you all informationin relation to] allegations of fraud, or suspected fraud, affecting

AU-C §930.A60 ©2019, AICPA

Page 33: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1573

the entity's interim financial information communicated by em-ployees, former employees, analysts, regulators, or others.

10. We have disclosed to you the identity of the entity's related partiesand all the related party relationships and transactions of whichwe are aware.

[Any other matters that the auditor may consider necessary]

11. We have reviewed our representation letter to you dated [date ofrepresentation letter relating to most recent audit] with respect tothe audited consolidated financial statements as of and for theyear ended [prior year-end date]. We believe that representations[references to applicable representations] within that representa-tion letter do not apply to the interim financial information re-ferred to above. We now confirm those representations [referencesto applicable representations], as they apply to the interim finan-cial information referred to above, and incorporate them herein,with the following changes:

[Indicate any changes.]

12. [Add any representations related to new accounting or auditingstandards that are being implemented for the first time.]

[Name of Chief Executive Officer and Title]

[Name of Chief Financial Officer and Title]

[Name of Chief Accounting Officer and Title]

Illustration 2—Detailed Representation Letter for a Review ofInterim Financial Information

This representation letter is similar in detail to the management representa-tion letter used for the audit of the financial statements of the prior year and,thus, need not refer to the written management representations received in themost recent audit.

[Date]

To [Independent Auditor]:

This representation letter is provided in connection with your review of the[consolidated] balance sheet as of June 30, 20X1 and the related [consolidated]statements of income, changes in equity, and cash flows for the six-month periodthen ended of ABC Company for the purpose of reporting whether any materialmodifications should be made to the [consolidated] interim financial informa-tion for it to be in accordance with accounting principles generally accepted inthe United States of America (U.S. GAAP) [including, if appropriate, an indi-cation as to the appropriate form and content of interim financial information(for example, Article 10 of SEC Regulation S-X)].

We confirm that [, to the best of our knowledge and belief, having made suchinquiries as we considered necessary for the purpose of appropriately informingourselves] [as of (date of auditor's review report),]:

©2019, AICPA AU-C §930.A60

Page 34: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1574 Special Considerations in the United States

Interim Financial Information1. We have fulfilled our responsibilities, as set out in the terms of the

engagement letter dated [insert date] for the preparation and fairpresentation of the interim financial information in accordancewith U.S. GAAP; in particular the interim financial informationis presented in accordance therewith.

2. We acknowledge our responsibility for the design, implementa-tion, and maintenance of internal control relevant to the prepa-ration and fair presentation of interim financial information thatis free from material misstatement, whether due to fraud or error.

3. Significant assumptions used by us in making accounting esti-mates, including those measured at fair value, are reasonable.

4. Related party relationships and transactions have been appropri-ately accounted for and disclosed in accordance with the require-ments of U.S. GAAP.

5. The interim financial information has been adjusted or includesdisclosures for all events subsequent to the date of the interimfinancial information for which U.S. GAAP requires adjustmentor disclosure.

6. The effects of uncorrected misstatements are immaterial, bothindividually and in the aggregate, to the interim financial infor-mation as a whole. A list of the uncorrected misstatements is at-tached to the representation letter.

[Any other matters that the auditor may consider appropriate]

Information Provided7. We have provided you with:

• Access to all information of which we are aware that isrelevant to the preparation and fair presentation of theinterim financial information such as records, documen-tation, and other matters;

• Minutes of the meetings of stockholders, directors, andcommittees of directors, or summaries of actions of recentmeetings for which minutes have not yet been prepared;

• Additional information that you have requested from usfor the purpose of the review; and

• Unrestricted access to persons within the entity of whomyou determined it necessary to make inquiries.

8. All transactions have been recorded in the accounting records andare reflected in the interim financial information.

9. We have disclosed to you all significant deficiencies or materialweaknesses in the design or operation of internal control of whichwe are aware, as it relates to the preparation and fair presenta-tion of both annual and interim financial information.

10. We have disclosed to you the results of our assessment of therisk that the interim financial information may be materially mis-stated as a result of fraud.

11. We have [no knowledge of any][disclosed to you all information ofwhich we are aware in relation to] fraud or suspected fraud thataffects the entity and involves:

AU-C §930.A60 ©2019, AICPA

Page 35: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1575

• Management;

• Employees who have significant roles in internal control;or

• Others when the fraud could have a material effect on theinterim financial information.

12. We have [no knowledge of any][disclosed to you all information inrelation to] allegations of fraud, or suspected fraud, affecting theentity's interim financial information communicated by employ-ees, former employees, analysts, regulators, or others.

13. We have disclosed to you all known instances of non-complianceor suspected non-compliance with laws and regulations whose ef-fects should be considered when preparing interim financial in-formation.

14. There have been no communications from regulatory agenciesconcerning noncompliance with or deficiencies in financial report-ing practices.

15. We have disclosed to you the identity of the entity's related partiesand all the related party relationships and transactions of whichwe are aware.

[Any other matters that the auditor may consider necessary]

[Name of Chief Executive Officer and Title]

[Name of Chief Financial Officer and Title]

[Name of Chief Accounting Officer and Title][Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

©2019, AICPA AU-C §930.A60

Page 36: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1576 Special Considerations in the United States

.A61

Exhibit B—Illustrations of Auditor’s Review Reportson Interim Financial Information (Ref: par. .A43)

Illustration 1 — A Review Report on Interim Financial InformationIllustration 2 — A Review Report on Condensed Comparative InterimFinancial InformationIllustration 3 — A Review Report That Refers to a Component Auditor'sReview Report on the Interim Financial Information of a SignificantComponent of a Reporting EntityIllustration 4 — A Review Report on Comparative Interim FinancialInformation When the Prior Period Was Reviewed by Another Auditor

Illustration 1—A Review Report on Interim Financial Information

Circumstances include the following:

• A review of interim financial information presented as a completeset of financial statements, including disclosures

Independent Auditor's Review Report

[Appropriate Addressee]

Report on the Financial Statements

We have reviewed the accompanying [describe the interim financial informationor statements reviewed] of ABC Company and subsidiaries as of September 30,20X1, and for the three-month and nine-month periods then ended.

Management’s Responsibility

The Company's management is responsible for the preparation and fair presen-tation of the interim financial information in accordance with [identify the ap-plicable financial reporting framework; for example, accounting principles gen-erally accepted in the United States of America]; this responsibility includesthe design, implementation, and maintenance of internal control sufficient toprovide a reasonable basis for the preparation and fair presentation of interimfinancial information in accordance with [identify the applicable financial re-porting framework; for example, accounting principles generally accepted in theUnited States of America].

Auditor’s Responsibility

Our responsibility is to conduct our review in accordance with auditing stan-dards generally accepted in the United States of America applicable to reviewsof interim financial information. A review of interim financial information con-sists principally of applying analytical procedures and making inquiries of per-sons responsible for financial and accounting matters. It is substantially lessin scope than an audit conducted in accordance with auditing standards gen-erally accepted in the United States of America, the objective of which is theexpression of an opinion regarding the financial information. Accordingly, wedo not express such an opinion.

AU-C §930.A61 ©2019, AICPA

Page 37: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1577

ConclusionBased on our review, we are not aware of any material modifications that shouldbe made to the accompanying interim financial information for it to be in accor-dance with [identify the applicable financial reporting framework; for example,accounting principles generally accepted in the United States of America].[Auditor's signature][Auditor's city and state][Date of the auditor's report]

Illustration 2—A Review Report on Condensed ComparativeInterim Financial InformationThe following is an example of a review report on a condensed balance sheet asof March 31, 20X1; the related condensed statements of income and cash flowsfor the three-month periods ended March 31, 20X1 and 20X0; and a condensedbalance sheet derived from audited financial statements as of December 31,20X0. If the auditor's report on the preceding year-end financial statements wasother than unmodified or included an emphasis-of-matter paragraph becauseof a going concern matter or an inconsistency in the application of accountingprinciples, the last paragraph of the illustrative report would be appropriatelymodified.

Independent Auditor's Review Report

[Appropriate Addressee]Report on the Financial StatementsWe have reviewed the condensed consolidated financial statements of ABCCompany and subsidiaries, which comprise the balance sheet as of March 31,20X1, and the related condensed consolidated statements of income and cashflows for the three-month periods ended March 31, 20X1 and 20X0.Management’s ResponsibilityThe Company's management is responsible for the preparation and fair pre-sentation of the condensed financial information in accordance with [identifythe applicable financial reporting framework; for example, accounting principlesgenerally accepted in the United States of America]; this responsibility includesthe design, implementation, and maintenance of internal control sufficient toprovide a reasonable basis for the preparation and fair presentation of interimfinancial information in accordance with [identify the applicable financial re-porting framework; for example, accounting principles generally accepted in theUnited States of America].Auditor’s ResponsibilityOur responsibility is to conduct our reviews in accordance with auditing stan-dards generally accepted in the United States of America applicable to reviewsof interim financial information. A review of interim financial information con-sists principally of applying analytical procedures and making inquiries of per-sons responsible for financial and accounting matters. It is substantially lessin scope than an audit conducted in accordance with auditing standards gen-erally accepted in the United States of America, the objective of which is theexpression of an opinion regarding the financial information. Accordingly, wedo not express such an opinion.ConclusionBased on our reviews, we are not aware of any material modifications thatshould be made to the condensed financial information referred to above for it

©2019, AICPA AU-C §930.A61

Page 38: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1578 Special Considerations in the United States

to be in accordance with [identify the applicable financial reporting framework;for example, accounting principles generally accepted in the United States ofAmerica].Report on Condensed Balance Sheet as of [Date]We have previously audited, in accordance with auditing standards generallyaccepted in the United States of America, the consolidated balance sheet as ofDecember 31, 20X0, and the related consolidated statements of income, changesin stockholders' equity, and cash flows for the year then ended (not presentedherein); and we expressed an unmodified audit opinion on those audited con-solidated financial statements in our report dated February 15, 20X1. In ouropinion, the accompanying condensed consolidated balance sheet of ABC Com-pany and subsidiaries as of December 31, 20X0, is consistent, in all materialrespects, with the audited consolidated financial statements from which it hasbeen derived.[Auditor's signature][Auditor's city and state][Date of the auditor's report]

Illustration 3—A Review Report That Refers to a ComponentAuditor’s Review Report on the Interim Financial Information ofa Significant Component of a Reporting EntityCircumstances include the following:

• A review of interim financial information presented as a completeset of financial statements, including disclosures.

• The auditor is making reference to another auditor's review reporton the interim financial information of a significant component ofa reporting entity.

Independent Auditor's Review Report

[Appropriate Addressee]Report on the Financial StatementsWe have reviewed the accompanying [describe the interim financial informationor statements reviewed] of ABC Company and subsidiaries as of September 30,20X1, and for the three-month and nine-month periods then ended.Management’s ResponsibilityThe Company's management is responsible for the preparation and fair presen-tation of the interim financial information in accordance with [identify the ap-plicable financial reporting framework; for example, accounting principles gen-erally accepted in the United States of America]; this responsibility includesthe design, implementation, and maintenance of internal control sufficient toprovide a reasonable basis for the preparation and fair presentation of interimfinancial information in accordance with [identify the applicable financial re-porting framework; for example, accounting principles generally accepted in theUnited States of America].Auditor’s ResponsibilityOur responsibility is to conduct our review in accordance with auditing stan-dards generally accepted in the United States of America applicable to reviewsof interim financial information. A review of interim financial information con-sists principally of applying analytical procedures and making inquiries of per-sons responsible for financial and accounting matters. It is substantially less

AU-C §930.A61 ©2019, AICPA

Page 39: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1579

in scope than an audit conducted in accordance with auditing standards gen-erally accepted in the United States of America, the objective of which is theexpression of an opinion regarding the financial information. Accordingly, wedo not express such an opinion.

We were furnished with the report of other auditors on their review of the in-terim financial information of DEF subsidiary, whose total assets as of Septem-ber 30, 20X1, and whose revenues for the three-month and nine-month periodsthen ended, constituted 15 percent, 20 percent, and 22 percent, respectively, ofthe related consolidated totals.

ConclusionBased on our review and the review report of other auditors, we are not aware ofany material modifications that should be made to the accompanying interimfinancial information for it to be in accordance with [identify the applicablefinancial reporting framework; for example, accounting principles generally ac-cepted in the United States of America].

[Auditor's signature]

[Auditor's city and state]

[Date of the auditor's report]

Illustration 4—A Review Report on Comparative InterimFinancial Information When the Prior Period Was Reviewed byAnother Auditor

Circumstances include the following:

• A review of interim financial information presented as a completeset of financial statements, including disclosures as of March 31,20X1, and for the three-month period then ended.

• Comparative information is presented for the balance sheet as ofDecember 31, 20X0, and for the statements of income and cashflows for the comparable interim period.

• The December 31, 20X0, financial statements were audited, andthe March 31, 20X0, interim financial information was reviewed,by another auditor.

Independent Auditor's Review Report

[Appropriate Addressee]

Report on the Financial StatementsWe have reviewed the accompanying [describe the interim financial informa-tion or statements reviewed] of ABC Company and subsidiaries as of March 31,20X1, and for the three-month period then ended. The consolidated statementsof income and cash flows of ABC Company and subsidiaries for the three-monthperiod ended March 31, 20X0, were reviewed by other auditors whose reportdated June 1, 20X0, stated that based on their review, they were not aware ofany material modifications that should be made to those statements in orderfor them to be in accordance with [identify the applicable financial reportingframework; for example, accounting principles generally accepted in the UnitedStates of America]. The consolidated balance sheet of the Company as of De-cember 31, 20X0, and the related consolidated statements of income, changesin stockholders' equity, and cash flows for the year then ended (not presentedherein), were audited by other auditors whose report dated March 15, 20X1,expressed an unmodified opinion on those statements.

©2019, AICPA AU-C §930.A61

Page 40: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1580 Special Considerations in the United States

Management’s ResponsibilityThe Company's management is responsible for the preparation and fair presen-tation of the interim financial information in accordance with [identify the ap-plicable financial reporting framework; for example, accounting principles gen-erally accepted in the United States of America]; this responsibility includesthe design, implementation, and maintenance of internal control sufficient toprovide a reasonable basis for the preparation and fair presentation of interimfinancial information in accordance with [identify the applicable financial re-porting framework; for example, accounting principles generally accepted in theUnited States of America].Auditor’s ResponsibilityOur responsibility is to conduct our review in accordance with auditing stan-dards generally accepted in the United States of America applicable to reviewsof interim financial information. A review of interim financial information con-sists principally of applying analytical procedures and making inquiries of per-sons responsible for financial and accounting matters. It is substantially lessin scope than an audit conducted in accordance with auditing standards gen-erally accepted in the United States of America, the objective of which is theexpression of an opinion regarding the financial information. Accordingly, wedo not express such an opinion.ConclusionBased on our review, we are not aware of any material modifications that shouldbe made to the accompanying interim financial information as of and for thethree months ended March 31, 20X1, for it to be in accordance with [identifythe applicable financial reporting framework; for example, accounting principlesgenerally accepted in the United States of America].[Auditor's signature][Auditor's city and state][Date of the auditor's report][Paragraph renumbered by the issuance of SAS No. 132, February 2017.]

AU-C §930.A61 ©2019, AICPA

Page 41: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1581

.A62

Exhibit C—Illustrations of Example Modificationsto the Auditor’s Review Report Due to DeparturesFrom the Applicable Financial Reporting Framework(Ref: par. .A49)

Illustration 1 — Modification Due to a Departure From the ApplicableFinancial Reporting FrameworkIllustration 2 — Modification Due to Inadequate Disclosure

Illustration 1—Modification Due to a Departure From theApplicable Financial Reporting FrameworkThe following is an example of a modification of the auditor's review report dueto a departure from the applicable financial reporting framework:[Basis for Modification Paragraph]Based on information furnished to us by management, we believe that the Com-pany has excluded from property and debt in the accompanying balance sheetcertain lease obligations that we believe should be capitalized to be in accor-dance with [identify the applicable financial reporting framework; for exam-ple, accounting principles generally accepted in the United States of America].This information indicates that if these lease obligations were capitalized atSeptember 30, 20X1, property would be increased by $______, long-term debtwould be increased by $______, and net income would be increased (decreased)by $________ and $________, respectively, for the three-month and nine-monthperiods then ended.[Conclusion]Based on our review, with the exception of the matter(s) described in the preced-ing paragraph(s), we are not aware of any material modifications that shouldbe made to the accompanying interim financial information for it to be in accor-dance with [identify the applicable financial reporting framework; for example,accounting principles generally accepted in the United States of America].

Illustration 2—Modification Due to Inadequate DisclosureThe following is an example of a modification of the auditor's review report dueto inadequate disclosure:[Basis for Modification Paragraph]Management has informed us that the Company is presently defending a claimregarding [describe the nature of the loss contingency] and that the extent of theCompany's liability, if any, and the effect on the accompanying interim financialinformation is not determinable at this time. The interim financial informationfails to disclose these matters, which we believe are required to be disclosedin accordance with [identify the applicable financial reporting framework;for example, accounting principles generally accepted in the United States ofAmerica].

©2019, AICPA AU-C §930.A62

Page 42: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1582 Special Considerations in the United States

[Conclusion]Based on our review, with the exception of the matter(s) described in the preced-ing paragraph(s), we are not aware of any material modifications that shouldbe made to the accompanying interim financial information for it to be in accor-dance with [identify the applicable financial reporting framework; for example,accounting principles generally accepted in the United States of America].

[Paragraph renumbered and amended, effective for audits of financial state-ments for periods ending on or after December 15, 2017, by SAS No. 132.]

AU-C §930.A62 ©2019, AICPA

Page 43: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1583

.A63

Exhibit D—Illustrations of Emphasis-of-MatterParagraphs in the Auditor’s Review Report(Ref: par. .A51)

Illustration 1 — Emphasis-of-Matter Paragraph When SubstantialDoubt is Disclosed in the Notes to the Financial Statements, a Go-ing Concern Emphasis-of-Matter Paragraph Was Included in the PriorYear's Audit Report, and Conditions or Events Giving Rise to theEmphasis-of-Matter Paragraph Have Been Identified and SubstantialDoubt Exists

Illustration 2 — Emphasis-of-Matter Paragraph When SubstantialDoubt is Not Disclosed in the Notes to the Financial Statements, aGoing Concern Emphasis-of-Matter Paragraph Was Included in thePrior Year's Audit Report, and Conditions or Events Giving Rise to theEmphasis-of-Matter Paragraph Have Been Identified and SubstantialDoubt Exists

Illustration 3 — Emphasis-of-Matter Paragraph When Management isRequired Under the Applicable Financial Reporting Framework to In-clude a Statement in the Notes to the Interim Financial Informationthat Conditions or Events Have Been Identified and Substantial DoubtExists, Such Statement Is Included in the Notes to the Interim Finan-cial Information, and a Going Concern Emphasis-of-Matter ParagraphWas Not Included in the Prior Year's Audit Report

Illustration 1—Emphasis-of-Matter Paragraph When SubstantialDoubt is Disclosed in the Notes to the Financial Statements, aGoing Concern Emphasis-of-Matter Paragraph Was Included inthe Prior Year’s Audit Report, and Conditions or Events GivingRise to the Emphasis-of-Matter Paragraph Have Been Identifiedand Substantial Doubt Exists

The following is an example of situations in which (a) a going concern emphasis-of-matter paragraph was included in the prior year's auditor's report, (b) con-ditions or events have been identified and substantial doubt continues to exist,and (c) the entity is required under the applicable financial reporting frame-work to include a statement in the notes to the interim financial informationthat substantial doubt exists.

[Emphasis-of-Matter Paragraph]

The accompanying interim financial information has been prepared assumingthat the Company will continue as a going concern. Note 4 of the Company'saudited financial statements as of December 31, 20X1, and for the year thenended, includes a statement that substantial doubt exists about the Company's

©2019, AICPA AU-C §930.A63

Page 44: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

1584 Special Considerations in the United States

ability to continue as a going concern. Note 4 of the Company's audited financialstatements also discloses the events and conditions, management's evaluationof the events and conditions, and management's plans regarding these matters,including the fact that the Company was unable to renew its line of credit orobtain alternative financing as of December 31, 20X1. Our auditor's report onthose financial statements includes an emphasis-of-matter paragraph referringto the matters in Note 4 of those financial statements. As indicated in Note 3 ofthe accompanying interim financial information as of March 31, 20X2, and forthe three months then ended, the Company was still unable to renew its lineof credit or obtain alternative financing as of March 31, 20X2, and has statedthat substantial doubt exists about the Company's ability to continue as a goingconcern. The accompanying interim financial information does not include anyadjustments that might result from the outcome of this uncertainty.

Illustration 2—Emphasis-of-Matter Paragraph When SubstantialDoubt is Not Disclosed in the Notes to the Financial Statements,a Going Concern Emphasis-of-Matter Paragraph Was Includedin the Prior Year’s Audit Report, and Conditions or Events GivingRise to the Emphasis-of-Matter Paragraph Have Been Identifiedand Substantial Doubt ExistsThe following is an example of a situation in which (a) a going concernemphasis-of-matter paragraph was included in the prior year's auditor's report,(b) conditions or events have been identified and substantial doubt continuesto exist, and (c) the entity is not required under the applicable financial re-porting framework to include a statement in the notes to the interim financialinformation that substantial doubt exists.

[Emphasis-of-Matter Paragraph]

The accompanying interim financial information has been prepared assumingthat the Company will continue as a going concern. Note 4 of the Company'saudited financial statements as of December 31, 20X1, and for the year thenended, discloses that the Company was unable to renew its line of credit orobtain alternative financing as of December 31, 20X1. Our auditor's report onthose financial statements includes an emphasis-of-matter paragraph referringto the matters in Note 4 of those financial statements, indicating that thesematters raised substantial doubt about the Company's ability to continue asa going concern. As indicated in Note 3 of the accompanying interim financialinformation as of March 31, 20X2, and for the three months then ended, theCompany was still unable to renew its line of credit or obtain alternative fi-nancing as of March 31, 20X2. Management's evaluation of the conditions andevents and management's plans regarding these matters are also disclosed inNote 3. The accompanying interim financial information does not include anyadjustments that might result from the outcome of this uncertainty.

AU-C §930.A63 ©2019, AICPA

Page 45: Interim Financial Information - AICPA...1544 Special Considerations in the United States Procedures for a Review of Interim Financial Information Understanding the Entity and Its Environment,

Interim Financial Information 1585

Illustration 3—Emphasis-of-Matter Paragraph WhenManagement is Required Under the Applicable FinancialReporting Framework to Include a Statement in the Notes to theInterim Financial Information that Conditions or Events HaveBeen Identified and Substantial Doubt Exists, Such Statement isincluded in the Notes to the Interim Financial Information, and aGoing Concern Emphasis-of-Matter Paragraph Was NotIncluded in the Prior Year’s Audit ReportThe following is an example of an emphasis-of-matter paragraph when (a) a go-ing concern emphasis-of-matter paragraph was not included in the prior year'sauditor's report, (b) the entity is required under the applicable financial report-ing framework to include a statement in the notes to the interim financial in-formation that conditions or events have been identified and substantial doubtexists, and (c) such statement is included in the notes to the interim financialinformation.

[Emphasis-of-Matter Paragraph]

The accompanying interim financial information has been prepared assumingthat the Company will continue as a going concern. As discussed in Note 3 tothe interim financial information, the Company has suffered recurring lossesfrom operations, has a net capital deficiency, and has stated that substantialdoubt exists about the Company's ability to continue as a going concern. Man-agement's evaluation of the conditions and events and management's plans re-garding these matters are also described in Note 3. The accompanying interimfinancial information does not include any adjustments that might result fromthe outcome of this uncertainty.

[Paragraph added, effective for audits of financial statements for periods endingon or after December 15, 2017, by SAS No. 132.]

©2019, AICPA AU-C §930.A63