22. Review

Question 1

Define audit and review?

Answer 1

Audit: Audit is a type of assurance engagement in which reasonable assurance is provided. For example: audit of financial statements.

Review: Review is a type of assurance engagement in which limited assurance is provided. For example: review of F/S of an entity for which an audit is not required.

Question 2

Define related services?

Answer 2

Agreed-Upon Procedures:
In this engagement, practitioner carries out procedures of audit nature to which the practitioner and the entity and any appropriate 3rd parties have agreed, and to report on factual findings. No assurance is provided in this engagement and report is restricted.
Example: Regulatory reporting or internal fraud investigation.

Compilations:
In this engagement, practitioner assists the management with the preparation and presentation of financial information. No assurance is provided in this engagement.

Question 3

What are the preconditions for review engagement?

Answer 3

Practitioner shall accept review engagement if:
Financial reporting framework is acceptable.
Management agrees on the premise on which review is conducted.
Practitioner shall NOT accept review engagement if:
Practitioner is not independent
There are doubts over the integrity of management.
There is no rational purpose for the engagement.

Question 4

What are the terms of engagement?

Answer 4

1. Identification of applicable financial reporting framework.
2. Objective and scope of review engagement.
3. Responsibilities of management and practitioner.
4. Reference to expected form and content of report to be issued by the practitioner.
5. Intended use and distribution of F/S.

Question 5

What are the inquiries performed in review?

Answer 5

The practitioner’s inquiries of mgt and others within the entity shall include:

1. how mgt makes significant accounting estimates.
2. identification of related parties and their transactions.
3. whether there are significant, unusual or complex transactions, events or matters affecting the f/s.
4. The existence of actual, suspected or alleged fraud.

Question 6

What are the analytical procedures and other procedures in review?

Answer 6

Analytical procedures:
1. unusual relationships between items in the financial statements.
2. individual items that appear unusual.
Other procedures:
1. use of work performed by others
2. written representations
3. subsequent events
4. going concern.

Question 7

When to express an unmodified opinion in a review?

Answer 7

when the practitioner has obtained sufficient appropriate evidence and concludes that nothing has come to his attention that causes him to believe that F/S do not give true and fair view.

Question 8

When to express modified conclusions?

Answer 8

when the practitioner has obtained sufficient appropriate evidence and concludes that there are misstatements in F/S whose effect is either pervasive and material.
or when the practitioner is unable to obtain evidence on which to base his conclusion and possible effect of undetected misstatements in F/S is either material and pervasive.

Question 9

What are the elements of review report?

Answer 9

1. Title
2. Addressee
3. Introductory paragraph that identifies title and period covered and states that F/S have been reviewed.
4. Description of : mgt responsibility
   practitioner’s responsibility
   review.
5. Conclusion
6. date, sign of practitioner, place