AUD 6.4 - Review Engagements Flashcards
A higher level of service than a preparation or compilation because it results in an expression of limited assurance:
Review engagement
In this report it states that the accountant is not aware of any material modifications necessary for the statements to conform with the applicable financial reporting framework:
Review report
In this engagement the accountant is not required to obtain an understanding of internal control or assess control risk:
Review engagement
What is the objective of an accountant when performing a review engagement?
Obtain limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the financial statements
In a review engagement is an accountant required to be independent?
Yes
Who governs the review engagements for issuers?
Who governs the review engagements for nonissuers?
Who governs the review engagements for nonissuers who also perform an annual YE audit?
- PCAOB
- SSARS
- SAS
What are the performance requirements applicable to a review? (ULIARCPA)
Understanding with the client
Learn the entity’s business
Inquiries
Analytical procedures
Review
Client representation letter
Professional judgement
Accountant should communicate results
To gain an understanding with the client before a review engagement commences, what should be obtained by the accountant?
An engagement letter
What does the engagement letter include?
Objectives of the engagement
Management and accountants responsibilities
Limitations of the engagement
Applicable financial reporting framework
Expected form and content of the accountants review report
What is the accountant not required to do in a review engagement?
Test internal controls
Perform audit tests
Assess fraud risk
Communicate with the predecessor accountant
What are the main areas inquiries with the client should cover?
Significant journal entires or adjustments
Ability to continue as a going concern
Existence of related party transactions
These procedures involve developing an expectation based on plausible relationship and comparing recorded amounts or ratios based on recorded amounts to that expectation:
Analytical procedures
These procedures are designed to detect relationships and individual items that appear to be unusual nd may indicate material misstatement
Analytical procedures
What other procedures belong inquiry and analytical procedures should an accountant also do during a review?
Read the financial statements
Obtain reports of other accountants who have been engaged
Obtain evidence
Consider the effects of any going concern uncertainties or subsequent events
Managements failure to provide a representation letter results in…
An incomplete review
If accountants cannot perform whatever procedures they deem necessary and therefore those procedures are not accomplished what happens to the review?
The review is incomplete and no review report is issued
Documentation of a review should include:
Engagement letter
Significant findings, actions taken, and the bass for the conclusion reached
Inquiry and responses
Communications with other accountants
Management representation letter
Copy of the review financial statements
What is not included in documentation of a review?
Tests of internal controls
Audit test work
Is the accountants report in a review engagement titled?
Yes, titled: independent accountants review report
What two important statements should be included in the introductory paragraph of the accountants review report?
statements that analytical procedures and inquiries were performed and that a review is substantially less in scope than an audit therefore no opinion is expressed
What statements are included in managements responsibilities section of the accountants review report?
That they are responsible for the preparation of the financials and the design, implementation, and maintenance of internal controls
What should be included in the accountants responsibility paragraph of the accountants review report?
That they conducted the review in accordance with SSARS
That they obtained limited assurance
And that they are independent
What key terms are used in the conclusion paragraph of the accountants review report?
That they are not aware of any material modifications
Each page of the financial statements in a review report should be marked:
See independent accountants review report
