Interim Financial Statements

Question 1

Identify the four paragraphs normally associated with an auditor’s review report on interim financial statements.

Answer 1

1. )Identify the nature of the engagement and the interim financial statements
2. )Identify management’s responsibility
3. )Identify the auditor’s responsibility (refer to AICPA standards, describe the procedures for a review, and include a disclaimer of opinion)
4. )Express negative assurance as to whether any material modifications should be made

Question 2

Identify the evidence-gathering procedures normally associated with a review of interim financial information.

Answer 2

1. )Read the interim financial information and read the minutes of meetings (board, etc.).
2. )Perform analytical procedures.
3. )Determine that interim information agrees (or reconciles) to accounting records.
4. )Make inquiries of management and other persons responsible for financial and accounting matters and obtain a management representations letter.

Question 3

The agreement on engagement terms for an auditor’s review of interim financial information should normally address what specific matters?

Answer 3

1. )The objectives and scope of the engagement
2. )The responsibilities of management
3. )The responsibilities of the auditor
4. )The limitations of a review engagement
5. )Identification of the applicable financial reporting framework

Question 4

What is the auditor’s responsibility to obtain an understanding of an entity’s internal control for an engagement to review the entity’s interim financial information?

Answer 4

The auditor should obtain an understanding of the entity and its environment, including internal control related to the preparation of annual and interim financial information. This should be sufficient to identify the types (and likelihood) of potential misstatements and to select the inquiries and analytical procedures for the auditor’s basis for conclusions.

Question 5

What is the purpose of the review of interim financial information?

Answer 5

To provide the CPA with a basis for communicating an awareness of any material modifications that should be made to conform with the applicable financial reporting framework, such as GAAP or other applicable financial reporting framework

Question 6

What is meant by the term “interim financial information”?

Answer 6

Financial information or statements covering a period less than a full year or for a 12-month period ending on a date other than the entity’s fiscal year-end. It may be condensed or in the form of a complete set of financial statements.