Interim Reviews M6

Question 1

Which procedures would be performed in a issuer company Interim Review of financils?

Could be done on issuer (PCAOB) or non-issuer (SAS)

Answer 1

• The accountant should perform analytical procedures, such as comparisons over time.
• The accountant should read the minutes of stockholder meetings, directors’ meetings, etc.
• Inquiry should be made regarding significant deficiencies in internal control.

Would NOT make inquiries with attorneys or anything that could change

Question 2

Why would a CPA perform Interim Financial Statement Reviews?

Answer 2

• Selected quarterly financial data is included in an annual report.
• Quarterly reports are required to be filed with the SEC.
• The accountant is performing an initial audit of financial statements that include selected quarterly data.
• Quarterly financial data is included in the ISSUER financials.

Question 3

When does materiality matter?

Answer 3

• A material illegal act may require disclosure in or adjustment to the financial statements, whereas an immaterial illegal act may not require disclosure.
• A material weakness in internal control will affect the nature, timing, and extent of audit procedures, whereas an immaterial weakness in internal control may have little impact on the audit.
• An auditor is likely to use positive confirmations for material accounts receivable but may consider negative confirmations for immaterial receivable balances.

Question 4

What is the objective of Interim Financials Reviews of a public entity?

Answer 4

Is to provide the accountant with a basis for reporting whether material modifications should be made to conform with GAAP.

Question 5

How does SSARS reviews compare to Interim Reviews?

Answer 5

• It is true that the interim review report for issuers’ includes
  reference to professional standards in the Basis for Review section. This is different than SSARS, where the reference to professional standards is included in the accountant’s responsibility paragraph. There is no Basis for Review Results section under SSARS.
• It is different from an audit report in that the audit report provides positive assurance whereas the review report provides negative assurance.
• It is similar to a review report under SSARS in that both make reference to the performance of inquiry and analytical procedures
• A review of a public entity’s interim financial information
  requires communication with the predecessor auditor while review of a nonissuer’s unaudited financial statements does not.
• The guidance for a review of a public entity’s interim financial
  information is provided by PCAOB standards, whereas a review of a nonissuer’s unaudited financial statements is conducted in accordance with Statements on Standards for Accounting and Review Services.
• A review of a public entity’s interim financial information
  requires an evaluation of internal control while a review of a nonissuer’s unaudited financial statements does not.