A review of financial statements consists primarily of inquiry, analytical procedures, and discussion related to information supplied to the public accountant by the client. The public accountant assesses whether the financial statements or other financial information being reported on is plausible, that is worthy of belief. These procedures are not sufficient to provide assurance that undetected fraud or error does not exist. A review is less in scope than an audit and provides a lesser level of assurance than an audit. A review does not constitute an audit and, consequently, an audit opinion is not expressed on the financial statements.
Generally, reviews do not require the public accountant to obtain supporting or independent evidence or to test and evaluate internal controls. Consequently a review generally does not include procedures such as physical inspection, observation of client procedures, confirmation from third parties, and examination of documents that are typically associated with an audit. However, these procedures may be performed if the public accountant has some doubt as to the plausibility of information or where such procedures assist in obtaining the required information.
The public accountant’s report on the financial statements or other financial information takes the form of a negative assurance report. This negative assurance form of reporting used for review engagements informs the reader that, although insufficient evidence has been obtained to enable the public accountant to express an audit opinion, a review has been completed in accordance with Canadian generally accepted standards for review engagements and that nothing has come to the attention of the public accountant that causes them to believe that the information being reported on is not, in all material respects, in accordance with appropriate criteria. The criteria used for the preparation of the financial statements or other financial information, could be generally accepted accounting principles or the basis of accounting described in the notes to the financial statements.
For more information on Review Engagement Reports and if it is suitable for your business purposes, please contact Lourdes Alvarez – Professional Accountants.