ssars 21 review of financial statements
TRANSCRIPT
Review of Financial StatementsSection 90 of SSARS 21
Objective for 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 for them to be in accordance with the applicable financial reporting framework
Primarily through the performance of inquiry and analytical procedures
What Changed?
New engagement letter (must be signed)
Communicate to client matters of
significant importance on a timely basis
Clarifies that audit procedures can be performed
during a review
Expands list of sample inquiries
New explicit requirement that
financial statements must reconcile with accounting records
New representation letter
New requirement to add a summary of
uncorrected immaterial adjustments
to the representation letter
What types of information
can a review engagement be applied to?
ReviewsFinancial statements
Other historical information:
Specified elements or accounts of a financial statement
Supplementary information
Financial information in a tax return
Objective of a review:
Provide limited assurance
How?
InquiriesAnalytics
Review Report Language
A review includes primarily applying analytical procedures to management’s (owners’) financial data and making inquiries of company management (owners).
Acceptance and Continuance
Acceptance Considerations
Can we meet ethical requirements?
Will sufficient information be available?
Do we doubt management's integrity?
New Engagement LetterObjectives of the review
Responsibilities of management
Responsibilities of the accountant
Identification of the financial reporting framework
Expected form and content of the review report
Knowledge of Entity
Understand the industry
Understand the accounting principles
Procedures
Inquiries What should be
asked?
New InquiriesAny allegations of fraud?
Any noncompliance (or suspicions of noncompliance) with laws and regulations?
Any related parties?
Are assumptions about estimates reasonable?
Analytics
At what level?How?
Analytics - Level?
Financial statement
Product line
Analytics - How? Comparison with prior year
Ratios
Budget to actual
Extensions (units x price)
Analytics - How?
Develop expectations
Compute numbers
Investigate unexpected variances
No significant changes expected - What then?
Simply state that based on discussions with management, no significant changes are expected
Then state "All changes of more than X% will be subjected to additional procedures"
Other Procedures
Read the financial statements
Reconcile financial statements to accounting information (e.g., trial balance)
Accumulate and evaluate misstatements and missing disclosures
Materiality not required to be documented
Materiality
Amount that would influence
the economic decisions of users
Representation Letter
Who should sign the representation letter?
Persons with overall responsibility for financial and operating matters
What date should be used?
"no earlier than the date on which the accountant
completed procedures sufficient to obtain limited
assurance"
AR-C 90.39
Rep letter date= Review report date
New requirement to add a summary of
uncorrected immaterial adjustments
to the representation letter
Paragraphs Added to Review Report
Emphasis of a matter (e.g., going concern)
Other matter (e.g., supplementary information)
Departures from Reporting Framework
Modify the review report
Disclose in a separate paragraph titled "Known Departures From the [identify the applicable financial reporting framework]" and disclose effects (if known)
