Which standards are applicable for a review of interim FS when an audit of previous annual FS was performed?
SAS: Statements on Auditing Standards for nonissuers
PCAOB: for issuers
True / False: SSARS are the standards to be used when performing a review of interim FS?
SAS: Statements on Auditing Standards
What criteria are needed for an auditor to perform a review of interim FS for a nonissuer?
The latest FS have been audited
Either the auditor was the one to audit the latest FS and a new auditor isn’t to take their place until later in the year OR the auditor is currently the auditor that will perform the audit on the next FS
The same financial reporting framework is used for the audited and interim FS
If condensed FS, it must be included with the full audited FS and state that it’s not the full FS
True / False: Auditing standards require a written report on a review of interim financial information.
False, unless the client states in a filing document with a regulatory agency, a shareholder document, or document to third parties that the interim FS were reviewed, then a written report is required and must be included with that document.
What procedures must be followed for a review of interim FS
Understanding with the client through an engagement letter complete
Learn and understand the entity, including internal control
Analytical procedures performed
Review of other procedures completed
Client representation letter obtained
Professional judgment to evaluate results completed
Auditor communicated results
What activities must be performed by the auditor prior to accepting an engagement to review the interim FS?
Determine whether the financial reporting framework used to prepare the interim financial information is acceptable
Obtain an agreement that management acknowledges and understands its typical responsibilities
True / False: The auditor must obtain a separate engagement letter if reviewing the interim FS, even though the auditor has been engaged to perform the year-end audit.
True / False: Not only does the auditor require an understanding of the entity and the industry in which it works for an interim review, but also must obtain an understanding of the internal control
True / False: The auditor performing a review of interim FS should perform limited inquiries to external clients
The only external inquiries allowed should be made to the client's lawyers regarding litigation.
True / False: The auditor must test internal controls when performing a review of the interim FS
The auditor must obtain an understanding, but will not perform tests of controls
True / False: The auditor should read the documentation of prior audits and reviews, the most recent annual financial information, and consider the results of current year audit procedures to obtain an understanding of the entity and its environment for a review of the interim FS
The current auditor did not perform the most recent audit. The current auditor has been engaged to perform the next audit and the review of interim FS. Should the current auditor solicit information from the predecessor auditor and, if so, what materials?
Yes, including the predecessor auditor’s documentation
The auditor becomes aware of significant deficiencies in internal control such that the auditor is unable to perform a review. How does the auditor handle such a situation?
No review report should be issued
The auditor should communicate such matters to management and/or those charged with governance.
True / False: The auditor may use the work of component auditors for the review of interim FS
True / False: Certain audit procedures related to the annual FS audit may be performed concurrently with the review of interim FS
Management refuses to provide a complete representation letter for the review of interim FS. The letter is purposely missing one specific concern. How should the auditor handle this situation?
Withdraw from the review of interim FS and consider withdraw from the annual audit engagement
The auditor has encountered a scope limitation wherein the auditor is unable to make inquiries of appropriate personnel. How should the auditor handle this situation?
No review report should be issued.
The auditor should communicate such matters, including the reasons why, to management and/or those charged with governance.
What communications are required with respect to a review of interim FS?
Fraud and noncompliance with laws and regulations
Significant deficiencies or material weaknesses in internal control.
Any material modifications that the auditor has become aware of that should be made to make the interim FS conform to the financial reporting framework
The interim FS should be marked with a statement indicating their review. What should the statement say?
The Auditor’s Responsibility paragraph in the Report on Review of the Interim FS should contain what information?
The review was conducted in accordance with SAS (or PCAOB) standards
That a review includes analytical procedures and inquiries of management
That a review is substantially less in scope than an audit and will not provide an opinion
The Conclusion paragraph in the Report on Review of the Interim FS should contain what information?
Negative assurance that the auditor is unaware of any material modifications that should be made for the interim financial information to be in accordance with the applicable financial reporting framework
The client has one departure from the applicable financial reporting framework in the form of missing disclosures for a review of interim procedures. How is this situation handled in the Review Report?
The departures are listed in a paragraph preceding the conclusion
You are the auditor for the year-end FS. The annual report includes information from the interim FS, but the interim FS are NOT labeled “UNAUDITED”. How is this situation handled?
The auditor must disclaim an opinion on the interim FS information
You are the auditor for the year-end FS. The annual report includes information from the interim FS. The interim FS were found to have departures, which are clearly indicated in the Interim Review Report. The Review Report is included in the annual report along with the interim FS. How is this situation handled?
The auditor of the year-end FS does not need to include an Other-Matter paragraph as the departures are documented and included in the annual report.
You are the auditor for the year-end FS. The annual report includes information from the interim FS. The interim FS were found to have departures, and the Interim Review Report is not included in the annual report along with the interim FS. How is this situation handled?
The auditor must include an Other-Matters paragraph indicating the departures.
The client includes interim financial information in connection with a registration statement. What statement regarding the interim FS should be included in the Review Report?
The Interim Review Report is not considered to be a report or part of the registration statement.