Reviews

The objective of the accountant when performing a review of financial statements is to 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.

At Sawyer Assurance, we have designed our Review process to be highly efficient and to produce a high-quality product.

FREQUENTLY ASKED QUESTIONS (FAQ) ABOUT REVIEWS

What is the objective of a financial statement review?

The accountant will obtain limited assurance, primarily by performing analytical procedures and inquiries, 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 (e.g., GAAP) and report on the financial statements as a whole.

What is the difference between an audit and a review?

A review differs significantly from an audit of financial statements. A review does not contemplate obtaining an understanding of the entity's internal control; assessing fraud risk; testing accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, or the examination of source documents; or other procedures ordinarily performed in an audit. Accordingly, in a review, the accountant does not obtain assurance that he or she will become aware of all significant matters that would be disclosed in an audit. Therefore, a review is designed to obtain only limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the financial statements in order for the statements to be in accordance with the applicable financial reporting framework.

What is limited assurance in a review engagement?

A level of assurance that is less than the reasonable assurance obtained in an audit engagement but is at an acceptable level as the basis for the conclusion expressed in the accountant's review report.

What are analytical procedures in a review engagement?

Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. Analytical procedures also encompass such investigation, as is necessary, of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount.

What are inquiries in a review engagement?

Inquiry consists of seeking information of knowledgeable persons within or outside the entity

Is the accountant required to be independent in a review engagement?

Yes. The accountant must be independent of the entity when performing a review of financial statements in accordance with SSARSs. If, during the performance of the review engagement, the accountant determines that the accountant's independence is impaired, the accountant will withdraw from the review engagement.

Can the accountant perform a review engagement that has been limited in scope by the client (e.g., the accountant's procedures are limited to certain areas of the financial statements)?

No. The accountant will not accept a review engagement if management or those charged with governance impose a limitation on the scope of the accountant's work in terms of a proposed review engagement such that the accountant believes the limitation will result in the accountant being unable to perform review procedures to provide an adequate basis for issuing a review report.

What responsibilities does management have in a review engagement?

Management has the following responsibilities in a review engagement:

  1. for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework and the inclusion of all informative disclosures that are appropriate for the applicable financial reporting framework used to prepare the entity's financial statements.

  2. to provide the accountant, at the conclusion of the engagement, with a letter that confirms certain representations made during the review.

  3. to include the accountant's review report in any document containing financial statements that indicates that such financial statements have been reviewed by the entity's accountant unless a different understanding is reached.

Does a review provide any assurance that the financial statements are accurate?

Sort of. The review provides what is called "negative assurance" (as opposed to "positive assurance"). The distinction is subtle, but important: in a review engagement, the accountant doesn't report whether the financial statements ARE accurate (as in an audit); but rather, as a result of his/her limited review procedures, the accountant reports whether there are any circumstances where the financial statements are INaccurate.

What is included in a review Engagement Letter (i.e., contract between the accountant and client)?

  1. The objectives of the engagement

  2. The responsibilities of management

  3. The responsibilities of the accountant

  4. The limitations of a review engagement, including a statement that a review is substantially less in scope than an audit and that the accountant will not express an opinion on the financial statements

  5. Identification of the applicable financial reporting framework for the preparation of the financial statements

  6. The expected form and content of the accountant's review report and a statement that there may be circumstances in which the report may differ from its expected form and content

  7. Price and timeline

  8. Signature of accountant and client

Can a review be performed on other historical information besides financial statements?

Yes. Examples of such other historical financial information include:

  1. Specified elements, accounts, or items of a financial statement, such as schedules of rentals, royalties, profit participation, or provision for income taxes

  2. Supplementary information

  3. Required supplementary information

  4. Financial information contained in a tax return

Can a review be performed on a single financial statement (such as balance sheet only, or income statement only)?

Yes. The accountant may review a single financial statement, such as a balance sheet, and not other related financial statements, such as the statements of income, retained earnings, and cash flows, if the scope of the accountant's inquiry and analytical procedures have not been restricted .

What types of communications will the accountant have with management throughout the review engagement?

In a review engagement, the accountant's communications with management and those charged with governance take the form of

  1. inquiries the accountant makes in the course of performing the procedures for the review and

  2. other communications, in the context of having effective two-way communication to understand matters arising and to develop a constructive working relationship for the engagement.

Our engagements generally include 4 meetings with management, which is one meeting for each stage of the review (i.e., planning, fieldwork, concluding, reporting). In the PLANNING PHASE, we will hold discussions with you and request information to help us gain an understanding of your organization and its accounting policies. In the FIELDWORK PHASE, we will hold analytical discussions with you regarding the financial statement account balances. In the CONCLUDING PHASE, we will review the work we have performed and request additional information from you if necessary. And in the REPORTING PHASE, we will prepare our review report and assist you in preparing the financial statements for the organization.

What is considered to be a "material" account balance in a financial statement review?

The accountant's determination of materiality is a matter of professional judgment and is affected by the accountant's perception of the financial information needs of users of the financial statements. Items in the financial statements are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. Judgments about materiality involve both qualitative and quantitative considerations, and are based on a consideration of the common financial information needs of users as a group.


What are the steps in the process of a financial statement review engagement?

  1. Prepare and sign an Engagement Letter

  2. Obtain an understanding of the entity and its industry

  3. Analytical procedures

  4. Inquiries of management

  5. Reconcile the financial statements to the underlying accounting records

  6. Prepare/read the financial statements

  7. Prepare written management representations

  8. Evaluate review evidence and form a conclusion

  9. Prepare/issue the accountant's review report

During a review engagement, how does the accountant obtain an understanding of the entity and the industry it operates in?

In a review engagement, the accountant is required to obtain an understanding of the entity and the industry it operates in, including the following:

  • the accounting principles and practices generally used in the industry

  • the entity's business , including a general understanding of the entity's organization; its operating characteristics; and the nature of its assets, liabilities, revenues, and expenses

  • the accounting principles and practices used by the entity in measuring, recognizing, recording, and disclosing all significant accounts and disclosures in the financial statements; including those that, based on the accountant's knowledge of the industry, are unusual

The accountant might obtain this understanding by performing the following procedures:

  • consulting AICPA guides, industry publications, financial statements of other entities in the industry, textbooks and periodicals, appropriate continuing professional education, or individuals knowledgeable about the industry

  • inquiry of the entity's personnel, the review of documents prepared by the entity, or experience with the entity or the entity's industry

What types of analytical procedures does the accountant perform during a financial statement review engagement?

The accountant applies analytical procedures to the financial statements to identify and provide a basis for inquiry about the relationships and individual items that appear to be unusual and that may indicate a material misstatement. Such analytical procedures include the following:

  • Comparing the financial statements with comparable information for the prior period, giving consideration to knowledge about changes in the entity's business and specific transactions

  • Considering plausible relationships among both financial and, when relevant, nonfinancial information

  • Comparing recorded amounts or ratios developed from recorded amounts to expectations developed by the accountant through identifying and using relationships that are reasonably expected to exist, based on the accountant's understanding of the entity and the industry in which the entity operates

  • Comparing disaggregated revenue data, as applicable

If analytical procedures identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the accountant will investigate such differences by inquiring of management and performing other review procedures if considered necessary in the circumstances. However, the accountant is not required to corroborate management's responses with other evidence.

What types of inquiries will the accountant make of management when performing a financial statement review engagement?

The accountant will inquire of members of management who have responsibility for financial and accounting matters concerning the financial statements, and others within the entity, as appropriate, about

  • whether the financial statements have been prepared and fairly presented in accordance with the applicable financial reporting framework consistently applied, including how management determined that significant accounting estimates are reasonable in the circumstances.

  • the identification of related parties and related party transactions, including the purpose of those transactions

  • whether there are significant, unusual, or complex transactions, events, or matters that have affected or may affect the entity's financial statements

  • matters about which questions have arisen in the course of applying the review procedures

  • the existence of any actual, suspected, or alleged fraud or noncompliance with laws and regulations affecting the entity

  • whether management has identified and addressed events subsequent to the date of the financial statements that require adjustment of, or disclosure in, the financial statements.

  • the basis for management's assessment of the entity's ability to continue as a going concern.

  • whether there are events or conditions that appear to cast doubt on the entity's ability to continue as a going concern.

  • material commitments, contractual obligations, or contingencies that have affected or may affect the entity's financial statements, including disclosures.

  • material nonmonetary transactions or transactions for no consideration in the financial reporting period under consideration.

  • communications from regulatory agencies, if applicable.

  • any litigation, claims, and assessments that existed at the date of the balance sheet being reported on and during the period from the balance sheet date to the date of management's response to the accountant's inquiry.

  • actions taken at meetings of stockholders, the board of directors, committees of the board of directors, or comparable meetings that may affect the financial statements.

  • any other matters that the accountant may consider necessary

The accountant will consider the reasonableness and consistency of management's responses in light of the results of other review procedures and the accountant's knowledge of the entity's business. However, the accountant is not required to corroborate management's responses with other evidence.

What happens if the accountant identifies suspected fraud or noncompliance with laws or regulations during the financial statement review engagement?

When there is an indication that fraud or noncompliance with laws or regulations has occurred, or is suspected to have occurred, the effects of which should be considered when preparing financial statements, the accountant will do the following:

  • Communicate identified or suspected fraud as soon as practical to the appropriate level of senior management (at a level above those involved with the suspected fraud, if possible) or those charged with governance, as appropriate.

  • Communicate to management identified or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements, other than matters that are clearly inconsequential.

  • Request management's assessment of the effects, if any, on the financial statements.

  • Consider the effect, if any, of management's assessment of the effects of fraud or noncompliance with laws or regulations communicated to the accountant on the accountant's conclusion on the financial statements and on the accountant's report.

  • Determine whether there is a responsibility to report the occurrence or suspicion of fraud or noncompliance with laws and regulations to a party outside the entity

  • If the fraud or noncompliance with laws or regulations involves senior management or results in a material misstatement of the financial statements, the accountant will communicate the matter directly to those charged with governance.

  • The accountant will consider the need to obtain legal advice and take appropriate action, including potential withdrawal, if management or, as appropriate, those charged with governance do not provide sufficient information that supports that the financial statements are not materially misstated due to fraud and that the entity is in compliance with laws and regulations, and in the accountant's professional judgment, the effect of the suspected noncompliance may be material to the financial statements.

What happens in a financial statement review engagement if the accountant becomes aware of conditions or events that raise substantial doubt about the entity's ability to continue as a going concern?

A review of financial statements is not designed to identify conditions or events that raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. However, conditions or events that raise substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time may have existed at the date of the prior period financial statements or may be identified as a result of inquiries of management or in the course of performing other review procedures. The following are examples of conditions or events that raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time:

  • Negative trends. For example, recurring operating losses, working capital deficiencies, negative cash flows from operating activities, and other adverse key financial ratios

  • Other indications of possible financial difficulties. For example, defaults on loans or similar agreements, arrearages in dividends, denial of usual trade credit from suppliers, a need to restructure debt to avoid default, noncompliance with statutory capital requirements, and a need to seek new sources or methods of financing or to dispose of substantial assets

  • Internal matters. For example, work stoppages or other labor difficulties, substantial dependence on the success of a particular project, uneconomic long-term commitments, and a need to significantly revise operations

  • External matters. For example, legal proceedings, legislation, or similar matters that might jeopardize an entity's ability to operate; loss of a key franchise, license, or patent; loss of a principal customer or supplier; and an uninsured or underinsured catastrophe such as a hurricane, tornado, earthquake, or flood

If the accountant becomes aware that such conditions exist, the accountant will:

  • Inquire of management whether the going concern basis of accounting is appropriate

  • Inquire of management about its plans for addressing the adverse effects of the conditions and events

  • Consider the adequacy of the disclosure about such matters in the financial statements.

The following list includes examples of plans that management may implement to mitigate conditions or events that raise substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time:

  • Plans to dispose of an asset or business

  • Plans to borrow money or restructure debt

  • Plans to reduce or delay expenditures

  • Plans to increase ownership equity

Relevant disclosure to be made in the financial statements include the following:

  • Principal conditions and events that raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time

  • The possible effects of such conditions and events

  • Management's evaluation of the significance of those conditions and events in relation to the entity's ability to meet its obligations and any mitigating factors

  • Possible discontinuance of operations

  • Management's plans (including relevant prospective financial information) that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time

  • Information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities


What happens if the accountant has reason to believe the financial statements are materially misstated as a result of performing his/her financial statement review procedures?

If the accountant becomes aware of a matter or matters that cause the accountant to believe the financial statements may be materially misstated, the accountant will design and perform additional procedures sufficient to enable the accountant to

  • conclude that the matter or matters are not likely to cause the financial statements as a whole to be materially misstated or

  • determine that the matter or matters cause the financial statements as a whole to be materially misstated.

Additional procedures focus on obtaining sufficient appropriate review evidence to enable the accountant to form a conclusion on matters that the accountant believes may cause the financial statements to be materially misstated. Such procedures may consist of the following:

  • Additional inquiry or analytical procedures, for example, being performed in greater detail or focused on the affected items (that is, amounts or disclosures concerning the affected accounts or transactions as reflected in the financial statements)

  • Other types of procedures, for example, a substantive test of details or external confirmations

What happens if the accountant is unable to obtain sufficient and appropriate evidence in a financial statement review engagement?

If the accountant is not able to obtain sufficient appropriate review evidence to form a conclusion, the accountant will withdraw from the engagement.

What happens if subsequently discovered facts become known to the accountant before the report release date in a financial statement review engagement?

The accountant is not required to perform any review procedures regarding the financial statements after the date of the accountant's review report. However, if a subsequently discovered fact becomes known to the accountant before the report release date, the accountant will

  • discuss the matter with management and, when appropriate, those charged with governance and

  • determine whether the financial statements need revision and, if revision is needed, inquire how management intends to address the matter in the financial statements.

If management revises the financial statements, the accountant should perform the review procedures necessary in the circumstances on the revision. If management does not revise the financial statements in circumstances in which the accountant believes they need to be revised, the accountant should modify the accountant's review report or withdraw, as appropriate.

What are management representations in the financial statement review?

The written representations will be in the form of a representation letter addressed to the accountant. For all financial statements presented and all periods covered by the review, the accountant will request management to provide written representations that are dated as of the date of the accountant's review report and that indicate that it has fulfilled its responsibilities, as set out in the terms of the engagement, including the following:

  • Management has fulfilled its responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework.

  • Management acknowledges its responsibility for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements, including its responsibility to prevent and detect fraud.

  • All transactions have been recorded and are reflected in the financial statements.

  • Management has provided the accountant with all relevant information and access to information, as agreed upon in the terms of the engagement.

  • Management has responded fully and truthfully to all of the accountant's inquiries

  • Management has disclosed to the accountant the identity of the entity's related parties and all the related party relationships and transactions of which it is aware, and it has appropriately accounted for and disclosed such relationships and transactions.

  • Management has disclosed to the accountant significant facts relating to any fraud or suspected fraud known to management that may have affected the entity involving

    • management,

    • employees who have significant roles in internal control, or

    • . others, when the fraud could have a material effect on the financial statements.

  • Management has disclosed to the accountant significant facts relating to any allegations of fraud or suspected fraud known to management that may have affected the entity's financial statements communicated by employees, former employees, regulators, or others.

  • Management has disclosed to the accountant all known actual or possible instances of noncompliance with laws and regulations whose effects should be considered when preparing financial statements.

  • Management has disclosed to the accountant all information relevant to the use of the going concern assumption in the financial statements.

  • Management has properly accounted for all events occurring subsequent to the date of the financial statements and for which the applicable financial reporting framework requires adjustment or disclosure, and it has made the necessary adjustments or disclosures.

  • Management has disclosed to the accountant whether it believes that the effects of uncorrected misstatements are immaterial, individually and in the aggregate, to the financial statements as a whole. A summary of such items should be included in, or attached to, the written representation.

  • Management has disclosed to the accountant all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements, and it has appropriately accounted for and disclosed such litigation and claims in accordance with the applicable financial reporting framework.

  • Management has disclosed to the accountant whether it believes that significant assumptions it used in making accounting estimates are reasonable.

If, in addition to the representations listed above, the accountant determines that it is necessary to obtain one or more written representations to support other review evidence relevant to the financial statements, the accountant will request such other written representations.

What are the types of conclusions the accountant will report in a financial statement review?

The accountant will express an UNMODIFIED CONCLUSION in the accountant's review report on the financial statements as a whole when the accountant has obtained limited assurance to be able to conclude that nothing has come to the accountant's attention that causes the accountant to believe that the financial statements are not prepared, in all material respects, in accordance with the applicable financial reporting framework. The accountant's report will say the following: "Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in accordance with [the applicable financial reporting framework]."

The accountant will express a MODIFIED CONCLUSION in the accountant's review report on the financial statements as a whole when the accountant determines, based on the procedures performed and the review evidence obtained, that the financial statements are materially misstated. A modified conclusion will take the form of either of the following:

  • QUALIFIED CONCLUSION: when the accountant concludes that the effects of the matter or matters giving rise to the modification are material but not pervasive to the financial statements. The accountant's report will say the following: "Based on our review, except for the effects of the matter(s) described in the Basis for Qualified Conclusion paragraph, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with [the applicable financial reporting framework]."

  • ADVERSE CONCLUSION: when the effects of the matter or matters giving rise to the modification are both material and pervasive to the financial statements. The accountant's report will say the following: "Based on our review, due to the significance of the matter(s) described in the Basis for Adverse Conclusion paragraph, the financial statements are not in accordance with [the applicable financial reporting framework]."

What will the accountant's review report say?

The written review report will include the following:

  • A title that includes the word independent to clearly indicate that it is the report of an independent accountant for a review engagement.

  • An addressee, based on the circumstances of the engagement.

  • An introductory paragraph that

    • identifies the entity whose financial statements have been reviewed,

    • states that the financial statements identified in the report were reviewed,

    • identifies the financial statements,

    • specifies the date or period covered by each financial statement,

    • includes a statement that a review includes primarily applying analytical procedures to management's (owner's) financial data and making inquiries of company management (owners), and

    • includes a statement that a review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole, and that, accordingly, the accountant does not express such an opinion.

  • A section with the heading "Management's Responsibility for the Financial Statements" that includes an explanation that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework; this responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

  • A section with the heading "Accountant's Responsibility" that includes the following statements:

    • The accountant's responsibility is to conduct the review engagement in accordance with SSARSs promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require that the accountant perform the procedures to 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.

    • The accountant believes that the results of the accountant's procedures provide a reasonable basis for the accountant's conclusion.

    • The accountant is required to be independent of the entity and to meet the accountant's other ethical responsibilities, in accordance with the relevant ethical requirements relating to the review.

  • A concluding section with an appropriate heading that includes the accountant's conclusion on the financial statements, and that identifies the country of origin of the financial reporting framework, if applicable

  • When the accountant's conclusion on the financial statements is modified,

    • a paragraph, under the appropriate heading, that contains the accountant's modified conclusion

    • a paragraph, under an appropriate heading, that provides a description of the matter or matters giving rise to the modification

  • The signature of the accountant or the accountant's firm.

  • The city and state where the accountant practices.

  • The date of the review report.

REVIEW STANDARDS

Introduction to Performing Financial Statement Review Engagements

Statements on Standards for Accounting and Review Services (SSARSs) are issued by the AICPA Accounting and Review Services Committee (ARSC). Those standards relevant to financial statement reviews are as follows:

AR-C Section 60A: General Principles for Engagements Performed in Accordance with Statements on Standards for Accounting and Review Services

AR-C Section 90A: Review of Financial Statements

Also, for periods ending on or after June 15, 2019, SSARS No. 24 creates a new AR-C Section 100 to address adherence to international standards, and also substantially revises a few of the requirements in the above sections to address procedures for assessing an entity's ability to continue as a going concern.

AR-C Section 60A.01-06: General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services

"Introduction

Scope of This Section

.01 This section provides general principles for engagements performed in accordance with Statements on Standards for Accounting and Review Services (SSARSs) issued by the Accounting and Review Services Committee (ARSC) and codified into AR-C sections. This section also sets forth the meaning of certain terms used in SSARSs when describing the professional requirements imposed on accountants performing an engagement in accordance with SSARSs. [As amended, effective October 2016, by SSARS No. 23.]

.02 This section is intended to help accountants better understand their professional responsibilities when performing an engagement in accordance with SSARSs. Additional sections have been established to set forth specific performance and reporting requirements. Such additional requirements are based on the general principles provided by this section, and any requirements created by this section also have been incorporated into the additional sections.

.03 SSARSs do not address the responsibilities of the accountant that may exist in legislation, regulation, or otherwise. Such responsibilities may differ from those established in SSARSs. Accordingly, although the accountant may find aspects of SSARSs helpful in such circumstances, it is the responsibility of the accountant to ensure compliance with all relevant legal, regulatory, or professional obligations. [As amended, effective October 2016, by SSARS No. 23.]

.04 The financial statements subject to the engagement performed in accordance with SSARSs are those of the entity. SSARSs do not impose responsibilities on management and do not override laws and regulations that govern their responsibilities. (Ref: par. .A4–.A11) [Paragraph renumbered and amended, effective October 2016, by SSARS No. 23.]

Effective Date

.05 This section is effective for engagements performed in accordance with SSARSs for periods ending on or after December 15, 2015. Early implementation is permitted. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

Objective

.06 The objective of the accountant is to obtain an understanding of the general principles for engagements performed in accordance with SSARSs. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]"

AR-C Section 60A.08: Ethical Requirements

".08 The accountant should comply with relevant ethical requirements. (Ref: par. .A13–.A16)"

AR-C Section 60A.09: Professional Judgment

".09 The accountant should exercise professional judgment in the performance of an engagement in accordance with SSARSs. (Ref: par. .A17–.A21)"

AR-C Section 60A.10-13: Complying with AR-C Sections Relevant to the Engagement

"Conduct of the Engagement in Accordance With SSARSs

.10 The accountant must perform a review, compilation, or an engagement to prepare financial statements in accordance with SSARSs, except for certain reviews of interim financial information as discussed in section 90, Review of Financial Statements.

Complying With AR-C Sections Relevant to the Engagement

.11 The accountant should comply with all AR-C sections relevant to the engagement. An AR-C section is relevant to the engagement when the AR-C section is in effect, and the circumstances addressed by the AR-C section exist. (Ref: par. .A22–.A27)

.12 The accountant should have an understanding of the entire text of an AR-C section, including its application and other explanatory material, to understand its objectives and apply its requirements properly. (Ref: par. .A28– .A32)

.13 An accountant should not represent compliance with SSARSs in the accountant's compilation or review report unless the accountant has complied with the requirements of this section and all other AR-C sections relevant to the engagement."

AR-C Section 60A.14-19: Complying with Relevant SSARS Requirements

"Complying With Relevant Requirements

.14 Subject to paragraph .16, the accountant should comply with each requirement of the relevant AR-C section unless, in the circumstances of the engagement, the requirement is not relevant because it is conditional, and the condition does not exist. (Ref: par. .A33)

Defining Professional Responsibilities in SSARSs

.15 SSARSs use the following two categories of professional requirements, identified by specific terms, to describe the degree of responsibility they impose on accountants:

• Unconditional requirements. The accountant must comply with an unconditional requirement in all cases in which such requirement is relevant. SSARSs use the word "must" to indicate an unconditional requirement.

• Presumptively mandatory requirements. The accountant must comply with a presumptively mandatory requirement in all cases in which such a requirement is relevant, except in rare circumstances discussed in paragraph .16. SSARSs use the word "should" to indicate a presumptively mandatory requirement. (Ref: par. .A34)

.16 In rare circumstances, the accountant may judge it necessary to depart from a relevant presumptively mandatory requirement. In such circumstances, the accountant should perform alternative procedures to achieve the intent of the requirement. The need for an accountant to depart from a relevant, presumptively mandatory requirement is expected to arise only when the requirement is for a specific procedure to be performed and, in the specific circumstances of the engagement, that procedure would be ineffective in achieving the intent of the requirement.

.17 If, in rare circumstances, the accountant judges it necessary to depart from a relevant presumptively mandatory requirement, the accountant must document the justification for the departure and how the alternative procedures performed in the circumstances were sufficient to achieve the intent of that requirement. [Paragraph added, effective October 2016, by SSARS No. 23.]

Interpretive Publications

.18 The accountant should consider applicable interpretive publications in the performance of an engagement in accordance with SSARSs. (Ref: par. .A35) [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

Other Preparation, Compilation and Review Publications

.19 In applying the guidance included in an other preparation, compilation and review publication, the accountant should, exercising professional judgment, assess the relevance and appropriateness of such guidance to the circumstances of the engagement. (Ref: par. .A36–.A38) [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]"

AR-C Section 60A.20-24: Engagement Level Quality Control under SSARS

".20 In an engagement performed in accordance with SSARSs, the engagement partner should possess the competence and capabilities to perform the engagement and competence in financial reporting, appropriate to the engagement circumstances. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

.21 In an engagement performed in accordance with SSARSs, the engagement partner should take responsibility for the following: (Ref: par. .A39–.A42)

a. The overall quality of each engagement to which that partner is assigned

b. The direction, supervision, planning and performance of the engagement in compliance with professional standards and applicable legal and regulatory requirements (Ref: par. .A43)

c. The accountant's report being appropriate in the circumstances

d. The engagement being performed in accordance with the firm's quality control policies and procedures, including the following:

i. Being satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and engagements have been followed, and that conclusions reached are appropriate, including considering whether there is information that would lead the engagement partner to conclude that management lacks integrity (Ref: par. .A44–.A45)

ii. Being satisfied that the engagement team collectively has the appropriate competence and capabilities to perform the engagement and expertise in financial reporting to

(1) perform the engagement in accordance with professional standards and applicable legal and regulatory requirements and

(2) enable a report that is appropriate in the circumstances to be issued, if applicable

iii. Taking responsibility for appropriate engagement documentation being maintained. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

Relevant Considerations After Engagement Acceptance

.22 If the engagement partner obtains information that would have caused the firm to decline the engagement had that information been available earlier, the engagement partner should communicate that information promptly to the firm, so that the firm and the engagement partner can take the necessary action. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

Compliance With Relevant Ethical Requirements

.23 Throughout the engagement, the engagement partner should remain alert, through observation and making inquiries as necessary, for evidence of noncompliance with relevant ethical requirements by members of the engagement team. If matters come to the engagement partner's attention through the firm's system of quality control or otherwise that indicate that members of the engagement team have not complied with relevant ethical requirements, the engagement partner, in consultation with others in the firm, should determine the appropriate action. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

Monitoring

.24 An effective system of quality control for a firm includes a monitoring process designed to provide the firm with reasonable assurance that the firm's policies and procedures relating to the system of quality control are relevant, adequate, and operating effectively. The engagement partner should consider the results of the firm's monitoring process as evidenced in the latest information circulated by the firm and, if applicable, other network firms and whether deficiencies noted in that information may affect the engagement. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]"

AR-C Section 60A.25-26: Acceptance and Continuance of Client Relationships and Engagements

".25 The accountant should not accept an engagement to be performed in accordance with SSARSs if (Ref: par. .A46)

a. the accountant has reason to believe that relevant ethical requirements will not be satisfied; (Ref: par. .A47)

b. the accountant's preliminary understanding of the engagement circumstances indicates that information needed to perform the engagement is likely to be unavailable or unreliable; or (Ref: par. .A48)

c. the accountant has cause to doubt management's integrity such that it is likely to affect the performance of the engagement. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]

.26 As a precondition for accepting an engagement to be performed in accordance with SSARSs, the accountant should

a. determine whether preliminary knowledge of the engagement circumstances indicate that ethical requirements regarding professional competence will be satisfied.

b. determine whether the financial reporting framework selected by management to be applied in the preparation of the financial statements is acceptable. (Ref: par. .A49)

c. obtain the agreement of management that it acknowledges and understands its responsibility (Ref: par. .A50)

i. for the selection of the financial reporting framework to be applied in the preparation of financial statements.

ii. for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, unless the accountant decides to accept responsibility for such internal control.

iii. for preventing and detecting fraud.

iv. for ensuring that the entity complies with laws and regulations applicable to its activities.

v. for the accuracy and completeness of the records, documents, explanations, and other information, including significant judgments provided by management for the preparation of financial statements.

vi. to provide the accountant with (Ref: par. .A51)

(1) access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters.

(2) additional information that the accountant may request from management for the purpose of the engagement.

(3) unrestricted access to persons within the entity of whom the accountant determines it necessary to make inquiries. [Paragraph renumbered and amended, effective October 2016, by SSARS No. 23.]"

AR-C Section 90A.01-04: Review of Financial Statements - Introduction and Objectives

"Introduction

Scope and Applicability of This Section

.01 This section applies when the accountant is engaged to perform a review of financial statements. This section also applies when the accountant is engaged to review other historical financial information, excluding pro forma financial information. Reviews of pro forma financial information are to be performed in accordance with Statements on Standards for Attestation Engagements. (Ref: par. .A1–.A3) [As amended, effective October 2016, by SSARS No. 23.]

.02 This section does not apply when the accountant is engaged to review interim financial information when

a. the entity's latest annual financial statements have been audited by the accountant or a predecessor;

b. the accountant either

i. has been engaged to audit the entity's current year financial statements or

ii. audited the entity's latest annual financial statements and, in situations in which it is expected that the current year financial statements will be audited, the engagement of another accountant to audit the current year financial statements is not effective prior to the beginning of the period covered by the review; and

c. the entity prepares its interim financial information in accordance with the same financial reporting framework as that used to prepare the annual financial statements.

AU-C section 930, Interim Financial Information, provides guidance for review engagements when the conditions in a–c are met.

Effective Date

.03 This section is effective for reviews of financial statements for periods ending on or after December 15, 2015. Early implementation is permitted.

Objective

.04 The objective of the accountant when performing a review of financial statements is to 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. (Ref: par. .A4–.A9)"

AR-C Section 90A.06-07: Independence

"General Principles for Performing and Reporting on Review Engagements

.06 In addition to complying with this section, an accountant is required to comply with section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services.

Independence

.07 The accountant must be independent of the entity when performing a review of financial statements in accordance with SSARSs. If, during the performance of the review engagement, the accountant determines that the accountant's independence is impaired, the accountant should withdraw from the review engagement. (Ref: par. .A13–.A14)"

AR-C Section 90A.08-10: Acceptance and Continuance of Client Relationships and Review Engagements

".08 The accountant should not accept a review engagement if, in addition to the requirements in paragraph .25 of section 60, management or those charged with governance impose a limitation on the scope of the accountant's work in terms of a proposed review engagement such that the accountant believes the limitation will result in the accountant being unable to perform review procedures to provide an adequate basis for issuing a review report.

.09 As a condition for accepting an engagement to review an entity's financial statements, in addition to the requirements in paragraph .26 of section 60, the accountant should obtain the agreement of management that it acknowledges and understands its responsibility

a. for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework and the inclusion of all informative disclosures that are appropriate for the applicable financial reporting framework used to prepare the entity's financial statements. If the financial statements are prepared in accordance with a special purpose framework, this includes (Ref: par. .A15)

i. a description of the special purpose framework, including a summary of significant accounting policies, and how the framework differs from GAAP, the effect of which need not be quantified, and informative disclosures similar to those required by GAAP in the case of special purpose financial statements that contain items that are the same as, or similar to, those in financial statements prepared in accordance with GAAP, (Ref: par. .A81)

ii. a description of any significant interpretations of the contract on which the special purpose financial statements are prepared in the case of financial statements prepared in accordance with a contractual-basis of accounting, and

iii. additional disclosures beyond those specifically required by the framework that may be necessary for the special purpose framework to achieve fair presentation.

b. to provide the accountant, at the conclusion of the engagement, with a letter that confirms certain representations made during the review.

c. to include the accountant's review report in any document containing financial statements that indicates that such financial statements have been reviewed by the entity's accountant unless a different understanding is reached. (Ref: par. .A16)

.10 If the accountant is not satisfied about any of the matters set out in paragraph .26 of section 60 or paragraph .09 of this section as preconditions for accepting a review engagement, the accountant should discuss the matter with management or those charged with governance. If changes cannot be made to satisfy the accountant about those matters, the accountant should not accept the proposed engagement."

AR-C Section 90A.11-12: Agreement on Engagement Terms

".11 The accountant should agree upon the terms of the engagement with management or those charged with governance, as appropriate. The agreed-upon terms of the engagement should be documented in an engagement letter or other suitable form of written agreement between the parties and should include the following: (Ref: par. .A17–.A22)

a. The objectives of the engagement

b. The responsibilities of management set forth in paragraph .26c of section 60 and paragraph .09 of this section

c. The responsibilities of the accountant

d. The limitations of a review engagement

e. Identification of the applicable financial reporting framework for the preparation of the financial statements

f. The expected form and content of the accountant's review report and a statement that there may be circumstances in which the report may differ from its expected form and content

[As amended, effective October 2016, by SSARS No. 23.]

.12 The engagement letter or other suitable form of written agreement should be signed by

a. the accountant or the accountant's firm and

b. management or those charged with governance, as appropriate. (Ref: par. .A18)

[As amended, effective October 2016, by SSARS No. 23.]"

AR-C Section 90A.13: Communication with Management and Those Charged with Governance

".13 The accountant should communicate with management or those charged with governance, as appropriate, on a timely basis during the course of the review engagement, all matters concerning the review engagement that, in the accountant's professional judgment, are of significant importance to merit the attention of management or those charged with governance, as appropriate. (Ref: par. .A23–.A29)"

AR-C Section 90A.14-16: Understanding of the Entity and its Industry

"Understanding of the Industry

.14 To perform the review engagement, the accountant should possess or obtain an understanding of the industry in which the entity operates, including the accounting principles and practices generally used in the industry, sufficient to enable the accountant to review financial statements that are appropriate for an entity operating in that industry. (Ref: par. .A30)

Knowledge of the Entity

.15 The accountant should obtain knowledge about the entity, including an understanding of

a. the entity's business and

b. the accounting principles and practices used by the entity sufficient to identify areas in the financial statements in which there is a greater likelihood that material misstatements may arise and to be able to design procedures to address those areas. (Ref: par. .A31–.A32)

.16 In obtaining the understanding of the entity's accounting policies and practices, the accountant should be alert to accounting policies and procedures that, based on the accountant's knowledge of the industry, are unusual."

AR-C Section 90A.17-18: Designing and Performing Review Procedures

".17 The accountant should design and perform analytical procedures and make inquiries and perform other procedures, as appropriate, to 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 in order for the statements to be in accordance with the applicable financial reporting framework based on the accountant's (Ref: par. .A33)

a. understanding of the industry,

b. knowledge of the entity, and

c. awareness of the risk that the accountant may unknowingly fail to modify the accountant's review report on financial statements that are materially misstated. (Ref: par. .A34)

.18 The accountant should focus the analytical procedures and inquiries in those areas where the accountant believes there are increased risks of material misstatements."

AR-C Section 90A.19-21: Analytical Procedures

".19 The accountant should apply analytical procedures to the financial statements to identify and provide a basis for inquiry about the relationships and individual items that appear to be unusual and that may indicate a material misstatement. Such analytical procedures should include the following: (Ref: par. .A35–.A37)

a. Comparing the financial statements with comparable information for the prior period, giving consideration to knowledge about changes in the entity's business and specific transactions

b. Considering plausible relationships among both financial and, when relevant, nonfinancial information (Ref: par. .A38)

c. Comparing recorded amounts or ratios developed from recorded amounts to expectations developed by the accountant through identifying and using relationships that are reasonably expected to exist, based on the accountant's understanding of the entity and the industry in which the entity operates (Ref: par. .A39)

d. Comparing disaggregated revenue data, as applicable (Ref: par. .A40)

.20 When designing and performing analytical procedures, the accountant should (Ref: par. .A41)

a. determine the suitability of particular analytical procedures;

b. consider the reliability of data from which the accountant's expectation of recorded amounts or ratios is developed, taking into account the source, comparability, and nature and relevance of information available;

c. develop an expectation of recorded amounts or ratios and evaluate whether the expectation is sufficiently precise to provide the accountant with limited assurance that a misstatement will be identified that, either individually or when aggregated with other misstatements, may cause the financial statements to be materially misstated; and

d. determine the amount of any difference of recorded amounts from expected values that is acceptable without further investigation as required by paragraph .21 and compare the recorded amounts, or ratios developed from recorded amounts, with the expectations.

Investigating Results of Analytical Procedures

.21 If analytical procedures identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the accountant should investigate such differences by

a. inquiring of management and

b. performing other review procedures if considered necessary in the circumstances. (Ref: par. .A42)"

AR-C Section 90A.22-23: Inquiries of Members of Management Who Have Responsibility for Financial and Accounting Matters

".22 The accountant should inquire of members of management who have responsibility for financial and accounting matters concerning the financial statements about (Ref: par. .A43)

a. whether the financial statements have been prepared and fairly presented in accordance with the applicable financial reporting framework consistently applied.

b. unusual or complex situations that may have an effect on the financial statements. (Ref: par. .A44)

c. significant transactions occurring or recognized during the period, particularly those in the last several days of the period.

d. the status of uncorrected misstatements identified during the previous review (that is, whether adjustments had been recorded subsequent to the periods covered by the prior review and, if so, the amounts recorded and period in which such adjustments were recorded).

e. matters about which questions have arisen in the course of applying the review procedures.

f. events subsequent to the date of the financial statements that could have a material effect on the fair presentation of such financial statements.

g. its knowledge of any fraud or suspected fraud affecting the entity involving

i. management,

ii. employees who have significant roles in internal control, or

iii. others, when the fraud could have a material effect on the financial statements. (Ref: par. .A45)

h. whether management is aware of allegations of fraud or suspected fraud affecting the entity communicated by employees, former employees, regulators, or others.

i. whether management has disclosed to the accountant all known instances of noncompliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements.

j. significant journal entries and other adjustments.

k. communications from regulatory agencies, if applicable.

l. related parties and significant new related party transactions.

m. any litigation, claims, and assessments that existed at the date of the balance sheet being reported on and during the period from the balance sheet date to the date of management's response to the accountant's inquiry.

n. whether management believes that significant assumptions used by it in making accounting estimates are reasonable.

o. actions taken at meetings of stockholders, the board of directors, committees of the board of directors, or comparable meetings that may affect the financial statements. (Ref: par. .A46)

p. any other matters that the accountant may consider necessary.

.23 The accountant should consider the reasonableness and consistency of management's responses in light of the results of other review procedures and the accountant's knowledge of the entity's business. However, the accountant is not required to corroborate management's responses with other evidence."

AR-C Section 90A.24-26: Reading and Reconciling the Financial Statements

"Reading the Financial Statements

.24 The accountant should read the financial statements and consider whether any information has come to the accountant's attention to indicate that such financial statements do not conform to the applicable financial reporting framework.

Using the Work of Other Accountants

.25 If other accountants have issued a report on the financial statements of significant components, such as subsidiaries and investees, the accountant should obtain and read reports from such other accountants.

Reconciling the Financial Statements to the Underlying Accounting Records

.26 The accountant should obtain evidence that the financial statements agree or reconcile with the accounting records. (Ref: par. .A47)"

AR-C Section 90A.27-31: Evaluating Evidence Obtained from the Procedures Performed

".27 The accountant should accumulate uncorrected misstatements, including inadequate disclosure, identified by the accountant in performing the review procedures or brought to the accountant's attention during the performance of the review.

.28 The accountant should evaluate whether the uncorrected misstatements accumulated in accordance with paragraph .27 are, individually and in the aggregate, material to the financial statements in order to determine whether any modifications should be made to the financial statements for them to be in accordance with the applicable financial reporting framework. (Ref: par. .A6 and .A48–.A49)

.29 If, during the performance of review procedures, the accountant becomes aware that information coming to the accountant's attention is incorrect, incomplete, or otherwise unsatisfactory, the accountant should

a. request that management consider the effect of those matters on the financial statements and communicate the results of its consideration to the accountant and

b. consider the results communicated to the accountant by management and whether such results indicate that the financial statements may be materially misstated.

.30 If the accountant believes that the financial statements may be materially misstated, the accountant should perform additional procedures deemed necessary to obtain limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in accordance with the applicable financial reporting framework.

.31 The accountant should evaluate whether sufficient appropriate review evidence has been obtained from the procedures performed and, if not, the accountant should perform other procedures judged by the accountant to be necessary in the circumstances to be able to form a conclusion on the financial statements. (Ref: par. .A50)"

AR-C Section 90A.32-37: Written Representations

"Written Representations as Review Evidence

.32 Written representations are necessary information that the accountant requires in connection with a review of the entity's financial statements. Accordingly, similar to responses to inquiries, written representations are review evidence. (Ref: par. .A51)

Management From Whom Written Representations Are Requested

.33 The accountant should request written representations from members of management who have appropriate responsibilities for the financial statements and knowledge of the matters concerned. (Ref: par. .A52–.A54)

Specific Written Representations

.34 For all financial statements presented and all periods covered by the review, the accountant should request management to provide written representations that are dated as of the date of the accountant's review report stating that (Ref: par. .A55–.A61)

a. management has fulfilled its responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework, as set out in the terms of the engagement.

b. management acknowledges its responsibility for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements, including its responsibility to prevent and detect fraud.

c. management has provided the accountant with all relevant information and access, as agreed upon in the terms of the engagement.

d. management has responded fully and truthfully to all of the accountant's inquiries

e. all transactions have been recorded and are reflected in the financial statements.

f. management has disclosed to the accountant its knowledge of fraud or suspected fraud affecting the entity involving

i. management,

ii. employees who have significant roles in internal control, or

iii. others, when the fraud could have a material effect on the financial statements.

g. management has disclosed to the accountant its knowledge of any allegations of fraud or suspected fraud affecting the entity's financial statements communicated by employees, former employees, regulators, or others.

h. management has disclosed to the accountant all known instances of noncompliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements.

i. whether management believes that the effects of uncorrected misstatements are immaterial, individually and in the aggregate, to the financial statements as a whole. A summary of such items should be included in, or attached to, the written representation.

j. management has disclosed to the accountant all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements, and it has appropriately accounted for and disclosed such litigation and claims in accordance with the applicable financial reporting framework.

k. whether management believes that significant assumptions used by it in making accounting estimates are reasonable.

l. management has disclosed to the accountant the identity of the entity's related parties and all of the related party relationships and transactions of which it is aware, and it has appropriately accounted for and disclosed such relationships and transactions.

m. all events occurring subsequent to the date of the financial statements and for which the applicable financial reporting framework requires adjustment or disclosure have been adjusted or disclosed.

.35 If, in addition to the representations required by paragraph .34, the accountant determines that it is necessary to obtain one or more written representations to support other review evidence relevant to the financial statements, the accountant should request such other written representations. (Ref: par. .A62)

Form of Written Representations

.36 The written representations should be in the form of a representation letter addressed to the accountant. (Ref: par. .A63–.A64)

Concerns About the Reliability of Written Representations and Requested Written Representations Not Provided

.37 If, in relation to the written representations required by paragraphs .34–.35

a. management does not provide the written representations, or

b. the accountant concludes that there is cause to doubt management's integrity such that the written representations provided are not reliable the accountant should discuss the matter with management and those charged with governance, as appropriate. If management does not provide the required representations or the accountant continues to doubt management's integrity such that the written representations provided may not be reliable, the accountant should withdraw from the engagement."

AR-C Section 90A.38-39: The Accountant's Review Report (General Inclusions)

"Reporting on the Financial Statements

.38 The accountant's review report should be in writing. (Ref: par. .A65– .A67)

Accountant’s Review Report

.39 The written review report should include the following (Ref: par. .A80)

a. a title that includes the word independent to clearly indicate that it is the report of an independent accountant. (Ref: par. .A68)

b. an addressee, as appropriate for the circumstances of the engagement. (Ref: par. .A69)

c. an introductory paragraph that (Ref: par. .A70–.A72)

i. identifies the entity whose financial statements have been reviewed,

ii. states that the financial statements identified in the report were reviewed,

iii. identifies the financial statements,

iv. specifies the date or period covered by each financial statement,

v. includes a statement that a review includes primarily applying analytical procedures to management's (owner's) financial data and making inquiries of company management (owners), and

vi. includes a statement that a review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole, and that, accordingly, the accountant does not express such an opinion.

d. a section with the heading "Management's Responsibility for the Financial Statements" that includes an explanation that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework; this responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error (Ref: par. .A73)

e. a section with the heading "Accountant's Responsibility" that includes the following statements:

i. The accountant's responsibility is to conduct the review engagement in accordance with SSARSs promulgated by the Accounting and Review Services Committee of the AICPA.

The accountant's review report should also explain that those standards require that the accountant perform the procedures to 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. (Ref: par. .A74–.A76)

ii. The accountant believes that the results of the accountant's procedures provide a reasonable basis for the accountant's conclusion.

f. a concluding section with an appropriate heading that includes a statement about whether the accountant is aware of any material modifications that should be made to the accompanying financial statements for them to be in accordance with the applicable financial reporting framework and that identifies the country of origin of those accounting principles, if applicable. (Ref: par. .A49)

g. the signature of the accountant or the accountant's firm.

h. the city and state where the accountant practices. (Ref: par. .A77)

i. the date of the review report, which should be dated no earlier than the date on which the accountant completed procedures sufficient to 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, including evidence that

i. all the statements that the financial statements comprise, including the related notes, have been prepared and

ii. management has asserted that they have taken responsibility for those financial statements. (Ref: par. .A78–.A79)

[As amended, effective October 2016, by SSARS No. 23. As amended, effective May 2018, by SSARS No. 24.]"

AR-C Section 90A.40-44: The Accountant's Review Report (When the Financial Statements are Prepared in Accordance with a Special Purpose Framework)

".40 The accountant should modify the review report when the accountant becomes aware that the financial statements do not include

a. a description of the special purpose framework. (Ref: par. .A81)

b. a summary of significant accounting policies.

c. an adequate description about how the special purpose framework differs from GAAP. The effects of these differences need not be quantified. (Ref: par. .A82)

d. informative disclosures similar to those required by GAAP when the financial statements contain items that are the same as, or similar to, those in financial statements prepared in accordance with GAAP. (Ref: par. .A83)

.41 In the case of financial statements prepared in accordance with a contractual-basis of accounting, the accountant should modify the review report if the financial statements do not adequately describe any significant interpretations of the contract on which the financial statements are based.

.42 The accountant's review report on financial statements prepared in accordance with a special purpose framework should

a. make reference to management's responsibility for determining that the applicable financial reporting framework is acceptable in the circumstances when management has a choice of financial reporting frameworks in the preparation of such financial statements.

b. describe the purpose for which the financial statements are prepared or refer to a note in the financial statements that contains that information when the financial statements are prepared in accordance with a regulatory- or contractual-basis of accounting. (Ref: par. .A84)

.43 The accountant's review report on financial statements prepared in accordance with a special purpose framework should include an emphasis-of-matter paragraph, under an appropriate heading, that

a. indicates that the financial statements are prepared in accordance with the applicable special purpose framework,

b. refers to the note to the financial statements that describes the framework, and

c. states that the special purpose framework is a basis of accounting other than GAAP.

.44 The accountant's review report on special purpose financial statements should include, in accordance with paragraph .54, an other-matter paragraph, under an appropriate heading, that, in accordance with paragraphs .61–.62, restricts the use of the accountant's review report when the special purpose financial statements are prepared in accordance with (Ref: par. .A85)

a. a contractual-basis of accounting,

b. a regulatory-basis of accounting, or

c. an other-basis of accounting when required pursuant to paragraph .61a–b."

AR-C Section 90A.45-50: The Accountant's Review Report (When Reporting on Comparative Financial Statements)

".45 Comparative financial statements may be required by the applicable financial reporting framework, or management may elect to provide such information. When comparative financial statements are presented, the accountant's report should refer to each period for which financial statements are presented. (Ref: par. .A86–.A87)

Updating the Report

.46 When reporting on all periods presented, a continuing accountant should update the report on one or more prior periods presented on a comparative basis with those of the current period. The accountant's report on comparative financial statements should not be dated earlier than the date that the accountant completed procedures sufficient to 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 with respect to the current period. (Ref: par. .A88)

.47 When issuing an updated report, the continuing accountant should consider information that the accountant has become aware of during the review of the current period financial statements.

.48 If, during the current engagement, circumstances or events come to the accountant's attention that may affect the prior-period financial statements presented, the accountant should consider the effects on the review report.

Changed Reference to a Departure From the Applicable Financial Reporting Framework

.49 When the accountant's report on the financial statements of the prior period contains a changed reference to a departure from the applicable financial reporting framework, the accountant's review report should include an other matter paragraph indicating (Ref: par. .A89)

a. the date of the accountant's previous review report.

b. the circumstances or events that caused the reference to be changed.

c. when applicable, that the financial statements of the prior period have been changed.

Reporting When One Period Is Audited

.50 When the prior period financial statements were audited and the auditor's report on the prior period financial statements is not reissued, the review report on the current period financial statements should include an other matter paragraph indicating

a. that the financial statements of the prior period were previously audited;

b. the date of the auditor's report on the prior period financial statements;

c. the type of opinion issued on the prior period financial statements;

d. if the opinion was modified, the substantive reasons for the modification; and

e. that no auditing procedures were performed after the date of the previous report."

AR-C Section 90A.51: Communicating to Management and Others Regarding Fraud or Noncompliance with Laws and Regulations

".51 If the accountant becomes aware that fraud (including misappropriation of assets) may have occurred, the accountant should communicate the matter as soon as practicable to the appropriate level of management (at a level above those involved with the suspected fraud, if possible). If the accountant becomes aware of matters involving identified or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements, the accountant should communicate the matters to management, other than when matters are clearly inconsequential. If the fraud or noncompliance with laws or regulations involves senior management or results in a material misstatement of the financial statements, the accountant should communicate the matter directly to those charged with governance. If management or, as appropriate, those charged with governance do not provide sufficient information that supports that (Ref: par. .A90–.A92)

a. the financial statements are not materially misstated due to fraud or

b. the entity is in compliance with laws and regulations, and in the accountant's professional judgment, the effect of the suspected noncompliance may be material to the financial statements the accountant should consider the need to obtain legal advice and take appropriate action, including potential withdrawal. (Ref: par. .A93)"

AR-C Section 90A.52-55: The Accountant's Review Report (When Including an Emphasis-of-Matter or Other-Matter Paragraph)

"Emphasis-of-Matter Paragraphs in the Accountant’s Review Report

.52 If the accountant considers it necessary to draw users' attention to a matter appropriately presented or disclosed in the financial statements that, in the accountant's professional judgment, is of such importance that it is fundamental to users' understanding of the financial statements, the accountant should include an emphasis-of-matter paragraph in the accountant's review report, provided that the accountant does not believe that the financial statements may be materially misstated. Such a paragraph should refer only to information presented or disclosed in the financial statements. (Ref: par. .A94– .A96)

.53 When the accountant includes an emphasis-of-matter paragraph in the accountant's review report, the accountant should

a. include it immediately after the accountant's conclusion paragraph in the accountant's review report,

b. use the heading "Emphasis of a Matter" or other appropriate heading, (Ref: par. .A97)

c. include in the paragraph a clear reference to the matter being emphasized and to where relevant disclosures that fully describe the matter can be found in the financial statements, and

d. indicate that the accountant's conclusion is not modified with respect to the matter emphasized. (Ref: par. .A98)

Other-Matter Paragraphs in the Accountant’s Review Report

.54 If the accountant considers it necessary to communicate a matter other than those that are presented or disclosed in the financial statements that, in the accountant's professional judgment, is relevant to the users' understanding of the review, the accountant's responsibilities, or the accountant's review report, the accountant should do so in a paragraph in the accountant's review report with the heading "Other Matter" or other appropriate heading. The accountant should include this paragraph immediately after the accountant's conclusion paragraph and any emphasis-of-matter paragraph. (Ref: .A94, .A97, and .A99–.A101)

Communication With Management

.55 If the accountant expects to include an emphasis-of-matter or other matter paragraph in the accountant's review report, the accountant should communicate with management regarding this expectation and the proposed wording of this paragraph. (Ref: par. .A102–.A103)"

AR-C Section 90A.56-60: The Accountant's Review Report (When Reporting Known Departures from the Applicable Financial Reporting Framework)

".56 When the accountant becomes aware of a departure from the applicable financial reporting framework (including inadequate disclosure) that is material to the financial statements and if the financial statements are not revised, the accountant should consider whether modification of the standard report is adequate to disclose the departure.

.57 If the accountant concludes that modification of the standard report is adequate, the departure should be disclosed in a separate paragraph of the report under the heading "Known Departures From the [identify the applicable financial reporting framework]," including disclosure of the effects of the departure on the financial statements if such effects have been determined by management or are known to the accountant as the result of the accountant's procedures. (Ref: par. .A104 and .A109)

.58 If the effects of the departure have not been determined by management or are not known to the accountant as a result of the accountant's procedures, the accountant is not required to determine the effects of a departure; however, in such circumstances, the accountant should state in the report that such determination has not been made.

.59 If the accountant believes that modification of the standard report is not adequate to indicate the deficiencies in the financial statements as a whole, the accountant should withdraw from the review engagement. (Ref: par. .A105)

.60 The accountant should not modify the standard report to include a statement that the financial statements are not in accordance with the applicable financial reporting framework. (Ref: par. .A106–.A108)"

AR-C section 90A.61-64: The Accountant's Review Report (When its Use is Restricted)

".61 An accountant's review report should include an alert, in a separate paragraph, that restricts its use when the subject matter of the accountant's review report is based on (Ref: par. .A110–.A112)

a. measurement or disclosure criteria that are determined by the accountant to be suitable only for a limited number of users who can be presumed to have an adequate understanding of the criteria or

b. measurement or disclosure criteria that are available only to the specified parties.

.62 The alert that restricts the use of the accountant's review report required by paragraph .61 should

a. state that the accountant's review report is intended solely for the information and use of the specified parties.

b. identify the specified parties for whom use is intended.

c. state that the accountant's review report is not intended to be, and should not be, used by anyone other than the specified parties. (Ref: par. .A113)

Adding Other Specified Parties

.63 When, in accordance with paragraph .61, the accountant includes an alert that restricts the use of the accountant's review report to certain specified parties and the accountant is requested to add other parties as specified parties, the accountant should determine whether to agree to add the other parties as specified parties. (Ref: par. .A114)

.64 If the other parties are added after the release of the accountant's review report, the accountant should either:

a. Amend the accountant's review report to add the other parties and, in such circumstances, not change the original date of the accountant's review report.

b. Provide a written acknowledgment to management and the other parties that such parties have been added as specified parties and state in the acknowledgment that no procedures were performed subsequent to the original date of the accountant's review report."

AR-C Section 90A.65-68: The Accountant’s Consideration of an Entity’s Ability to Continue as a Going Concern

"Consideration of Conditions or Events That Indicate That There Could Be an Uncertainty About the Entity’s Ability to Continue as a Going Concern

.65 The accountant should consider whether, during the performance of review procedures, evidence or information came to the accountant's attention indicating that there could be an uncertainty about the entity's ability to continue as a going concern for a reasonable period of time. A reasonable period of time is the same period of time required of management to assess going concern when specified by the applicable financial reporting framework. If the applicable financial reporting framework does not specify a period of time for management, a reasonable period is one year from the date of the financial statements being reviewed (hereinafter referred to as a reasonable period of time). (Ref: par. .A115)

Consideration of Financial Statement Effects

.66 If, after considering the evidence or information from paragraph .65, the accountant believes that there is an uncertainty about the entity's ability to continue as a going concern for a reasonable period of time, the accountant should request that management consider the possible effects of the going concern uncertainty on the financial statements, including the need for related disclosure. (Ref: par. .A116)

.67 After management communicates to the accountant the results of its consideration of the possible effects on the financial statements, the accountant should consider the reasonableness of management's conclusions, including the adequacy of the related disclosure.

Consideration of the Effects on the Accountant’s Review Report

.68 If the accountant determines that the entity's disclosures with respect to the entity's ability to continue as a going concern for a reasonable period of time are inadequate, a departure from the applicable financial reporting framework exists, and the accountant should follow the guidance in paragraphs .56– .60. (Ref: par. .A117–.A119)"

AR-C Section 90A.69-77: Subsequent Events and Subsequently Discovered Facts

"Subsequent Events

.69 When evidence or information that subsequent events that require adjustment of, or disclosure in, the financial statements comes to the accountant's attention, the accountant should request that management consider whether each such event is appropriately reflected in the financial statements in accordance with the applicable financial reporting framework. (Ref: par. .A120)

.70 If the accountant determines that the subsequent event is not adequately accounted for in the financial statements or disclosed in the notes, the accountant should follow the guidance in paragraphs .56–.60.

Subsequently Discovered Facts That Become Known to the Accountant Before the Report Release Date

.71 The accountant is not required to perform any review procedures regarding the financial statements after the date of the accountant's review report. However, if a subsequently discovered fact becomes known to the accountant before the report release date, the accountant should

a. discuss the matter with management and, when appropriate, those charged with governance and

b. determine whether the financial statements need revision and, if so, inquire how management intends to address the matter in the financial statements.

.72 If management revises the financial statements, the accountant should perform the review procedures necessary in the circumstances on the revision. The accountant also should either

a. date the accountant's review report as of a later date or

b. include an additional date in the accountant's review report on the revised financial statements that is limited to the revision (that is, dual-date the accountant's review report for that revision), thereby indicating that the accountant's review procedures subsequent to the original date of the accountant's review report are limited solely to the revision of the financial statements described in the relevant note to the financial statements.

.73 If management does not revise the financial statements in circumstances when the accountant believes they need to be revised, the accountant should modify the accountant's review report, as appropriate.

Subsequently Discovered Facts That Become Known to the Accountant After the Report Release Date

.74 If a subsequently discovered fact becomes known to the accountant after the report release date, the accountant should (Ref: par. .A121–.A122)

a. discuss the matter with management and, when appropriate, those charged with governance and

b. determine whether the financial statements need revision and, if so, inquire how management intends to address the matter in the financial statements.

.75 If management revises the financial statements, the accountant should

a. apply the requirements of paragraph .72.

b. if the reviewed financial statements (before revision) have been made available to third parties, assess whether the steps taken by management are timely and appropriate to ensure that anyone in receipt of those financial statements is informed of the situation, including that the reviewed financial statements are not to be used. If management does not take the necessary steps, the accountant should apply the requirements of paragraph .76. (Ref: par. .A123)

c. if the accountant's conclusion on the revised financial statements differs from the accountant's conclusion on the original financial statements, disclose in an emphasis-of-matter paragraph, in accordance with paragraphs .52–.53

i. the date of the accountant's previous report,

ii. a description of the revisions, and

iii. the substantive reasons for the revisions.

.76 If management does not revise the financial statements in circumstances when the accountant believes they need to be revised, then

a. if the reviewed financial statements have not been made available to third parties, the accountant should notify management and those charged with governance, unless all of those charged with governance are involved in managing the entity, not to make the reviewed financial statements available to third parties before the necessary revisions have been made and a new accountant's review report on the revised financial statements has been provided. If the reviewed financial statements are, nevertheless, subsequently made available to third parties without the necessary revisions, the accountant should apply the requirements of paragraph .76b.

b. if the reviewed financial statements have been made available to third parties, the accountant should assess whether the steps taken by management are timely and appropriate to ensure that anyone in receipt of the reviewed financial statements is informed of the situation, including that the reviewed financial statements are not to be used. If management does not take the necessary steps, the accountant should apply the requirements of paragraph .77. (Ref: par. .A121)

.77 If management does not take the necessary steps to ensure that anyone in receipt of the financial statements is informed of the situation, as provided by paragraph .75b or paragraph .76b, the accountant should notify management and those charged with governance, unless all of those charged with governance are involved in managing the entity, that the accountant will seek to prevent future use of the accountant's review report. If, despite such notification, management or those charged with governance do not take the necessary steps, the accountant should take appropriate action to seek to prevent use of the accountant's review report. (Ref: par. .A124–.A127)"

AR-C Section 90A.78-79: The Accountant's Review Report (When Referencing the Work of Other Accountants)

".78 If other accountants audited or reviewed the financial statements of significant components, such as consolidated and unconsolidated subsidiaries and investees, and the accountant of the reporting entity decides not to assume responsibility for the audit or review performed by the other accountants, the accountant of the reporting entity should make reference to the review or audit of such other accountants in the accountant's review report. In that instance, the accountant should clearly indicate in the accountant's review report that the accountant used the work of other accountants and should include the magnitude of the portion of the financial statements audited or reviewed by the other accountants. (Ref: par. .A128–.A130)

.79 Regardless of whether the accountant of the reporting entity decides to make reference to the review or audit of other accountants, the accountant of the reporting entity should communicate with the other accountants and ascertain

a. that the other accountants are aware that the financial statements of the component that the other accountants have audited or reviewed are to be included in the financial statements on which the accountant of the reporting entity will report and that the other accountants' report thereon will be relied upon (and, where applicable, referred to) by the accountant of the reporting entity.

b. that the other accountants are familiar with the applicable financial reporting framework and with SSARSs or auditing standards generally accepted in the United States of America, as applicable, and will conduct the review or audit in accordance therewith.

c. that a review will be made of matters affecting elimination of intercompany transactions and accounts and, if appropriate in the circumstances, the uniformity of accounting practices among the components included in the financial statements."

AR-C Section 90A.80-82: The Accountant's Review Report (When Supplementary Information Accompanies the Reviewed Financial Statements)

".80 When supplementary information accompanies reviewed financial statements and the accountant's review report thereon, the accountant should clearly indicate the degree of responsibility, if any, the accountant is taking with respect to such information in either

a. an other-matter paragraph in the accountant's review report on the financial statements or

b. a separate report on the supplementary information

.81 When the accountant has subjected the supplementary information to the review procedures applied in the accountant's review of the basic financial statements, the other-matter paragraph in the accountant's review report on the financial statements or the separate report on the supplementary information should state that (Ref: par. .A132 and .A134)

a. the supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements;

b. the supplementary information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the financial statements;

c. the supplementary information has been subjected to the review procedures applied in the accountant's review of the basic financial statements and whether the accountant is aware of any material modifications that should be made to the supplementary information; and

d. the accountant has not audited the supplementary information and does not express an opinion on such information.

[As amended, effective October 2016, by SSARS No. 23.]

.82 When the accountant has not subjected the supplementary information to the review procedures applied in the accountant's review of the basic financial statements, the other-matter paragraph in the accountant's review report on the financial statements or the separate report on the supplementary information should state that (Ref: par. .A133–.A134)

a. the supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements;

b. the supplementary information is the responsibility of management; and

c. the accountant has not audited or reviewed the supplementary information and, accordingly, does not express an opinion, a conclusion, nor provide any assurance on such information.

[As amended, effective October 2016, by SSARS No. 23.]"

AR-C Section 90A.83-85: The Accountant's Review Report (When Required Supplementary Information Accompanies the Reviewed Financial Statements)

".83 Concerning the requirement in paragraph .80, with respect to required supplementary information, the accountant should include an other-matter paragraph in the accountant's review report on the financial statements. The other-matter paragraph should include language to explain the following circumstances, as applicable: (Ref: par. .A135)

a. The required supplementary information is included, and the accountant performed a compilation engagement on the required supplementary information.

b. The required supplementary information is included, and the accountant reviewed the required supplementary information.

c. The required supplementary information is included, and the accountant did not perform a compilation, review, or audit on the required supplementary information.

d. The required supplementary information is omitted.

e. Some required supplementary information is missing, and some is presented in accordance with the prescribed guidelines (Ref: par. .A136)

f. The accountant has identified departures from the prescribed guidelines.

g. The accountant has unresolved doubts about whether the required supplementary information is presented in accordance with prescribed guidelines.

[As amended, effective October 2016, by SSARS No. 23.]

.84 If the entity has presented all or some of the required supplementary information and the accountant did not perform a compilation or review on the required supplementary information, the other-matter paragraph referred to in paragraph .80 should include the following elements: (Ref: par. .A137)

a. A statement that [identify the applicable financial reporting framework (for example, accounting principles generally accepted in the United States of America)] require that the [identify the required supplementary information] be presented to supplement the basic financial statements

b. A statement that such information, although not a part of the basic financial statements, is required by [identify designated accounting standards-setter], who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context

c. A statement that the accountant did not perform a compilation, review, or audit on the required supplementary information and does not express an opinion or provide any assurance on the information

d. If some of the required supplementary information is omitted

i. a statement that management has omitted [description of the missing required supplementary information] that [identify the applicable financial reporting framework (for example, accounting principles generally accepted in the United States of America)] require to be presented to supplement the basic financial statements

ii. a statement that such missing information, although not a part of the basic financial statements, is required by [identify designated accounting standards-setter], who considers

it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context

e. If the measurement or presentation of the required supplementary information departs materially from the prescribed guidelines, a statement that material departures from prescribed guidelines exist [describe the material departures from the applicable financial reporting framework]

f. If the accountant has unresolved doubts about whether the required supplementary information is measured or presented in accordance with prescribed guidelines, a statement that the accountant has doubts about whether material modifications should be made to the required supplementary information for it to be presented in accordance with guidelines established by [identify designated accounting standards-setter]

[As amended, effective October 2016, by SSARS No. 23.]

.85 If all the required supplementary information is omitted, the other matter paragraph should include the following elements:

a. A statement that management has omitted [description of the missing required supplementary information] that [identify the applicable financial reporting framework (for example, accounting principles generally accepted in the United States of America)] require to be presented to supplement the basic financial statements

b. A statement that such missing information, although not a part of the basic financial statements, is required by [identify designated accounting standards-setter], who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context"

AR-C Section 90A.86-90: Change in Engagement From Audit to Review

".86 If the accountant, who was engaged to perform an audit engagement in accordance with generally accepted auditing standards, has been requested to change the engagement to a review engagement, the accountant should consider the following before deciding whether to agree to the change: (Ref: par. .A138–.A139)

a. The reason given for the request, particularly the implications of a restriction on the scope of the audit engagement, whether imposed by management or by circumstances (Ref: par. .A140)

b. The additional audit effort required to complete the audit engagement

c. The estimated additional cost to complete the audit engagement

.87 In all circumstances, if the audit procedures are substantially complete or the cost to complete such procedures is relatively insignificant, the accountant should consider the propriety of accepting a change in the engagement.

.88 If the accountant concludes, based upon the accountant's professional judgment, that reasonable justification exists to change the engagement, and if the accountant complies with the standards applicable to a review engagement, the accountant should issue an appropriate review report.

.89 The report should not include reference to

a. the original engagement,

b. any audit procedures that may have been performed, or

c. scope limitations that resulted in the changed engagement.

.90 When the accountant has been engaged to audit an entity's financial statements and management refuses to allow the accountant to correspond with the entity's legal counsel, the accountant, except in rare circumstances, is precluded from accepting an engagement to review those financial statements."

AR-C Section 91-92: Review Documentation

".91 The accountant should prepare review documentation that is sufficient to enable an experienced accountant, having no previous connection to the review, to understand (Ref: par. .A141–.A145)

a. the nature, timing, and extent of the review procedures performed to comply with SSARSs;

b. the results of the review procedures performed and the review evidence obtained; and

c. significant findings or issues arising during the review, the conclusions reached thereon, and significant professional judgments made in reaching those conclusions.

.92 In addition to the requirements in paragraph .91, the review documentation should include the following:

a. The engagement letter or other suitable form of written documentation with management, as described in paragraphs .11–.12 (Ref: par. .A20 and .A22)

b. Communications to management and others regarding fraud or noncompliance with laws and regulations as required by paragraph .51

c. Communications with management regarding the accountant's expectation to include an emphasis-of-matter or other-matter paragraph in the accountant's review report as required by paragraph .55

d. Communications with other accountants that have audited or reviewed the financial statements of significant components as required by paragraph .79

e. The representation letter

f. A copy of the reviewed financial statements and the accountant's review report thereon"

SSARS No. 24: Omnibus Statement on Standards for Accounting and Review Services—2018

"This standard creates a new AR-C section entitled Special Considerations—International Reporting Issues and amends Statement on Standards for Accounting and Review Services No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification [as revised] to amend AR-C section 60,General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services, and AR-C section 90, Review of Financial Statements, supersedes Interpretation No. 1, “Considerations Related to Reviews Performed in Accordance With International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements,”of AR-C section 90 "