He goes on to say: “Independence in appearance is the avoidance of circumstances that would allow a reasonable and informed third party to have knowledge of all relevant information, including the security measures applied, reasonably concluding that the integrity, objectivity or professional skepticism of a company or a member of the attestation engagement team is compromised.” So, what are the requirements for participation in the exam? When is a review preferable to an audit? Does the CPA have to be independent? Can the CPA prepare the annual financial statements and carry out the audit mandate? Can a reporting framework be used for special purposes? Who might want a review report (not an audit or compilation report)? So how can the limited security of a review order be compared to compilations and audits? For compilation work, disclosures may be removed. This is not the case with a review undertaking. Full disclosure is required, regardless of the reporting framework. The main purpose of a review is to provide limited assurance regarding information. Inquiries and analyses are required. A signed letter of representation is also required. During an audit, the accountant offers a high degree of security. The accountant performs procedures that go beyond investigations and analyses such as confirmations. The requirements for risk assessment and audit planning are much stricter than those for an examination. Although audits offer a higher level of security, they take longer. Therefore, the extra time increases the cost to the customer.

For this reason, reviews are sometimes carried out and not an audit. The date of the letter of representation is the same as the date of the examination report. In no case shall the date of the letter of representation be earlier than the date of the examination report. (The accountant is not required to be physically in possession of the letter on the day of the review report. However, the accountant must have the letter signed before the annual financial statements are published.) A review engagement letter must be prepared and signed by the accountant or firm and the management of the accountant or persons responsible for governance. See instructions for the mission letter below. We cannot rely on our commitment to identify or disclose false information in the financial statements, including information caused by errors or fraud, or to identify or disclose misconduct within the company or non-compliance with laws and regulations. However, we will inform the appropriate level of management of any material error and any evidence or information that we become aware of in the course of conducting our review procedures that indicates that fraud may have occurred.

In addition, we will report to you any evidence or information that we become aware of while conducting our review procedures regarding non-compliance with any laws and regulations that may have occurred, unless it is clearly irrelevant. The objective of the accountant in a review engagement is to provide limited assurance regarding the financial statements. Other historical information such as additional information may also be included. Second, decide if you want to refer to other accountants in your review report. With respect to this, RA-C 90.79 states: “The accountant must clearly indicate in his audit report that he has used the work of other accountants and must include the size of the portion of the financial statements that has been audited or audited by the other accountants.” See Figure 6 of Appendix C of RA-C 90 for the sample reporting language. If you are talking about the other accountant, indicate that you have not reviewed the financial statements of the subsidiary. Caution should be exercised when writing a mission letter. First, it is a tool to ensure that both parties work as directed. And if not, it can be used to enforce penalties for non-compliance.

Second, the letter of commitment must comply with the SSARS (Statements on Standards for Accounting and Review) standards. The mandate letter for the audit of the financial report is intended to explain who, what and how of the review. It usually consists of five parts: the introduction, the responsibilities of the CPA, the responsibilities of the company, the report and other matters. Like any contact, it is a binding legal agreement if properly prepared. You have asked us to prepare abc Company`s financial statements, which include the balance sheet as at December 31, 20XX, and related income statements, changes in equity and cash flows for the year then ended, and the notes to the financial statements, and to undertake a commitment to revise those financial statements. With this letter, we are pleased to confirm our acceptance and understanding of this commitment. We will carry out our mandate in accordance with the Standards for Accounting and Examination Services (SSARS) statements issued by the AICPA Accounting and Review Services Committee and will comply with the AICPA Code of Conduct, including the ethical principles of integrity, objectivity, expertise and due diligence. Should there be a reference to the report and notes at the end of each page of the financial statements? Although not required by SSARS, it is acceptable to add a reference such as: Can the cash flow statement be omitted? GAAP requires a statement of cash flows if it includes a statement of financial position and an income statement. Compilation standards allow the GAAP statement of cash flows to be omitted if the omission is noted in the preparation report. This is not the case with a review undertaking.

The statement of cash flows should be included when using GAAP. A review report is always required for a review engagement. This report indicates that no material changes are required to bring the financial statements into conformity with the reporting framework. (See an example report below.) Before placing a verification order, make sure that everyone involved accepts this product. Some lenders may need verification. A review engagement consists primarily of applying analytical procedures to your financial data and responding to inquiries to the company`s management. An audit engagement is much smaller in scope than an audit mandate, the purpose of which is to express an opinion on the overall financial statements. A review mandate does not provide an understanding of the company`s system of internal control; fraud risk assessment; the verification of accounting records by obtaining sufficient appropriate audit evidence by inspection, observation, confirmation or review of source documents; or other procedures normally carried out in the context of an audit engagement. Therefore, we will not comment on the annual financial statements.

f. The accuracy and completeness of the records, documents, statements and other information, including material judgments, that you provide to us for the Mission My (our) responsibility is to conduct review engagements in accordance with the Statements on Standards for Accounting and Examination Services issued by the Accounting and Review Services Committee of the AICPA. These standards require me to implement procedures to obtain limited assurance as a basis for indicating whether I am aware of any material changes that would need to be made to the financial statements in order to comply with generally accepted accounting principles in the United States of America. I (we) believe that the results of my (our) procedures provide a reasonable basis for my (our) conclusion. Although it is possible for the accountant to conduct a single review and not prepare the financial statements, most letters of order of revision indicate that the following is done by the accountant: h. To provide us with a letter at the end of the order confirming certain assurances made during the examination. The AICPA`s independence standards require the accountant to verify that he or she is independent when the CPA provides an assurance service (p.B. audit) and non-audit preparation. B of financial statements) to the same client. If management does not have the skills, knowledge and experience to oversee the preparation of financial statements and assume responsibility, the accountant may not be independent. See illustrative mission letters in Appendix A of RA-C 90.

Interestingly (at least to me), AR-C 90.A34 indicates that you can perform audit procedures in an order of review. Although your review engagement letter states that you are not conducting an audit, your review file may contain audit procedures. Why should the AICPA offer this flexibility? To give you the opportunity to go beyond your usual examination procedures (investigation and analysis). You need a foundation for the limited security you provide. And in some situations, you may need audit procedures to get there. You should make a review commitment if you are hired to do so. If your customer asks you for this service and accepts you, you are committed. In general, the Company`s management is responsible for financial reporting and for ensuring that it complies with GAAP. They are also responsible for detecting and preventing fraud, as well as complying with laws and regulations. You are responsible for providing the CPA with any access necessary to complete the exam. .