Page 187 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

10 REVIEW OF FINANCIAL INFORMATION

Case Study—Madhulika
Engagement: Madhulika, a CA final student, is part of a team conducting a review of quarterly results for Track
Data Limited, a listed company, in accordance with SEBI listing regulations.
Review vs Audit: She is trying to understand the difference between the scope of an audit and a review,
including the types of procedures performed, the extent of evidence gathered, and the responsibilities of a
professional accountant in each case.
Reporting: She is interested in the reporting requirements of a review engagement, particularly how the contents
of a review report might differ from an audit report and what happens if misstatements identified during the
review are not corrected by the company.
Modified Report: She is contemplating whether it's possible to issue a modified review report similar to an
audit, and the modalities of the same.
Benefits: She is considering the potential benefits of review engagements beyond meeting mandatory legal and
regulatory requirements, and how these might apply to different entities.

(CNO SRE 2400.020) Introduction
Limited Assurance Engagement: “Review” is a limited assurance engagement. Limited assurance is the level of
assurance obtained where engagement risk is reduced to an acceptable level but is greater than for a reasonable
assurance engagement. In simpler terms, limited assurance engagement provides a lower level of assurance than
an audit. It involves fewer procedures and gathers sufficient and appropriate evidence.
Expressing a Conclusion: The combination of the nature, timing, and extent of evidence gathering procedures
is sufficient for expressing a conclusion. This level of assurance is likely to enhance the intended users’ confidence
about the financial statements. On the basis of the gathered evidence, limited conclusions can be drawn up.
However, “review” is related to financial statements prepared on the basis of historical financial information just
like an audit.
Standards on Review Engagements
Application of Standards on Review Engagements: Standards on Review Engagements apply where “Review”
of financial information is undertaken by the practitioner. The following Standards on review engagements have
been issued in this regard.
Listed Standards on Review Engagements:
SRE 2400 Engagements to Review Historical Financial Statements
SRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.
Relation with Standards on Quality Control: It is worth remembering that Standards on Quality Control
(SQCs) are to be applied for all services covered by Engagement Standards. Standards on review engagements
are part of Engagement Standards. Therefore, quality control at the level of individual review engagements is
premised on the basis that the firm is subject to SQC 1.
SRE 2400 Engagements to Review Historical Financial Statements
Responsibilities: SRE 2400 deals with the practitioner’s responsibilities when engaged to perform a review of
historical financial statements, when the practitioner is not the auditor of the entity’s financial statements.
Form and Content of Report: The standard also addresses the form and content of the practitioner’s report on
the financial statements.
Limited Assurance: The practitioner’s conclusion is based on obtaining limited assurance. The practitioner’s
report includes a description of the nature of a review engagement as context for the readers of the report.

www.auditguru.in 10.1