A Review Report Provides the User With Which One of the Following Types of Assurance?

What is Review Engagement?

A review engagement is also known as a limited assurance or negative engagement. Auditors conduct a review appointment after an auditor'due south completed an audit of a company's financial statements, and therefore, the auditor provides limited assurance on the accuracy of the financial statements 3 Financial Statements The three fiscal statements are the income statement, the balance sheet, and the statement of greenbacks flows. These three core statements are . During the engagement, the accountant performs inquiry and belittling review procedures to provide a moderate level of balls required to provide a negative assurance report.

In a negative balls study, the auditor states whether they found anything that causes them to believe that the assertion of one political party does not present a truthful and off-white view. The auditor is required to disclose if they encountered any data during the engagement that causes them to believe that the fiscal statements do not nowadays a true and fair view of the company or the fiscal statements practise non comply with the specific bookkeeping standards. A review engagement differs significantly from an audit engagement since the sometime provides less assurance to the intended user.

Summary

• A review engagement is a type of appointment that provides a limited level of balls that a company'south financial statements comply with the applicative financial reporting framework.
• It gives users limited assurance on the accuracy or correctness of financial statements.
• A review engagement takes less time than an audit appointment since there is less effort involved.

How It Works

A review date is preferred when the company'south financial statements have already been prepared and certified to exist accurate, and the company engages an external accountant Big Four Bookkeeping Firms The Big Iv bookkeeping firms refer to Deloitte, PricewaterhouseCoopers (PwC), KPMG, and Ernst & Young. These firms are the 4 largest professional services firms in the world that provide audit, transaction advisory, taxation, consulting, risk informational, and actuarial services. to review the financial statements. Since the financial statements have already been certified every bit accurate, the external auditor is required to provide negative assurance that the financial statements are free of material misstatements.

During the review, the accountant performs belittling procedures to gain a better agreement of the figures. A review engagement is less intensive in terms of the procedures performed by the accountant. Therefore, the accountant cannot express an opinion on the fairness of the financial statements.

Main Parties in a Review Date

The post-obit are the main parties in a review appointment and the roles they place in the procedure:

one. Management

The management is responsible for preparing the main fiscal statements, i.eastward., residuum sheet, income argument, and cash menstruum statement Greenbacks Flow Statement​ A cash flow Statement contains information on how much cash a company generated and used during a given period. , in accordance with the financial reporting framework.

Also, the direction is required to implement internal control systems to help in preparing fiscal statements that are gratis of material misstatement. They should also provide the relevant financial data to help the accountant prepare the financial statements in a timely mode.

2. Practitioner

The individual performing a review engagement must exist a licensed practitioner. The practitioner is required to obtain evidence directly rather than rely on evidence provided by third parties. He/she must also perform procedures to accomplish a determination on whether anything came to their attention that causes them to believe that the fiscal statements are not prepared in accordance with the applicative financial reporting framework. The review procedures that the practitioner is required to perform include:

• Inquiries on the bookkeeping practices used past the company
• Representations from management on the accuracy of the fiscal statements
• Management responsibility for internal command systems
• Management responsibleness to notice and forestall fraud
• Information on subsequent events
• Knowledge of fraud
• Ratios and relationships of recorded amounts
• Analytical procedures on comparisons
• Receipt of appropriate fiscal data
• Procedures for recording financial information

iii. Intended users

The intended users of the financial statements can be shareholders Shareholder A shareholder can exist a person, company, or system that holds stock(south) in a given company. A shareholder must ain a minimum of one share in a company's stock or mutual fund to brand them a partial owner. , investors, creditors, etc. The review appointment is conducted with the goal of enhancing the user's confidence in the financial statements.

Since the fiscal statements accept already been audited and certified, the auditor's role is to provide negative assurance on whether the reviewed financial statements comply with the applicative reporting standards, and whether they are free from material misstatement. The financial statements are considered materially misstated if they incorporate errors, fraud, or omissions that can potentially influence the user'south economic decisions.

Review Engagement vs. Inspect Appointment

A review date is considered weaker than an inspect appointment. In an audit engagement, the accountant is required to perform more than rigorous procedures before issuing a positive balls. The auditor must understand the company's internal control systems and perform verification, substantiation, inquiries, and analytical procedures.

After gathering the appropriate bear witness through the abovementioned procedures, the accountant expresses an opinion on whether the financial statements are prepared in accordance with the applicative financial reporting framework, and if they paint a true moving picture of the fiscal position of the company.

Depending on the findings of the audit, the auditor may provide an unqualified opinion, qualified opinion, or an adverse stance. An unqualified opinion means that the accountant is satisfied that the financial statement reflects a true and fair view of the company's position and that they are free from textile errors or fraud.

A qualified opinion is issued when the auditor is unable to issue an unqualified stance due to a divergence from the financial reporting framework or telescopic of limitation. The auditor must disclose specific problems related to the qualification, or where there is a material departure from GAAP rules.

An adverse opinion is issued when the accountant concludes that the departures from the financial reporting framework are so meaning that he/she believes the financial statements are not fairly stated.

Additional Resources

Thank you for reading CFI'south guide to Review Engagement. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

• Auditor Opinions Auditor Opinions In the independent auditor's report, an accountant can issue one of five dissimilar opinions:Make clean (unqualified) opinion; Qualified stance due
• Compilation Appointment Compilation Engagement A compilation engagement is a service provided past an outside accountant to assist the management in the presentation of financial data in the form of
• Forensic Audit Guide Forensic Inspect Guide A forensic inspect is a detailed audit of a company's records to exist used in a courtroom of police in a legal proceeding. Accountants, lawyers, and
• Legal Liability of Auditors Legal Liability of Auditors Concerns well-nigh the legal liability of auditors keep to grow every 24-hour interval. Auditors are highly important people because, ultimately, they are

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Source: https://corporatefinanceinstitute.com/resources/knowledge/finance/review-engagement/

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