Benefits for All Parties Involved In summary, there are benefits for all parties involved in an ISRE 2400 (Revised) review engagement.
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The review standard also requires professional accountants to exercise professional judgment and to be skeptical throughout the engagement.
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Under ISRE 2400 (Revised), the practitioner is required to comply with relevant ethical requirements, including those pertaining to independence in the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants ( IESBA Code), or national equivalent requirements that are at least as restrictive. This additional work effort allows for the meaningful and valuable level of assurance conveyed by the review conclusion. Additional procedures are also required when further questions arise, such as if related party transactions fall outside the normal course of business, fraud or non-compliance with laws or regulations is suspected, or doubts arise regarding the entity’s ability to continue as a going concern. Adding a Meaningful Level of Assurance to Financial Statements In accordance with ISRE 2400 (Revised), a review engagement is not just about practitioners obtaining knowledge of their clients through questions and analysis it also requires the accountant to dig deeper and obtain additional evidence if it is determined there may be a material misstatement in the financial statements. As so much of a review consists of effective communication with clients, performing a significant proportion of the work at the client’s place of business is preferable. Practitioners can provide review services most efficiently by staffing a review engagement with professionals competent in assurance skills and techniques, consistently using the same staff members, and making use of technology to automate the mechanics of the engagement wherever possible. In the course of the engagement, the practitioner develops a significant understanding of the client and its business, which gives him/her an excellent opportunity to offer additional value to the client through the provision of bespoke advice. The professional accountant uses this knowledge to design and perform inquiry and analytical procedures on both material items in the financial statements and on those items where material misstatements are likely to arise.
This understanding includes relevant industry, regulatory, and other external factors the entity’s operations, ownership, and governance structure how it is financed and its accounting systems and records. Adding Cost-Effective Value to Clients A review, consisting primarily of inquiry and analysis, is based on the professional accountant’s understanding of the entity and its environment and the applicable financial reporting framework according to which the financial statements are prepared. Review engagements provide a limited form of assurance on historical financial statements and may be a cost effective and value-adding alternative when an audit is not required. The International Auditing and Assurance Standards Board (IAASB) has issued International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements, which is now effective for periods ended on or after December 31, 2013. Professional accountants are therefore in a unique position to add value, both in terms of enhancing the credibility of their clients’ financial statements and being able to provide them with tailored business advice. This relationship stems from their significant breadth of business experience combined with detailed knowledge of their clients’ businesses, much of which is obtained in the process of performing assurance engagements on their clients’ financial statements. Professional accountants in practice are frequently looked upon as trusted business advisors. Note to Editors: This article is available for IFAC member organizations to publish in their journals and/or websites. Review Engagements-A Value-Adding Client Service Having trouble viewing this email? View the online version here.
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