Independent Review

A review of historical financial statements is a limited assurance engagement. The review of historical financial statements is an evidence-based assurance engagement. Accordingly, the objectives and requirements of a review engagement obligates the practitioner to evaluate the sufficiency and appropriateness of the evidence obtained to support the practitioner's expression of a conclusion on the financial statements. The evidential basis for a review must be sufficient and appropriate for the practitioner to conclude and report on the financial statements. The evidence is cumulative in nature and is primarily obtained from the procedures performed during the course of the review. Professional judgment is essential to the proper conduct of a review engagement. If the results obtained from the inquiry and analytical procedures performed do not adequately address areas in the financial statements where material misstatements are likely to arise, the practitioner must determine whether it is necessary to perform additional procedures in order to be able to form a conclusion on the financial statements. In that situation, the practitioner would be required to design and perform additional procedures considered necessary in the circumstances, to either conclude that the matter is not likely to cause the financial statements as a whole to be materially misstated, or to determine that the matter causes the financial statements as a whole to be materially misstated. Following the iterative nature of a review engagement, the practitioner's evaluation of results obtained from procedures performed serves also to update the practitioner's understanding throughout the engagement, and accordingly also the practitioner's judgment about the evidence that is needed to obtain limited assurance. The practitioner may, in certain circumstances, consider it effective and efficient to design and perform procedures other than inquiry and analytical procedures to obtain sufficient appropriate evidence. The practitioner's decision to perform other procedures does not alter the practitioner's objective of obtaining limited assurance in relation to the financial statements as a whole. In evaluating evidence obtained from procedures performed, if the practitioner considers that the evidence is not sufficient and appropriate to be able to form a conclusion on the financial statements, the practitioner may extend the work performed, or perform other procedures judged by the practitioner to be necessary in the circumstances. Where that is not practicable in the circumstances, and that means the practitioner is not able to obtain sufficient appropriate evidence to be able to form a conclusion, the practitioner is required to determine the effect on the practitioner's report, or on the practitioner's ability to complete the engagement. The requirement is a conditional one, applying only if the practitioner "becomes aware of a matter(s) that causes the practitioner to believe..." Accordingly, it is intended that the requirement would become effective only when something is identified or has occurred in the course of the review engagement and not by the mere possibility that risk of material misstatement in the financial statements may exist. The review report should include a standard description of the review engagement as a limited assurance engagement comprising primarily inquiry and analytical procedures, and evaluating the evidence obtained. The practitioner must not accept a review engagement if the practitioner is not satisfied that there is a rational purpose for the engagement. Emphasis should be place on the importance of the practitioner possessing competencies appropriate to the engagement circumstances, in the context of both having responsibility for engagement-level quality and performing the engagement. These skills are: competence in assurance skills and techniques, and competence in financial reporting, appropriate to the engagement circumstances; and responsibility for the engagement team collectively having the appropriate competence and capabilities, including assurance skills and techniques and expertise in financial reporting.