To identify the reporting factors, the accountant first establishes which standards govern the requested review of financial statements.
A financial statement review obtains limited assurance primarily through inquiry and analytical procedures, with additional procedures when circumstances require them. Limited assurance is lower than an audit's reasonable assurance but sufficient to support the prescribed review conclusion.
- Subject: Reviews of nonissuer historical financial statements ordinarily follow the Statements on Standards for Accounting and Review Services (SSARS), issued by the American Institute of Certified Public Accountants (AICPA).
- Annual-audit relationship: A SSARS review does not require an annual audit relationship. Nonissuer interim eligibility depends on the four conditions in section 1.3.
- Control knowledge: A SSARS reviewer understands the business and accounting practices. A qualifying interim reviewer obtains or updates relevant control knowledge associated with the annual audit relationship.
- Report form: The SSARS report identifies the statements and review limitations, explains responsibilities, and then concludes. The qualifying nonissuer interim report presents review results first.
An issuer's interim financial information is reviewed under Public Company Accounting Oversight Board (PCAOB) standards, which establish a separate review regime.
Common mistakes
- Quarterly date decides the regime. A March 31 nonissuer review still requires an applicability assessment before using the nonissuer interim report form.
- Every analytical difference is an error. The $250,000 anomaly in Example 2 remains unresolved; the same amount became an established departure only after Example 1's follow-up.
- Inspection changes the engagement. Inspecting selected service records to resolve the $250,000 anomaly remains compatible with a review.
Bottom line
- The subject and applicability conditions determine the review regime; nonissuer interim reviews do not automatically follow SSARS.
- A SSARS review requires independence, agreed terms, inquiry, analytics, agreement or reconciliation to accounting records, necessary follow-up, and reliable written representations.
- The report identifies the actual statements, periods, framework, responsibilities, review limitations, conclusion, signature, location, and completion date.
- Completed SSARS reviews support qualified conclusions for uncorrected material nonpervasive departures and adverse conclusions for material pervasive departures.
Exam shortcut
The engagement family controls report language. A nonissuer quarterly date requires the four-condition eligibility test before selection of the interim-review form. Management's response identifies the reporting issue. “Refused correction” after a confirmed error requires a severity assessment; “refused access” with unsuccessful alternatives prevents completion. Specimen analysis traces the statement names and periods into the conclusion, then checks the responsibility headings, standards family, modification basis, and date.
The full lesson (about 5,289 words, 35 min read) adds 3 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- IV.C3
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