An interim review provides limited assurance on financial information issued between annual audits. Its procedures and conclusion differ from those of the annual financial statement audit.
A review of interim financial information applies inquiry and analytical procedures to obtain limited assurance on interim data. The report gives negative assurance: the auditor is not aware of any material modifications needed for the information to conform with the financial reporting framework. No opinion is expressed.
To identify the factors an auditor weighs when reporting on a review of interim financial information, start with the level of assurance. An audit opinion provides reasonable assurance that is high but not absolute. The review gives a negative-assurance conclusion that provides limited assurance; preparation and compilation provide no assurance.
The contrast with an audit shapes every reporting decision that follows:
The applicable review standard depends on the annual audit relationship and the information presented:
- Nonissuer: the interim-review standards issued by the American Institute of Certified Public Accountants (AICPA) apply when all four conditions below are met. The engagement exists by agreement.
- Issuer: an appropriately engaged registered auditor reviews the interim information under Public Company Accounting Oversight Board (PCAOB) standards before the quarterly filing with the Securities and Exchange Commission (SEC).
Common mistakes
- Scope limitation reported as a modification. A restriction that stops the inquiries, analytical procedures or written representations leaves no basis for limited assurance. The answer is no report plus a communication to governance, never a conclusion "with the exception of" the untested area.
- Opinion vocabulary in a review report. "In our opinion" and "present fairly" express reasonable assurance and never appear in a review conclusion. The review says only that the auditor is "not aware of any material modifications."
- Emphasis used to cure a departure. An emphasis-of-matter paragraph (an explanatory paragraph on an issuer report) refers only to a matter the interim information already handles properly. An omitted going concern disclosure is a departure and modifies the conclusion, as in the $9,000,000 covenant case.
Bottom line
- Assurance level: an interim review gives limited assurance through inquiry and analytical procedures and expresses negative assurance, never an opinion.
- Eligibility: the latest annual statements were audited, the reviewer audited them or is engaged for the current annual audit, the framework is the same, and audited annual statements accompany the interim information or are readily available.
- Four reporting factors: procedures completed, material departure uncorrected, going concern or subsequent-event wording, and unaudited marking and presentation.
- Incomplete procedures: no review report is issued; communicate with management and governance, and a nonissuer auditor considers withdrawing.
Exam shortcut
Determine whether the review is complete before assessing a departure. Incomplete required procedures support no report and appropriate communication, with withdrawal considered where applicable. For a completed review, request correction of a material departure and assess whether modified wording can communicate an unresolved deficiency. Identify the periods actually reviewed and distinguish any annual-audit reference. Read conclusion wording in context; management's fair-presentation responsibility does not turn a review into an audit.
The full lesson (about 4,707 words, 31 min read) adds 3 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- IV.E3
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