ISRE (Revised),. Engagements to Review. Historical Financial. Statements. Basis for Conclusions. Prepared by the Staff of the IAASB. September International Standard on Review Engagements (ISRE) , “Engagements to. Review Financial Statements” should be read in the context of the “Preface to. ISRE (Revised), Engagements to Review Historical Financial Statements. REQUEST FOR COMMENTS The International Auditing and Assurance.

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ICAEW connects overchartered accountants worldwide, providing this community of professionals with the power to build and sustain strong economies. Our profession is right at the heart of the decisions that will define the future, and insight and we contribute by sharing our knowledge, insight and capabilities with others.

That way, we can be sure that we are building robust, accountable and fair economies across the globe. Internationally recognised as a source of expertise, the Faculty is responsible for submissions to regulators and standard setters and provides a range of resources to professionals, providing practical assistance in dealing with common audit and assurance problems.

Every effort has been made to make sure the information it contains is accurate at the time of creation. It provides guidance on the conduct of assurance reviews of financial statements. The absolute number and the proportion of audit exempt companies have been growing since audit exemption was introduced indue to a number of increases in the thresholds.

When all these companies are added to the large number of unincorporated businesses out there, there is a substantial potential market for chartered accountants to offer their assurance skills to businesses who are not required to have an audit. The International Standard on Review Engagements ISRE Revised Engagements to Review Historical Financial Statements provides a framework for the conduct of reviews over historical financial information, so the client will know what it is getting and the accountant has access to guidance on the service they are providing.

ISRE Revised requires the chartered accountant to make enquiries of management, and others, and to carry out analytical procedures to gain a degree of assurance that:. In the UK, there are two financial reporting frameworks: This includes reduced disclosures for the individual accounts of qualifying entities and for entities qualifying as small entities; and. Further guidance on the application of this technical release to the micro-entities regime is provided in Appendix 7.

Assurance review engagements, like audits, may help the chartered accountant report weaknesses and other issues that come to their attention to the directors. In other words, such engagements can generate much more value for the directors than just the assurance report itself. Further substantive testing is not required unless the chartered accountant has reason to be concerned about some aspect of the business. An assurance review engagement is therefore a flexible and proportionate service which can be adapted to suit different clients.

It also provides, in the appendices, illustrative letters and reports to support these engagements. It should not be regarded as a substitute for reading and understanding ISRE Revised which remains the appropriate standard to support assurance review engagements and is available from IFAC.

An increasing number of companies are entitled to take advantage of exemption from audit. Audit exemption has created an open market for services that add credibility to the financial statements of audit exempt companies.

In summary, the options available are:. The user is left to draw their own conclusions, but will have increased confidence as these conclusions will be based on facts that have been checked by a chartered accountant.

An agreed-upon procedures engagement does not lead to a conclusion over the information as a whole. Instead, factual procedures sample tests of particular balances, for example are agreed ire between the business and its chartered accountant.

The accountant then carries out those procedures and reports the results, so that the business reivsed its stakeholders can make use of them. Assurance review reports provide a conclusion on the basis of the work performed, which is limited in scope according to the judgement of the chartered accountant. Audit reports provide an opinion giving the highest reasonable level of assurance, and remain the gold standard.

It may be possible to develop a bespoke assurance engagement referencing this standard and guidance. Revisef the chartered accountant conducting an assurance review engagement instead of an audit, the following benefits should result:. Any decision as to whether, and to what extent, these methods of assurance should be used is a matter of professional judgement. There has been widespread use of this technical release and ISRE Revised to perform assurance review engagements.


An assurance review engagement could focus on the isge risk areas.


References in the subsequent sections of this technical release are as follows:. The general principles of this technical release may also be applied when engaged to carry out an assurance review under the ISRE of the financial statements of other types of entities, with suitable modifications. For the majority of small UK incorporated companies, management and those charged with governance will normally be the directors.

In other types of entity they will be equivalent persons, such as the partners, proprietors, committee of management or trustees. In particular the independence requirements in Section — Independence — Audit and Review Engagements will need to be applied.

The following frameworks will be acceptable:.

Example extracts to include in an engagement letter can be found in Appendix 1. When taking audit exemption, the Companies Act s 3 requires a statement by the directors on the balance sheet acknowledging their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.

An example of this statement is provided in Appendix 3. An example of this statement is provided in Appendix 6. It is possible to apply the principles of ISRE Revised to financial statements for entities which do not have to comply with a recognised GAAP but which do follow accepted accounting principles eg, Trust accounts.

The chartered accountant needs to be satisfied that the accounting policies provide sufficient detail as to the accounting basis and policies adopted and that there is sufficient information disclosed within the financial statements for purpose of the users of the financial statements. The report will need to be amended appropriately. A40 for further information when assessing the appropriateness of the accounting framework.

Chartered accountants need to be aware that third parties may seek to rely on the financial statements and, indeed, the whole purpose of the assurance review engagement is to enhance their credibility.

Under some circumstances for example, special purpose financial statements it may be possible to identify in advance all the third parties who will have access to the financial statements, and therefore to the assurance review report. When all the third parties can be identified, the accountant may seek to manage their risk with a tri- partite or multi-partite engagement contract with the client and the third parties.

The contract would accept that they owe a duty of care not only to the client but also to those third parties, and could then include provisions limiting liability if appropriate.

It is important to note that ISRE Revised does not require any such contract, that this approach can only be effective if all the third parties are party to the contract, and that it may prove difficult and time-consuming to negotiate if there are numerous third parties.

It is probable that in most cases assurance review reports will be obtained over general purpose financial statements. These are likely to be made widely available. For example, they may be filed at Companies House.

This will make it impossible to restrict who has access to them, and it will therefore not be possible to avoid risk by means of a contract.

Review Report

An assurance review report appended to general financial statements can, however, include a paragraph disclaiming liability to third parties. The illustrative report in Appendix 4 includes a paragraph to this effect, which is equivalent to the Bannerman paragraph used in audit reports, and relies on the same legal precedent.

Management of risk and liability. In performing the engagement, the following additional sources of guidance and standards may be helpful:. The depth of work carried out by the chartered accountant will be less than that for an audit. However, the chartered accountant will need to consider the disclosures in this area in accordance with the applicable financial reporting framework and the FRC guidance for directors.

Independent Review Engagements

Written representations are required from management by ISRE Example wording is set out in Appendix 2. Where it is necessary to issue a modified conclusion, the illustrative assurance review report in Appendix 4 can be modified in the same way shown in Appendix 2 of the ISRE Revisedwhere examples 2—5 can be applied to modify example 1 as follows:. This will include where there is material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern.


Example wording is set out in Appendix 5. Appendix 4 sets out an example unmodified assurance review report for a UK incorporated company. Please note that sire wording may be adapted, as appropriate. As [directors] [designated members] you must not approve the financial statements unless you are satisfied that they give a true and fair view of gevised assets, liabilities, financial position and profit or loss of the [company] [limited liability partnership].

This is in addition to the general duties required by directors under s. Our conclusion, if unmodified, will be in the form:. The review of the financial statements does not relieve you of your responsibilities.

ISRE Revised requires us to conclude whether anything has come to our isrre that causes us to believe that the financial statements, taken as a whole, are not prepared, in all material respects, in accordance with the [applicable financial reporting framework]. ISRE Revised also requires us to comply with relevant ethical requirements.

We will perform procedures, primarily consisting of making enquiries of management and others within the entity, as appropriate, applying analytical procedures, and evaluating the evidence obtained. We will also perform additional procedures if we become aware of matters that cause us to believe the financial statements as a whole may be materially revisef. These procedures are performed to enable us to express our conclusion on the financial statements in accordance with ISRE Revised.

The procedures selected will depend on what we consider necessary applying our professional judgement, based on our understanding of the [company] [limited liability partnership] and its environment, and our understanding of [applicable financial reporting framework] and its application in the context of your [company] [limited 24000 partnership].

The form and content of our report may need to be amended in the light of our findings. Additional wording to be included in the letter of engagement if a practitioner wishes to limit their liability in respect of a claim.

You should consider whether this is suitable and, if necessary, take legal advice. This representation letter is provided in connection with your review of the financial statements of…………………. We confirm that the [company] was entitled to exemption under section [x] of the Companies Act from the requirement to have its financial statements for the financial year ended [date] audited.

We iste confirm that the members have not required the 240 to obtain an audit of its financial statements for the financial year in accordance with section usre the Act. We acknowledge that the work performed by you is substantially less in scope than an audit performed in accordance with International Standards on Auditing Iste and that you do not express an audit opinion.

Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements reviised accounting standards.

All events since the balance sheet date which require disclosure or which would materially affect the amounts in the financial statements have been adjusted or disclosed in the financial statements.

Any other matters relevant to the financial statements that have been represented by management. For example stock or investment property valuations or bad debt or other provisions.

All accounting records and relevant information have been made available to you for the purpose of your …………………. We have provided to you all other information requested and given unrestricted access to rwvised within the entity from whom you have deemed it necessary to …………………. All other records and related information [including minutes of all management and shareholders meetings] have been made available to you.

All transactions undertaken by the …………………. There are no liabilities, contingent liabilities or guarantees to third parties other than those disclosed in the financial statements.

The company has at no time during the year entered into any arrangement, transaction or agreement to provide credit facilities including loans, quasi loans or credit transactions for directors, nor to guarantee or provide security for such matters, except as disclosed in the financial regised.

Any other information relevant to the financial statements that has been represented by management. We gevised reviewed the financial statements of XYZ Limited for the year ended [date], which comprise the [specify the titles of the primary statements] and notes to the financial statements, including a summary of significant accounting policies. Our responsibility is to express a conclusion on the financial statements.