Your audit firm has been the statutory auditors for Apenkwa Co. Ltd. for the last three years. The company prepares its financial statements to December 31 each year. Due to the size of the company, it has been the practice of the client to prepare interim financial information to June 30 every year. At the request of the client you have been reviewing the interim financial information each year it is prepared.
Required:
Compare and contrast the audit of a completed financial statements and the review of an interim financial statements. (10 marks)
View Solution
Differences:
- Audit is a statutory requirement while review of interim financial statements is at the request of the client.
- The audit report provides an opinion while the review report gives a conclusion.
- The audit opinion provides a high or reasonable assurance while the review conclusion gives a limited or moderate assurance to the user.
- Procedures performed in an audit are more detailed than those performed in a review engagement.
- The audit opinion is in respect of whether the financial statements give a true and fair view while the review conclusion is in respect of whether nothing has come to the auditor’s attention to cause him to believe that the information does not give a true and fair view. (5 points for 5 marks)
Similarities:
- Ethical Consideration
The auditor must follow the same requirement in the performance of both arrangements and should apply quality control procedures applicable to the individual engagement. - Planning and engagement performance
The auditor must plan and assign staff with the requisite qualification and provide the necessary direction, supervision and review of the work for both assignments. - Both engagements are performed by the auditor of the client using International Standards established by IAASB.
- The auditor performs both engagements with the attitude of professional skepticism.
- For both engagements, the auditor should agree the terms of the engagement with the client.
- At the end of performing procedures and obtaining sufficient appropriate evidence, the auditor must furnish the client with a report.
- In both engagements, the auditor obtains written representation from management on its responsibilities for internal control and the financial information. (Any 5 points for 5 marks)