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c. Review engagements
Review engagements are often undertaken as an alternative to an audit, and involve a practitioner
reviewing financial data, such as six-monthly figures. This would involve the practitioner undertaking
procedures to state whether anything has come to their attention which causes the practitioner to
believe that the financial data is not in accordance with the financial reporting framework.
A review engagement differs to an external audit in that the procedures undertaken are not nearly
as comprehensive as those in an audit, with procedures such as analytical review and enquiry used
extensively. In addition, the practitioner does not need to comply with ISAs as these only relate to
external audits.
d. Levels of assurance
External audit A high but not absolute level of assurance is provided, this is known as reasonable
assurance. This provides comfort that the financial statements present fairly in all material respects
(or are true and fair) and are free of material misstatements.
A. Forecasts are prospective that presents an entitys expectation and based on assumptions
reflecting conditions the responsible part expect to exist and expectations whereas projections are
prospective financial information based on one or more hypothetical assumptions about future
events and the responsible partys actions.
(i) Agreed upon procedures is an engagement may involve the auditor in performing certain
procedures concerning individual items of financial data (for example, account payable, account
receivable, purchase from related parties and sales and profits of a segment of an entity), a financial
statement (for example, a balance sheet) or even a complete set of financial statements.
(ii) Review comprises inquiry and analytical procedures which are designed to review the reliability
of an assertion, which is the responsibility of one party, for the use of another party.
External auditor in order to accept the work of internal auditor should evaluate the internal auditor
in terms of:-
i. Technical competence: The skill and expertise of the internal auditor
ii. Professional due care: The process of internal audit with due care, i.e. proper planned,
supervision, review and documentations
iii. Scope of work: Audit evidence obtained is sufficient and appropriate for external auditor to form
an opinion
iv. The documentation on planning of internal auditor
v. Sample size selected by internal auditor
Question 5
d) (i) Review engagement Review comprises inquiry and analytical procedures which are designed
to review reliability of an assertion, which responsibility of one party, for use by another party.
Review of engagement will involve the application of audit skills and techniques and the gathering
evidence BUT it does not involve and assessment of accounting and internal control systems, tests of
records and other procedures in auditing.
The objective is to enable the Chartered Accountant to state whether, in all material respects, the
financial statements are prepared in accordance with an identified financial reporting framework.
External Audit A high but not absolute level of assurance is provided, this is known as reasonable
assurance. This provides comfort that the financial statements are true and fair and are free of
material misstatements.
Auditing (broadly defined) is a systematic process of (1) objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria and (2) communicating the
results to interested users.
An assurance engagement is an engagement in which a practitioner expresses a conclusion designed
to enhance the degree of confidence of the intended users other than the responsible party about
the outcome of the evaluation or measurement of a subject matter against criteria.
JUN13 Question 3C
The differences between review of financial information services and agreed-upon procedure. Your
discussion should cover the definition, comparative level of assurance and the report to be provided
by each of the assurance services.