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  • Ercan ALPTÜRK
    Ercan ALPTÜRK    Premium Member   Group moderator
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    AUDIT AND REVIEW OF FINANCIAL STATEMENTS
    These engagements are carried out in accordance with “international standards on auditing” and “international standards on review engagements” both issued by IAASB(1) of IFAC(2).

    The audit engagement includes; examination on test basis evidence supporting the amounts and disclosures in financial statements, assessment of accounting principles, assessment of significant estimates made by management, evaluation of overall financial statement presentation. The review engagement is primarily limited to inquiries of company personnel and application of analytical procedures to financial data.

    The purpose of the audit is to express an opinion whether the financial statements present fairly, in all material respects, the financial position and financial performance of the company in accordance with the relevant financial reporting framework

    The purpose of the review is to state whether anything has come to our attention that causes us to believe that the financial statements do not present fairly, in all material respects, the financial position and financial performance of the company in accordance with the relevant financial reporting framework.

    At completion of the engagements, an “independent audit report” or “an “independent review report” is submitted to our client. Naturally, both reports are prepared in accordance with standards mentioned in the first paragraph.

    Though it is very neat in what is said above, let’s say it one more time; review engagement provides less assurance than audit.


    Footnotes:
    (1) IAASB: International Auditing and Assurance Standards Board
    (2) IFAC: International Federation of Accountants


    EXAMINATION OF PROSPECTIVE FINANCIAL INFORMATION

    Prospective financial information can be in the form of forecast or projection. Forecast is “prospective financial information prepared on the basis of assumptions [i.e. best-estimate assumptions] as to future events management expects to take place and the actions management expects to take as of the date of the information is prepared” . Projection is “prospective financial information prepared either on the basis of hypothetical assumptions about future events and management actions which are not necessarily expected to take place [for example; assumptions made when an entity is in a start-up phase] or on the basis of a mixture of best-estimate assumptions and hypothetical assumptions.

    This engagement is carried out in accordance with “international standards on examination of prospective financial information” issued by IAASB(1) of IFAC(2).

    The purpose of the examination is to state whether anything has come to our attention that causes us to believe that the assumptions do not provide a reasonable basis, and to express an opinion as to whether the financial information is prepared on the basis of these assumptions and presented in accordance with the relevant financial reporting framework.

    At completion of the engagement, an “independent examination report” is submitted to our client. Naturally, the report is prepared in accordance with the standard mentioned in the first paragraph and includes a summary of nature of our examination work.

    Footnotes:
    (1) IAASB: International Auditing and Assurance Standards Board
    (2) IFAC: International Federation of Accountants
    • 24 Nov 2010, 12:36 am