New Review Engagement standards: what do they mean for me?

• Author: Bissonette, Laurie
• Position: Economically Speaking

Now that new Review Engagement standards are in place, bankers, shareholders and regulators may want to consider whether they need to make changes to their assurance requirement. These new standards, which apply for periods ended on or after Dec. 14,2017 (e.g. companies with Dec. 31 year-ends), will affect financial statements going forward.

Historically, public accountants have provided three levels of service for financial statements--audits, reviews and compilations (notice to reader). Public accountants render reports on these services for users of financial statements, who have understood the underlying level of assurance that the accountants provide and its impact on their reliance on the financial statements.

How have Review Engagements changed?

Traditionally, a Review Engagement consisted of analytical review of the financial statements and inquiry of the company's management and considered the "Plausibility" of the attached financial statements. The new Review Engagement standards are designed to provide "Limited Assurance," which is intended to enhance the creditability of the financial statements and make them more user-focused. In particular, the new Review Engagement standards:

* Are risk-focused (as is an audit)

* Require additional rigour in the analytic process

* Include a requirement to focus on significant or unusual transactions

* Include a requirement to explicitly identify areas where material misstatements are likely to arise and design procedures to address these areas

* Require fraud considerations

* Result in more communication with both management and those charged with governance (shareholders, etc.) to obtain a depth of understanding of the entity.

The new review engagement report is longer. Users will note that, like the audit report, the new report addresses management's responsibility and the practitioner's responsibility. Users may see additional inclusions where the practitioner considers it...