ASRE 2405 PDF

Compiled Auditing Standard. Prepared by the Auditing and Assurance Standards Board. The text, graphics and layout of this compiled Auditing Standard on Review Engagements are protected by Australian copyright law and the comparable law of other countries. Otherwise, no part of this compiled Auditing Standard on Review Engagements may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law. Operative Date

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Compiled Auditing Standard. Prepared by the Auditing and Assurance Standards Board. The text, graphics and layout of this compiled Auditing Standard on Review Engagements are protected by Australian copyright law and the comparable law of other countries.

Otherwise, no part of this compiled Auditing Standard on Review Engagements may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law. Operative Date Scope of this Auditing Standard on Review Engagements Performing a Review General Principles of a Review of a Financial Report Agreeing the Terms of the Engagement Procedures for a Review of a Financial Report Enquiries, Analytical and Other Review Procedures Comparatives — First Financial Report Evaluation of Misstatements Written Representations Departure from the Applicable Financial Reporting Framework Limitation on Scope Limitation on Scope Imposed by Management Going Concern and Significant Uncertainties Other Considerations Conformity with International Standards on Review Engagements.

Example of a Representation Letter. This Auditing Standard on Review Engagements applies to:. For the purposes of this Auditing Standard, the following terms have the meanings attributed below:. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information. The requirements of the applicable financial reporting framework determine the form and content of the financial report.

The auditor who is engaged to perform a review of a financial report shall perform the review in accordance with this Auditing Standard. The auditor shall comply with relevant ethical requirements relating to the audit of the annual financial report of the entity. The auditor shall implement quality control procedures that are applicable to the individual engagement. The auditor shall plan and perform the review by exercising professional judgement and with an attitude of professional scepticism, recognising that circumstances may exist that cause the financial report to require a material adjustment for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework.

The auditor shall, prior to agreeing the terms of the engagement, determine whether the financial reporting framework is acceptable and obtain agreement from management and, where appropriate, those charged with governance, that it acknowledges and understands its responsibility:. The auditor shall agree the terms of the engagement with the entity, which shall be recorded in writing by the auditor and forwarded to the entity.

When the review engagement is undertaken pursuant to legislation, the minimum applicable terms are those contained in the legislation. The auditor shall obtain an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both the annual and interim or other financial reports, sufficient to plan and conduct the engagement so as to be able to:.

In order to plan and conduct a review of a financial report, a recently appointed auditor, who has not yet performed an audit of the annual financial report in accordance with Australian Auditing Standards, shall obtain an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both the annual and interim or other financial reports.

The auditor shall consider materiality, using professional judgement, when:. The auditor shall obtain evidence that the financial report agrees or reconciles with the underlying accounting records. The auditor shall enquire whether management has identified all events up to the date of the review report that may require adjustment to or disclosure in the financial report.

When comparative information is included for the first time in a financial report, an auditor shall perform similar procedures on the comparative information as applied to the current period financial report. The auditor shall endeavour to obtain written representations from management and, where appropriate, those charged with governance, that:.

A summary of such items is included in or attached to the written representations;. The auditor shall read the other information that accompanies the financial report to consider whether any such information is materially inconsistent with the financial report.

Aus A The auditor shall communicate relevant matters of governance interest arising from the review of the financial report to those charged with governance. A40 and A The auditor shall issue a written report that contains the following:. The auditor shall include a basis for modification paragraph in the report, that describes the nature of the departure and, if practicable, states the effects on the financial report.

If the effects or possible effects are incapable of being measured reliably, a statement to that effect and the reasons therefor shall be included in the basis for modification paragraph. When the effect of the departure is so material and pervasive to the financial report that the auditor concludes a qualified conclusion is not adequate to disclose the misleading or incomplete nature of the financial report, the auditor shall express an adverse conclusion.

When the auditor is unable to complete the review, the auditor shall communicate, in writing, to the appropriate level of management and to those charged with governance the reason why the review cannot be completed, and consider whether it is appropriate to issue a review report.

A45 and A If, after accepting the engagement, management imposes a limitation on the scope of the review, the auditor shall request management to remove the limitation. The report shall include specific reference to the fact that there is such a material uncertainty. If a significant uncertainty other than a going concern problem is not adequately disclosed in the financial report, the auditor shall express a qualified or adverse conclusion, as appropriate.

The report shall include specific reference to the fact that there is such a significant uncertainty. The objective of a review of a financial report differs significantly from that of an audit conducted in accordance with Australian Auditing Standards. A review of a financial report does not provide a basis for expressing an opinion whether the financial report gives a true and fair view, or is presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

A review, in contrast to an audit, is not designed to obtain reasonable assurance that the financial report is free from material misstatement. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

Through performing the audit of the annual financial report, the auditor obtains an understanding of the entity and its environment, including its internal control. Although other Auditing Standards do not apply to review engagements, they include guidance which may be helpful to auditors performing reviews covered by this Auditing Standard. The elements of quality control that are relevant to an individual engagement include leadership responsibilities for quality on the engagement, ethical requirements, acceptance and continuance of client relationships and specific engagements, assignment of engagement teams, engagement performance, and monitoring.

An attitude of professional scepticism denotes that the auditor makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by management of the entity. The communication ordinarily covers the following matters:. The terms of engagement to review a financial report can also be combined with the terms of engagement to audit the annual financial report.

In planning a review of a financial report, the auditor needs to update this understanding. The auditor also needs to obtain a sufficient understanding of internal control as it relates to the preparation of the financial report subject to review, as it may differ from internal control as it relates to the preparation of the annual financial report. The auditor needs to use the understanding of the entity and its environment, including its internal control, to determine the enquiries to be made and the analytical and other review procedures to be applied, and to identify the particular events, transactions or assertions to which enquiries may be directed or analytical or other review procedures applied.

The procedures performed by the auditor to update the understanding of the entity and its environment, including its internal control, ordinarily include the following:.

The auditor needs to determine the nature of the review procedures, if any, to be performed for components and, where applicable, communicate these matters to other auditors involved in the review. Obtaining an understanding of the entity and its environment enables the auditor to focus the enquiries made, and the analytical and other review procedures applied in performing a review of the financial report in accordance with this Auditing Standard.

In doing so, ordinarily the auditor considers the nature of any corrected misstatements, and any uncorrected misstatements aggregated by the auditor, any significant risks, including the risk of management override of controls, and significant accounting and any reporting matters that may be of continuing significance, such as material weaknesses in internal control.

The auditor needs to use professional judgement and consider qualitative and quantitative factors in determining materiality. If the applicable financial reporting framework contains a definition of materiality, it will ordinarily provide a frame of reference to the auditor when determining materiality for planning and performing the review. The auditor needs, when relevant, to consider materiality from the perspective of both the entity and the consolidated entity.

A review ordinarily does not require tests of the accounting records through inspection, observation or confirmation. Procedures for performing a review of a financial report ordinarily are limited to making enquiries, primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures, rather than corroborating information obtained concerning matters relating to the financial report.

The auditor ordinarily performs the following procedures:. For example, it may be practicable to update the understanding of the entity and its environment, including its internal control, and begin reading applicable minutes before the end of the period. Performing some of the review procedures earlier in the period also permits early identification and consideration of significant accounting matters affecting the financial report. The auditor performing a review of the financial report is also the auditor of the annual financial report of the entity.

For convenience and efficiency, the auditor may decide to perform certain audit procedures concurrently with the review of the financial report.

For example, information gained from reading the minutes of meetings of the board of directors in connection with the review of the financial report may also be used for the annual audit. The auditor may decide also to perform, at the time of the review, auditing procedures that would need to be performed for the purpose of the audit of the annual financial report, for example, performing auditing procedures on:.

A review of a financial report ordinarily does not require corroborating the enquiries about litigation or claims. The auditor may obtain evidence that the financial report agrees or reconciles with the underlying accounting records by tracing the financial report to:. The auditor need not perform procedures to identify events occurring after the date of the review report.

The auditor needs to enquire also as to the feasibility of the plans of those charged with governance and whether they believe that the outcome of these plans will improve the situation.

Ordinarily, the auditor considers, based on procedures performed, whether it is necessary to corroborate the feasibility of the plans of those charged with governance and whether the outcome of these plans will improve the situation. When comparative information is included in the first financial report and the auditor is unable to obtain sufficient appropriate review evidence to achieve the review objective, a limitation on the scope of the review exists and the auditor needs to modify the review report.

In such cases, ordinarily an auditor encourages clear disclosure in the financial report, that the auditor has been unable to review the comparatives. When an entity has come into existence only within the first financial reporting period, comparative information will not be provided in the first financial report and no modified review report is required. A review of a financial report, in contrast to an audit engagement, is not designed to obtain reasonable assurance that the financial report is free from material misstatement.

The auditor needs to exercise professional judgement in evaluating the materiality of any misstatements that the entity has not corrected. Ordinarily, the auditor considers matters such as the nature, cause and amount of the misstatements, whether the misstatements originated in the preceding year or current year, and the potential effect of the misstatements on future interim or annual periods.

The auditor may designate an amount below which misstatements need not be aggregated, because the auditor expects that the aggregation of such amounts clearly would not have a material effect on the financial report. If the auditor identifies a material inconsistency, the auditor needs to consider whether the financial report or the other information needs to be amended.

For example, those charged with governance may present alternative measures of earnings that more positively portray financial performance than the financial report, and such alternative measures are given excessive prominence, or are not clearly defined, or not clearly reconciled to the financial report such that they are confusing and potentially misleading.

If an amendment is necessary to correct a material misstatement of fact and management refuses to make the amendment, ordinarily the auditor considers taking further action as appropriate, such as notifying those charged with governance and, if necessary, obtaining legal advice.

The determination of which level of management may also be informed is affected by the likelihood of collusion or the involvement of a member of management.

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Assurance audits and reviews have their base in legislation in the main and are designed to provide confidence and reasonable certainty to the user of those reports. SAAS Audit undertake a range of audits and reviews which provide a level of assurance to the regulator that the licensee or person responsible have complied with the appropriate legislation. In respect to real estate businesses, accountants and solicitors these assurances relate to the management of monies held in trust. In respect to forensic investigations the assurance is given to the client about the correctness and completion of information in order to form an opinion. SAAS Audit works with insurance companies, loss adjustors and brokers in relation to these matters. SAAS can also assist in litigation disputes and valuation assessment if required.

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