What New Review Standards Mean For Your Year-End
OCTOBER 29, 2017
New standards for Review Engagements will be effective for financial statements with periods ending on or after December 14, 2017. This year as you and your staff prepare and work with us through the Review engagement process you may notice different types of questions being asked, more questions asked in certain areas and less in others. Below are some of the key changes that you will notice.
HIGHLIGHTS OF KEY CHANGES
The new report will be longer and will look similar to an audit report which more clearly defines the responsibilities of management and practitioners.
The review report will conclude on whether anything has come to the attention of the practitioners that causes them to believe that the financial statement is not prepared, in all material respects, in accordance with the accounting basis used. In the existing standards, the report provides negative assurance meaning that the practitioners conclude that nothing has come to their attention that the financial statements are materially misstated.
UNDERSTANDING THE ENTITY
The new standards require a deeper understanding of your business, in particular the areas that affect financial reporting and results and the internal controls that surround them. Similar to the existing standards, there is no responsibility to evaluate the design of the controls to determine whether they have been implemented or to determine the effectiveness.
FRAUD AND NON-COMPLIANCE WITH LAWS AND REGULATIONS
The new standards require more inquiry to fraud and non-compliance with laws and regulations.
Though the concept is not new, the standards now specifically require materiality to be determined.
In summary, the goal of the new standards is still to provide the same level of assurance as before but with more clarity and transparency.