Our existing client has requested us to perform a review of financial information for the 12-month period ended 31 March 2012 for management purpose in accordance with SSRE 2400. The financial year end of the client is 31 December.
My question is whether are we prohibited from performing the procedures according to SSRE 2400 and issue a report thereof because we are the statutory auditors and hence, we should apply SSRE 2410 instead?
The principal distinction between SSRE 2400 Engagements to Review Historical Financial Statements and SSRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity is that SSRE 2400 applies in the case of a review of financial statements performed by a practitioner, who is not the auditor of the entity whereas SSRE 2410 applies in the case of a review of interim financial information by the auditor of the entity.
Through performing the audit of the annual financial statements, the auditor obtains an understanding of the entity and its environment, including its internal control. When the auditor is engaged to review the interim financial information, this understanding is updated through inquiries made in the course of the review, and assists the auditor in focusing the inquiries to be made and the analytical and other review procedures to be applied. Where the practitioner is not the auditor of the entity, the practitioner does not ordinarily have the same understanding of the entity and its environment, including its internal control. Hence, under SSRE 2400, the practitioner needs to carry out different inquiries and procedures to meet the objective of the review.
SSRE 2410 is directed towards a review of interim financial information by an entity’s auditor. However, SSRE 2410 paragraph 3(a) states that SSRE 2410 is to be applied, adapted as necessary in the circumstances, when an entity’s auditor undertakes an engagement to review historical financial information other than interim financial information of an audit client. In your query, where the review covers 12 months instead of a period shorter than the entity’s financial year, SSRE 2410 would still be the appropriate framework upon which to perform your engagement. You may also wish to refer to footnote 4 in Appendix 4 of SSRE 2410 on the wordings to be used in the auditor’s report in the case of a review of historical financial information instead of interim financial information.
Can a practising accountant, who has been engaged to compile financial information for a client, have the option not to enclose a report on the compilation engagement?
SSRS 4410 Engagements to Compile Financial Information paragraph 6 provides guidance that the accountant should issue a report when the accountant’s name is associated with financial information compiled by the accountant.