Financial report review services are services in which public accountants carry out analytical procedures, inquiries and other procedures to obtain "limited certainty" about financial reports and are intended to provide a level of certainty for users regarding their accuracy.
This review is the basic level of public accounting assurance services. The public accountant is required to determine whether he or she is truly independent. If he determines that he is not independent, the public accountant cannot perform the review engagement.
A review is substantially narrower in scope than an audit. This review is not intended to gain an understanding of the internal controls of the client's business; assess the risk of
fraud/fraud; testing accounting records through inspection, observation, external confirmation or examination of source documents or other procedures usually carried out in an audit.
In a review engagement, the public accountant will issue a formal report that includes a conclusion as to whether, based on the review, he is aware of any material modifications that must be made to the financial statements to conform with the applicable financial reporting framework.
1. Gain knowledge of accounting principles and client industry practices. Accountants can study industry guides or other sources to gain this knowledge. The level of knowledge required is slightly below audit.
2. Gain an understanding of the client. Information that needs to be obtained includes, among other things, the nature of the client's business transactions, bookkeeping and employees, and the contents of financial reports. The level of knowledge required is less than auditing.
3. Conduct questions and answers with management. Questioning and answering is the most important review procedure. The goal is to determine whether the financial statements are presented fairly, assuming that management does not intend to deceive the accountants.
The PSAK Report Form states three types of compilation reports, namely:
1. Compilation with full requirements, where this type requires disclosure in accordance with GAAP, the same as for audits or reviews of financial reports.
2. Compilation that eliminates all disclosures, showing the correct words when an accountant compiles a report without disclosure.
3. Compilation without independence, where the KAP can issue a compilation report with or without disclosure even though the report is not independent from the client.
