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The purpose of SRE 2400 is to develop standards and offer guidance on the professional responsibilities of a practitioner’s when he/she not being the auditor of the entity, assumes an engagement of reviewing the financial statements and SRE 2400 also prescribes the content and form of a report which practitioner issues following such a review
The main purpose of reviewing of financial statement is to allow the practitioner to report whether, based on the procedures which don’t provide that all evidence which is required in the audit, anything has caught his/her attention which causes him/her to believe that financial statements aren’t prepared, in all the material respects, as per the relevant financial reporting framework.
A practitioner must abide by the Code of Ethics which has been issued by ICAI (Institute of Chartered Accountants of India). Ethical principles which govern the professional responsibilities of the practitioner are:
The practitioner must conduct a review as per this SRE. A practitioner must plan and execute his/her review with professional skepticism as a part of his/her attitude for recognizing circumstances that may exist causing financial statements to be misstated materially. For expressing the negative assurance in his/her review report, a practitioner must find appropriate, reasonable and adequate evidence mainly through analytical procedures and inquiry for drawing specific conclusions.
Here, the scope implies review procedures which are deemed necessary in the circumstances for achieving the objective of such review. The procedures and methods required for conducting the review of financial statements must be determined by a practitioner considering the requirements of the SRE, applicable regulation, legislation, professional bodies and wherever appropriate, the terms of such review engagement and the reporting requirements.
The client and practitioner must give their consent to the terms of the engagement. Such agreed terms need to be recorded in the engagement letter or similar other suitable forms. Matters to be included in the engagement letter:
The practitioner must plan his/her work in a way that the execution of the engagement is effective. When planning the review of the financial statements, a practitioner must obtain or update his/her knowledge of the relevant business that includes understating of the entity’s organization, operating characteristics, accounting systems and nature of its revenues, expenses, assets, and liabilities.
When a practitioner uses the work done by another practitioner (s) or expert(s), he/she must be satisfied that the work is acceptable for the purposes of such review.
A practitioner must document the matters that are crucial in providing the evidence to assist his/her review report, and the evidence that such review was carried performed as per this SRE.
A practitioner must use judgment to determine the particular nature, timing as well as the extent of the review procedures. The practitioner would be guided by the matters as follows:
A review report must have an expression of negative assurance written in clear and unambiguous form. The practitioner must assess and review his/her conclusions drawn from evidence obtained by him/her as their basis for expressing the negative assurance. Depending on the work performed, a practitioner must assess whether the information that is obtained during his/her review point out that financial statements don’t provide a true and fair view as per relevant financial reporting framework. A report on the review of financial statements defines the scope of the engagement for enabling the reader of such financial statements in understanding the nature of work performed and clarify that the audit has not been performed and, hence, the audit opinion isn’t expressed or provided.
A review report must: