are management representation letters required for reviews

• AR-C 90: Definitive Guide to Review Engagements

By Charles Hall | Preparation, Compilation & Review

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Review engagements provide limited assurance using  AR-C 90, Review of Financial Statements . And these engagements can be done with much less effort than audits.

So, what are the requirements of a review engagement? When might a review be preferable to an audit? Must the CPA be independent? Can the CPA prepare the financial statements and perform the review engagement? Can a special purpose reporting framework be used? Who might desire a review report (rather than an audit or a compilation report)?

I'll answer these questions below, but, first here's a quick video introduction to the post.

Review Engagement Guidance

The guidance for reviews can be found in AR-C 90, Review of Financial Statements . AR-C 90 is part of  the AICPA's Statements on Standards for Accounting and Reporting Services (SSARS)..

Though this article is long, it's not intended to be comprehensive. It's an overview.

Applicability of AR-C 90

You should perform a review engagement when engaged to do so . If your client asks for this service and you accept, you are engaged.

A review engagement letter should be prepared and signed by the accountant or the accountant’s firm and management or those charged with governance. See engagement letter guidance below.

AR-C 90 Objectives

The objective of the accountant in a review engagement is to provide limited assurance regarding the financial statements. Other historical information such as supplementary information can also be included.

So how does an accountant perform a review engagement? Primarily with inquiries and analytics.

How does the limited assurance in a review engagement compare with compilations and audits?

In a compilation engagement, no assurance is provided. What procedures are employed in a compilation? Primarily, the accountant reads the financial statements for appropriateness. Why perform a compilation rather than a review? Economy and cost. Since procedures are minimal, it's easier to perform a compilation and less costly to the client.

In an audit, the accountant provides a high level of assurance. The accountant performs procedures beyond inquires and analytics such as confirmations. Audit risk assessment and planning requirements are much more rigorous than that of a review. While audits provide a higher level of assurance, they are more time-consuming. Consequently, the additional time raises the cost for the client. This is why reviews are sometimes performed rather than an audit.

Prior to performing a review engagement, make sure all stakeholders will accept this product. Some lenders might require an audit.

Review Reports

A review report is always required in a review engagement .

The standard review report states that no material modifications are necessary for the financial statements to be in accordance with the reporting framework. (See a sample review report below.)

If material misstatements are identified and relate to specific amounts in the financial statements, you will issue a review report with a basis for qualified conclusion paragraph and you'll have a qualified conclusion. See Exhibit C, illustration 5 in AR-C 90 for a sample review report with a departure from GAAP.  If the effects of the departure are determined, they are disclosed in the report. If not known, the paragraph states that the effects have not been determined.  

If misstatements are material and pervasive, an adverse conclusion is appropriate. The review report will also have a basis for adverse conclusion paragraph. See Exhibit C, illustration 7 in AR-C 90 for a sample review report with an adverse conclusion.

Review Financial Statements

The accountant prepares financial statements as directed by management or those charged with governance. The financials should be prepared using an acceptable reporting framework including any of the following:

• Regulatory basis
• Contractual basis
• Other basis (as long as the basis uses reasonable, logical criteria that are applied to all material items) 
• Generally accepted accounting principles (GAAP)

All of the above bases of accounting, with the exception of GAAP, are referred to as special purpose frameworks. When such a framework   is used, a description is required and   can be included in:

• The financial statement titles
• The notes to the financial statements, or
• Otherwise on the face of the financial statements

The financial statement should disclose how the special purpose framework differs from generally accepted accounting principles. If, for example, a company uses accelerated depreciation in tax-basis statements, the financial statements should disclose how this method differs from straight-line (the usual GAAP method). 

The review report language changes when a company uses a special purpose reporting framework. See Exhibit C, illustration 3 in AR-90 for a tax-basis review report. 

Which Financial Statements?

Management specifies the financial statements to be prepared. Normally a company desires a balance sheet, an income statement, and a cash flow statement. The accountant can, however, issue just one financial statement (e.g., income statement). 

Who prepares the financial statements? The company or the CPA firm can prepare them.

Can the cash flow statement be omitted? GAAP requires a cash flow statement when a statement of financial condition and an income statement are included. Compilation standards allow for the omission of the GAAP cash flow statement if the omission is noted in the compilation report. Not so in a review engagement. The cash flow statement must be included when GAAP is used.

But is the cash flow statement required when the tax-basis of accounting is used? No, the cash flow statement can be omitted when the financial statements are tax-basis.

Disclosures in Reviewed Financial Statements

What about disclosures? Are they required in a review engagement?

In compilation engagements , disclosures can be omitted. Not so in a review engagement. Full disclosure is required, regardless of the reporting framework.

References to Review Report and Notes

Should a reference to the review report and the notes be included at the bottom of each financial statement page? While not required by the SSARS, it is acceptable to add a reference such as:

• See Accountant’s Report and accompanying notes
• See Accountant’s Review Report and accompanying notes, or
• See Independent Accountant’s Review Report and accompanying notes

Review Engagement Documentation Requirements

The accountant should prepare and retain the following documentation:

• Engagement letter
• A copy of the reviewed financial statements 
• Accountant’s review report 
• Communications with management and those charged with governance about significant matters arising during the engagement
• Communications with other accountants that reviewed or audited financial statements of significant components 
• Emphasis-of-matter or other-matter paragraph communications with management or others
• The representation letter (see Exhibit B of AR-C 90 for sample wording)
• Information about how any inconsistencies were addressed when the accountant identified information that was inconsistent with the accountant's findings regarding significant matters affecting the financial statements

The review documentation should be sufficient to enable an experienced accountant, having no previous connection to the engagement to understand:

• the nature, timing, and extent of the review procedures,
• the evidence obtained and the accountant's conclusions based on that evidence
• significant matters and the related conclusions and judgments

Review Engagement Letter

While it is possible for the accountant to perform only a review and not prepare the financial statements, most review engagement letters will state that the following will be performed by the accountant:

• Preparation of the financial statements (a nonattest service)
• A review engagement (an attest service)

Since a nonattest service and an attest service are being provided, the accountant will add language to the engagement letter describing the client’s responsibility for the nonattest service. 

See illustrative engagement letters in Exhibit A of AR-C 90 .

AICPA independence standards require the accountant to consider whether he is independent when the CPA performs an attest service (e.g., review) and a nonattest service (e.g., preparation of financial statements) for the same client. If management does not possess the skill, knowledge, and experience to oversee the preparation of the financial statements and accept responsibility, the accountant may not be independent.

So, must the accountant be independent? Yes, independence is required in review engagements.

AR-C 90 Review Procedures

The accountant should:

• Make inquiries,
• Perform analytical procedures, and
• Perform other procedures, as appropriate

Direct your procedures to areas with increased risks of material misstatement. An understanding of the entity and the industry in which the entity operates will better enable you to identify potential misstatements.

1. Review Inquiries

AR-90.29 provides a series of inquiries that should be made of management and others. Those questions include matters such as fraud, subsequent events, related party transactions, and litigation. Additionally, once you create your analytical procedures, you may have questions regarding unexpected changes.

The accountant should remain alert for related party transactions outside the normal business course. Inquiries should be made about such transactions. 

2. Review Analytical Procedures

Apply analytical procedures to the numbers. What kind? Well, that depends. What numbers are most important? What numbers are most likely to be misstated? What types of analytics illuminate the client's business? Consideration of such factors will lead you to the right analytics.

Here are examples:

• Comparing the current year's financial statement numbers with the prior year
• Comparing the current year trial balance numbers with the prior year
• Ratios such as debt/equity or current assets/current liabilities or depreciation/total depreciable assets
• Computing numbers with nonfinancial information such as the number of units sold times the average price 
• Comparing quarterly revenues by location

As you can see, judgment is required. Moreover, you need to develop expectations before computing the numbers. AR-C 90 says that the expectations should enable you to identify material misstatements. So the expectations have to be precise enough to yield that result. 

Here are the five steps I use:

• Develop expectations
• Compute the numbers
• See if the numbers align with expectations
• Follow up with additional inquiries if expectations are not met
• Develop a conclusion

I find that many accountants fail to document their expectations. Or if expectations are documented, a second problem occurs: The numbers don't align with the expectation and there's no documented follow-up. If the numbers don't align with expectations, make sure you determine why.

Expectations

How do we develop expectations?

It is helpful to discuss current operations with management before computing your numbers. You want to know, for example, if sales rose during the year or if there were reductions in the workforce. The conversation informs your expectations.

Also, if you've previously worked with the client, you are familiar with their profit margins or debt levels. This prior knowledge informs your expectations.

Finally, you might also read the minutes (if there are any) before computing your numbers.

3. Other Review Procedures

AR-C 90 states that procedures include inquiry, analytics, and other procedures. The third element--other procedures-- is a general category that encompasses reading the financial statements and responding to risks. You might, for example, identify potential misstatements as you perform analytical procedures. If revenues are up 25% but you expected them to be stable, you'll perform additional procedures to see why.

Interestingly (at least to me), AR-C 90.A45 states that you can perform audit procedures in a review engagement. Though your review engagement letter states you are not performing an audit, your review file can include audit procedures. Why would the AICPA provide this latitude? To give you the ability to reach beyond your typical review procedures (inquiry and analytics). You need a basis for the limited assurance you are providing. And in some situations, you may need audit procedures to get you there.

Materiality in Review Engagements

AR-C 90 requires accountants to determine and use materiality. This makes sense given the review report says the following:

Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America.

You can't know what a "material modification" is without knowing what materiality is. So, the accountant should use materiality in the planning and conduct of the review engagement. AR-C 90 says the determination of materiality is a matter of professional judgment. 

Review Representation Letter

A signed representation letter is required in all review engagements.

The date of the representation letter will agree with the date of the review report. In no event should the date of the representation letter precede the date of the review report. (The accountant is not required to have physical possession of the letter on the date of the review report. But the accountant should have the signed letter before releasing the financial statements.)

Provide the draft of the financial statements to the client promptly so they can review them and assume responsibility. Thereafter, the client can sign the representation letter.

Additionally, the representation letter should cover all financial statements and all periods in the report.

Exhibit B of AR-90 provides a sample representation letter.

Review Report Sample

The following is a review report sample (sometimes referred to as an accounting review report):

Independent Accountant's Review Report

[ Appropriate Addressee ]

I (We) have reviewed the accompanying financial statements of XYZ Company, which comprise the balance sheets as of December 31, 20X2 and 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management's (owners') financial data and making inquiries of company management (owners). A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I (we) do not express such an opinion.

Management's Responsibility for the Financial Statements

Management (Owners) is (are) responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

Accountant's Responsibility

My (Our) responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require me (us) to perform procedures to obtain limited assurance as a basis for reporting whether I am (we are) aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. I (We) believe that the results of my (our) procedures provide a reasonable basis for my (our) conclusion.

We are required to be independent of XYZ Company and to meet our ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews.

Accountant's Conclusion

Based on my (our) reviews, I am (we are) not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

[ Signature of accounting firm or accountant, as appropriate ]

[ Accountant's city and state ]

[ Date of the accountant's review report ]

Exhibit C of  AR-C 90 provides seven review report illustrations.

Reporting When There are Other Accountants

What are your responsibilities if you are performing the review of a consolidated entity that includes a subsidiary audited or reviewed by another accountant? 

First, obtain and read the subsidiary report.

Second, decide whether to refer to the other accountants in your review report. If reference is made, AR-C 90.122 states the accountant should clearly indicate in the accountant's review report that the accountant used the work of other accountants. The report should also include the magnitude of the portion of the financial statements audited or reviewed by the other accountants." See Illustration 6 in Appendix C of AR-C 90 for sample report language. If you refer to the other accountant, you will state that your conclusion, as it relates to the entity reviewed by the other accountants, is based solely on their report.

Third, regardless of whether you decide to refer to the other accountants, communicate with the other accountants. Determine the following:

• That the other accountants are familiar with the relevant reporting framework and review or auditing standards, as applicable. 
• Advise them that you are including the subsidiary's financials in the consolidation and that their report will be relied upon, and when applicable, that the other accountant's report will be referred to in your review report. 
• Communicate the ethical requirements of the engagement, mainly independence. 
• And finally, advise them that you are reviewing matters affecting the intercompany eliminations.

Going Concern in Review Engagements

If the reporting framework requires that management evaluate going concern (FASB has such a requirement), then you should perform going concern review procedures. Those procedures include:

• Determining whether the going concern basis of accounting is appropriate
• Reviewing management's evaluation of whether substantial doubt exists
• When there is substantial doubt, reviewing management's plans to mitigate the conditions
• Reviewing going concern disclosures

See my article about going concern in relation to FASB standards. 

If the applicable reporting framework does not require management to evaluate going concern but you become aware of conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, do the following:

• Ask management if the going concern basis of accounting is appropriate
• Ask management about their plans to address the adverse effects of the conditions or events
• Review the going concern disclosures to see if they are appropriate

Other Historical Information in Review Engagements

In addition to historical financial statements, AR-C 90 may be applied to the following:

• Profit participation, or
• Income tax provisions
• Supplementary information
• Required supplementary information
• Tax return information

Review Engagements Conclusion

There you have it. Now you know how to perform a review engagement.

The main purpose of a review is to provide limited assurance in regard to the information. Inquiries and analytics are required. A signed representation letter is also required.

If you desire to issue financial statements without a compilation or review report, consider the use of AR-C 70, Preparation of Financial Statements .

If you desire to issue financial statements without a review report, consider using AR-C 80, Compilation Engagements .

The AICPA provides the full text of AR-C 90 online . You can download the PDF if you like. Once you download the document, you can use control-f to find particular words. I find this useful.

For additional SSARS-related articles see:

• AR-C 70: The Definitive Guide to Preparations
• AR-C 80: The Definitive Guide to Compilations

About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty-five years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention, The Why and How of Auditing, Audit Risk Assessment Made Easy, and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles consults with other CPA firms, assisting them with auditing and accounting issues.

Hello Charles – My client is selling his business (Sch C). The buyer’s bank is requesting reviewed financial statements prior to closing. The person paying for the work is the buyer. For the engagement letter, do both the seller (I am thinking here about the management representations) and the buyer need to sign the EL? Do you have another suggestion? Thank you.

It’s permissible for you to prepare the financial statements in a review engagement as long as management reviews them (after you prepare them) and assumes responsibility for them. The client (designated person) assuming responsibility for the financial statements must have sufficient skill, knowledge, and experience to perform this role. If the client does not understand the financials, they can’t assume responsibility, and you would not be independent–and could not perform the review engagement.

Lyli, I’d consider whether the records are sufficient before accepting the engagement. It sounds like the transaction detail from the general ledger is not available. If not, you may not want to accept the engagement. You can do a compilation or a review on an entity that has sufficient records. If your independence is impaired, you cannot perform a review engagement. A compilation can be performed, even when your independence is impaired, but you’ll need to disclose your lack of independence in your compilation report. I hope this helps.

Can a CPA prepare financial statements as part of a review engagement? Long story short. A new property management company took over after some irregularities of the previous management company. No tax returns were filed for 2021 and 2022. The current board obtained some bookkeeping records (balance sheet and the general ledger), but only printed reports, not the actual records from the accounting system. At first, we were engaged to do a compilation but the mistatements are so significant that a review would be more appropriate. The client intended to use the new financials for applying to loans, going to litigation proceedings against the former management company and for filing taxes. Can we modified our engagement to a review and as part of such review issue new financial statements? If yes, the reviewed financials should be part of the Independent Accountant’s Report? Our independence would be impaired considering we had to prepare the financials almost from scratch, because the records provided are not reliable? In this case, management was not responsible for preparing the financials under reviewed, who will sign the management representation letter? I couldn’t find a template for this case. Thanks.

I would subject all numbers to review procedures (inquiry and analytics). You may want to use quarterly or monthly comparisons within the first year.

The following if from an audit article I wrote, but should help:

First Option One option is to compute expected numbers using non-financial information. Then compare the calculated numbers to the general ledger to search for unexpected variances.

Second Option A second option is to calculate ratios common to the entity’s industry and compare the results to industry benchmarks.

While industry analytics can be computed, I’m not sure how useful they are for a new company. An infant company often does not generate numbers comparable to more mature entities. But we’ll keep this choice in our quiver–just in case.

Third Option A more useful option is the third: comparing intraperiod numbers.

Discuss the expected monthly or quarterly revenue trends with the client before you examine the accounting records. The warehouse foreman might say, “We shipped almost nothing the first six months. Then things caught fire. My head was spinning the last half of the year.” Does the general ledger reflect this story? Did revenues and costs of goods sold significantly increase in the latter half of the year?

Fourth Option The last option we’ve listed is a review of the budgetary comparisons. Some entities, such as governments, lend themselves to this alternative. Others, not so–those that don’t adopt budgets.

When performing a financial statement Review for the first year can you cover the income statement and cashflow as Reviewed or do they have to be Compiled since the prior year was not Reviewed?

It’s fine to manually create your analytics. Most people still use Excel to do so. The main thing is to document your expectations and then create analytics for material areas. I hope your peer review goes well.

With review analytics, is it acceptable to do it manually or use some type of computer system to assist? Can you recommend a few if the latter? I’m worried about peer review and if it’s done manually, will that be less acceptable?

You can provide a balance sheet using GAAP and it can be subject to a review engagement. But you will need disclosures in addition to the balance sheet. You’ll also need to follow all AR-C 90 guidance.

Licensing bureau is requesting review balance sheet only. Is this in conformity with GAAP

Naina, either is fine, but I prefer the first since it highlights that you are independent. Charles

Hello Mr.Charles,

I have been looking for some illustrative reviewed financial statements. On the report I have seen some firms say “Financial Statements and Independent Accountant’s Report” and few say “Reviewed Financial Statements”. Can you please advice what is the correct title to be disclosed on a Review report. Any help is highly appreciated.

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The Role of Management Representation Letters in Audits

Explore the significance of management representation letters in audits, their preparation process, and common misunderstandings in this insightful overview.

Audits are a critical component of financial transparency and corporate governance. Within this process, management representation letters play an essential role that often goes unnoticed by those outside the accounting profession.

These documents serve as a written assertion from company management regarding the accuracy and completeness of information provided to auditors. Their importance cannot be overstated, as they underpin the trust and integrity of the entire audit process.

Purpose of Management Representation Letters

Management representation letters serve as a formal attestation from a company’s executives to the auditors, confirming the veracity of the financial statements and disclosures. These letters are a professional necessity, providing auditors with assurances that all relevant information has been disclosed. They are a testament to the management’s confidence in their financial reporting and their commitment to transparency.

The letters also support the auditor’s assessment of the risk of material misstatement in the financial statements. By obtaining written confirmations, auditors can reduce the extent of substantive testing required, which can streamline the audit process. This efficiency is beneficial for both the auditors and the company being audited, as it can lead to a more focused and timely audit.

Moreover, these letters can be a safeguard against potential disputes or legal issues that may arise post-audit. In instances where inaccuracies are discovered after the audit has been completed, the letter serves as a record that management had affirmed the completeness and accuracy of the information at the time of the audit. This can be particularly important in cases where financial statements are later found to be fraudulent or misleading.

Preparing a Management Representation Letter

The preparation of a management representation letter is a meticulous process that requires careful attention to detail and a comprehensive understanding of the company’s financial affairs. It is a collaborative effort between management and auditors to ensure that all significant information is accurately reflected.

Necessary Statements Identification

Identifying the necessary statements to be included in the management representation letter is a foundational step. These statements typically cover a range of areas such as the acknowledgment of responsibility for the fair presentation of financial statements in conformity with the applicable financial reporting framework, confirmation of the completeness of the information provided, and the disclosure of any subsequent events that may affect the financial statements. Management must also confirm that they have made the auditors aware of all known instances of fraud or suspected fraud affecting the company. The identification process is guided by professional auditing standards, such as those issued by the American Institute of Certified Public Accountants (AICPA) or the International Auditing and Assurance Standards Board (IAASB).

Information Completeness

Ensuring the completeness of information in the management representation letter is paramount. This involves a thorough review of the company’s financial records and disclosures to verify that all relevant information has been included. Management must confirm that all transactions have been recorded and are reflected in the financial statements. They must also attest to the appropriateness of the accounting policies applied and whether any unrecorded liabilities exist. This step is critical as it directly impacts the credibility of the financial statements and the audit’s outcome. The completeness of information also extends to the disclosure of any related party transactions and the effects of any uncorrected misstatements identified during the audit.

Review and Approval

The final step in preparing a management representation letter is the review and approval by the company’s top executives, typically the CEO and CFO. This review process is not merely a formality; it is an active examination to ensure that the letter accurately reflects the company’s financial position and that all statements can be substantiated. The approval signifies that management has taken ownership of the representations made within the letter. It is also an opportunity for management to discuss any concerns or clarifications with the auditors before the letter is finalized. The signed letter is then dated as of the last day of fieldwork, signifying that the representations are relevant and up-to-date with the findings of the audit.

Misconceptions About Representation Letters

A common misunderstanding about management representation letters is that they are a mere formality, a routine sign-off without substantial impact on the audit’s outcome. This view underestimates the letter’s function as a document that auditors rely upon for assurance beyond the financial data and records they examine. It is not simply a procedural step, but a declaration that can have legal implications for the signatories, particularly if it is later found that the information provided was knowingly false or misleading.

Another misconception is that the letter is solely for the benefit of the auditors. While it is true that auditors use these letters to corroborate information and reduce audit risk, the benefits extend to the management and the company as well. The process of preparing the letter encourages a comprehensive review of the company’s financial disclosures, which can lead to the identification and rectification of errors before the audit is finalized. This proactive approach can enhance the quality of financial reporting and potentially prevent future financial discrepancies.

There is also a belief that once the letter is signed and the audit is complete, the responsibilities of management in relation to the representations made are concluded. However, the representations have a lasting effect, as they are a testament to the financial condition of the company at the point of the audit. Should any issues arise from the period covered by the audit, the representations made can be scrutinized for their accuracy and completeness.

The Importance of the Going Concern Assumption in Financial Reporting and Analysis

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AS 4105: Reviews of Interim Financial Information

Summary table of contents.

• .01  Introduction
• .05  Applicability
• .07  Objective of a Review of Interim Financial Information
• .08  Establishing an Understanding with the Audit Committee  
• .10  The Accountant's Knowledge of the Entity's Business and Its Internal Control
• .15  Analytical Procedures, Inquiries, and Other Review Procedures
• .24  Written Representations From Management
• .25  Evaluating the Results of Interim Review Procedures
• .29  Communications to Management, Audit Committees, and Others
• .37  The Accountant's Report on a Review of Interim Financial Information
• .47  Client's Representation Concerning a Review of Interim Financial Information
• .49  Interim Financial Information Accompanying Audited Financial Statements
• .51  Documentation
• .53  Effective Date
• .54   Appendix A -  Analytical Procedures the Accountant May Consider Performing When Conducting a Review of Interim Financial Information
• .55   Appendix B -  Unusual or Complex Situations to Be Considered by the Accountant When Conducting a Review of Interim Financial Information
• .56   Appendix C -  Illustrative Management Representation Letters for a Review of Interim Financial Information

Introduction

.01       The purpose of this section is to establish standards and provide guidance on the nature, timing, and extent of the procedures to be performed by an independent accountant when conducting a review of interim financial information (as that term is defined in paragraph .02 of this section). The general standards 1A  are applicable to a review of interim financial information conducted in accordance with this section. This section provides guidance on the application of the field work and reporting standards to a review of interim financial information, to the extent those standards are relevant.

.02       For purposes of this section, the term interim financial information means financial information or statements covering a period less than a full year or for a 12-month period ending on a date other than the entity's fiscal year end.

.03       The Securities and Exchange Commission (SEC) requires 1  a registrant to engage an independent accountant to review the registrant's interim financial information, in accordance with this section, before the registrant files its quarterly report on Form 10-Q or Form 10-QSB. The SEC also requires management, with the participation of the principal executive and financial officers (the certifying officers) to make certain quarterly and annual certifications with respect to the company's internal control over financial reporting. 2 Although this section does not require an accountant to issue a written report on a review of interim financial information, the SEC requires that an accountant's review report be filed with the interim financial information if, in any filing, the entity states that the interim financial information has been reviewed by an independent public accountant. Paragraphs .37 through .46 of this section provide reporting guidance for a review of interim financial information.

Applicability 2A

.05       An accountant may conduct, in accordance with this section, a review of the interim financial information of an SEC registrant 3 or of a non-SEC registrant that makes a filing with a regulatory agency 4 in preparation for a public offering or listing, if the entity's latest annual financial statements have been or are being audited. The interim financial information may be presented in the form of financial statements or in a summarized form that purports to conform with generally accepted accounting principles 5 and applicable regulatory requirements, for example, Article 10 of Regulation S-X for Form 10-Q.

.06       Many SEC registrants are required by item 302(a) of Regulation S-K to include selected quarterly financial data (that is, interim financial information for each full quarter within the two most recent fiscal years and any subsequent interim period for which financial statements are included or are required to be included) in their annual reports and in certain other SEC filings. Consequently, a review of the entity's fourth quarter interim financial information must be conducted even though a quarterly report for the fourth quarter is not filed on Form 10-Q. Furthermore, an accountant performing an initial audit of an entity's annual financial statements that includes selected quarterly data who has not previously reviewed one or more of the quarters in that year should perform a review of those quarters, in accordance with this section, in order to report on the audited financial statements containing such interim financial information.

Objective of a Review of Interim Financial Information

.07       The objective of a review of interim financial information pursuant to this section is to provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles. The objective of a review of interim financial information differs significantly from that of an audit conducted in accordance with the standards of the PCAOB. A review of interim financial information does not provide a basis for expressing an opinion about whether the financial statements are presented fairly, in all material respects, in conformity with generally accepted accounting principles. A review consists principally of performing analytical procedures and making inquiries of persons responsible for financial and accounting matters, and does not contemplate ( a ) tests of accounting records through inspection, observation, or confirmation; ( b ) tests of controls to evaluate their effectiveness; ( c ) obtaining corroborating evidence in response to inquiries; or ( d ) performing certain other procedures ordinarily performed in an audit. A review may bring to the accountant's attention significant matters affecting the interim financial information, but it does not provide assurance that the accountant will become aware of all significant matters that would be identified in an audit. Paragraph .22 of this section provides guidance to the accountant if he or she becomes aware of information that leads him or her to believe that the interim financial information may not be in conformity with generally accepted accounting principles. Likewise, the auditor's responsibility as it relates to management's quarterly certifications on internal control over financial reporting is different from the auditor's responsibility as it relates to management's annual assessment of internal control over financial reporting. The auditor should perform limited procedures quarterly to provide a basis for determining whether he or she has become aware of any material modifications that, in the auditor's judgment, should be made to the disclosures about changes in internal control over financial reporting in order for the certifications to be accurate and to comply with the requirements of Section 302 of the Act.

Note: The auditor's responsibilities for evaluating management's certification disclosures about internal control over financial reporting take effect beginning with the first quarter after the company's first annual assessment of internal control over financial reporting as described in Item 308(a)(3) of Regulations S-B and SK.

Establishing an Understanding with the Audit Committee

.08       The accountant should establish an understanding of the terms of an engagement to review interim financial information with the audit committee or others with equivalent authority and responsibility (hereafter referred to as the audit committee). 6 This understanding includes the objective of the review of interim financial information, the responsibilities of the accountant, and the responsibilities of management. Such an understanding reduces the risk that either the accountant or the audit committee may misinterpret the needs or expectations of the other party. The accountant should record this understanding of the terms of the engagement in an engagement letter and should provide the engagement letter to the audit committee. The accountant should have the engagement letter executed by the appropriate party or parties on behalf of the company. If the appropriate party or parties are other than the audit committee, or its chair on behalf of the audit committee, the accountant should determine that the audit committee has acknowledged and agreed to the terms of the engagement. If the accountant believes he or she cannot establish an understanding of the terms of an engagement to review interim financial information with the audit committee, the accountant should decline to accept, continue, or perform the engagement.

.09       An understanding with the audit committee regarding a review of interim financial information generally includes the following matters:

• The objective of a review of interim financial information is to provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with accounting principles generally accepted in the United States of America.
• Management is responsible for the entity's interim financial information.
• Management is responsible for establishing and maintaining effective internal control over financial reporting.
• Management is responsible for identifying and ensuring that the entity complies with the laws and regulations applicable to its activities.
• Management is responsible for making all financial records and related information available to the accountant.
• At the conclusion of the engagement, management will provide the accountant with a letter confirming certain representations made during the review.
• Management is responsible for adjusting the interim financial information to correct material misstatements. Although a review of interim financial information is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement, management also is responsible for affirming in its representation letter to the accountant that the effects of any uncorrected misstatements aggregated by the accountant during the current engagement and pertaining to the current-year period(s) under review are immaterial, both individually and in the aggregate, to the interim financial information taken as a whole.
• The accountant is responsible for conducting the review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of performing analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, the accountant will not express an opinion on the interim financial information.
• Identify the types of potential material misstatements in the interim financial information and consider the likelihood of their occurrence.
• Select the inquiries and analytical procedures that will provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principle
• A review is not designed to provide assurance on internal control or to identify significant deficiencies. However, the accountant is responsible for communicating with the audit committee or others with equivalent authority or responsibility, regarding any significant deficiencies that come to his or her attention.

The Accountant's Knowledge of the Entity's Business and Its Internal Control

.10       To perform a review of interim financial information, the accountant should have sufficient knowledge of the entity's business and its internal control as they relate to the preparation of both annual and interim financial information to:

• Select the inquiries and analytical procedures that will provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles.

.11       In planning a review of interim financial information, the accountant should perform procedures to update his or her knowledge of the entity's business and its internal control to ( a ) aid in the determination of the inquiries to be made and the analytical procedures to be performed and ( b ) identify particular events, transactions, or assertions to which the inquiries may be directed or analytical procedures applied. Such procedures should include:

• Reading documentation of the preceding year's audit and of reviews of prior interim period(s) of the current year and corresponding quarterly and year-to-date interim period(s) of the prior year to the extent necessary, based on the accountant's judgment, to enable the accountant to identify matters that may affect the current-period interim financial information. In reading such documents, the accountant should specifically consider the nature of any ( a ) corrected material misstatements; ( b ) matters identified in any summary of uncorrected misstatements; 7 ( c ) identified risks of material misstatement due to fraud, including the risk of management override of controls; and ( d ) significant financial accounting and reporting matters that may be of continuing significance, such as weaknesses in internal control.
• Reading the most recent annual and comparable prior interim period financial information.
• Considering the results of any audit procedures performed with respect to the current year's financial statements.
• Inquiring of management about changes in the entity's business activities.
• Inquiring of management about whether significant changes in internal control, as it relates to the preparation of interim financial information, have occurred subsequent to the preceding annual audit or prior review of interim financial information, including changes in the entity's policies, procedures, and personnel, as well as the nature and extent of such changes.

.12       In an initial review of interim financial information, the accountant should perform procedures that will enable him or her to obtain sufficient knowledge of the entity's business and its internal control to address the objectives discussed in paragraph .07 of this section. As part of the procedures to obtain this knowledge, the accountant performing an initial review of interim financial information makes inquiries of the predecessor accountant and reviews the predecessor accountant's documentation for the preceding annual audit and for any prior interim periods in the current year that have been reviewed by the predecessor accountant if the predecessor accountant permits access to such documentation. 8 In doing so, the accountant should specifically consider the nature of any ( a ) corrected material misstatements; ( b ) matters identified in any summary of uncorrected misstatements; ( c ) identified risks of material misstatement due to fraud, including the risk of management override of controls; and ( d ) significant financial accounting and reporting matters that may be of continuing significance, such as weaknesses in internal control. However, the inquiries made and analytical procedures performed or other procedures performed in the initial review and the conclusions reached are solely the responsibility of the successor accountant. If the successor accountant is reporting on the review, the successor accountant should not make reference to the report or work of the predecessor accountant as the basis, in part, for the successor accountant's own report. If the predecessor accountant does not respond to the successor accountant's inquiries, or does not allow the successor accountant to review the predecessor accountant's documentation, the successor accountant should use alternative procedures to obtain knowledge of the matters discussed in this paragraph.

.13       The accountant who has audited the entity's financial statements for one or more annual periods would have acquired sufficient knowledge of an entity's internal control as it relates to the preparation of annual financial information and may have acquired such knowledge with respect to interim financial information. If the accountant has not audited the most recent annual financial statements, the accountant should perform procedures to obtain such knowledge. Knowledge of an entity's internal control, as it relates to the preparation of both annual and interim financial information, includes knowledge of the relevant aspects of the control environment, the entity's risk assessment process, control activities, information and communication, and monitoring, as those terms are defined in AS 2110, Identifying and Assessing Risks of Material Misstatement . Internal control over the preparation of interim financial information may differ from internal control over the preparation of annual financial statements because certain accounting principles and practices used for interim financial information may differ from those used for the preparation of annual financial statements, for example, the use of estimated effective income tax rates for the preparation of interim financial information, which is prescribed by Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting .

.14       A restriction on the scope of the review may be imposed if the entity's internal control appears to contain deficiencies so significant that it would be impracticable for the accountant, based on his or her judgment, to effectively perform review procedures that would provide a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles. 9

Analytical Procedures, Inquiries, and Other Review Procedures

.15       Procedures for conducting a review of interim financial information generally are limited to analytical procedures, inquiries, and other procedures that address significant accounting and disclosure matters relating to the interim financial information to be reported. The accountant performs these procedures to obtain a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles. The specific inquiries made and the analytical and other procedures performed should be tailored to the engagement based on the accountant's knowledge of the entity's business and its internal control. The accountant's knowledge of an entity's business and its internal control influences the inquiries made and analytical procedures performed. For example, if the accountant becomes aware of a significant change in the entity's control activities at a particular location, the accountant may consider ( a ) making additional inquiries, such as whether management monitored the changes and considered whether they were operating as intended, ( b ) employing analytical procedures with a more precise expectation, or ( c ) both.

.16        Analytical procedures and related inquiries. The accountant should apply analytical procedures to the interim financial information to identify and provide a basis for inquiry about the relationships and individual items that appear to be unusual and that may indicate a material misstatement. Analytical procedures, for the purposes of this section, should include:

• Comparing the quarterly interim financial information with comparable information for the immediately preceding interim period and the quarterly and year-to-date interim financial information with the corresponding period(s) in the previous year, giving consideration to knowledge about changes in the entity's business and specific transactions.
• Considering plausible relationships among both financial and, where relevant, nonfinancial information. The accountant also may wish to consider information developed and used by the entity, for example, information in a director's information package or in a senior committee's briefing materials.
• Comparing recorded amounts, or ratios developed from recorded amounts, to expectations developed by the accountant. The accountant develops such expectations by identifying and using plausible relationships that are reasonably expected to exist based on the accountant's understanding of the entity and the industry in which the entity operates ( see paragraph .17 of this section).
• Comparing disaggregated revenue data, for example, comparing revenue reported by month and by product line or operating segment during the current interim period with that of comparable prior periods.

See Appendix A [paragraph .54] of this section for examples of analytical procedures an accountant may consider performing when conducting a review of interim financial information. The accountant may find the guidance in AS 2305, Substantive Analytical Procedures , useful in conducting a review of interim financial information.

.17       Expectations developed by the accountant in performing analytical procedures in connection with a review of interim financial information ordinarily are less precise than those developed in an audit. Also, in a review the accountant ordinarily is not required to corroborate management's responses with other evidence. However, the accountant should consider the reasonableness and consistency of management's responses in light of the results of other review procedures and the accountant's knowledge of the entity's business and its internal control. 10

.18        Inquiries and other review procedures. The following are inquiries the accountant should make and other review procedures the accountant should perform when conducting a review of interim financial information:

• Reading the available minutes of meetings of stockholders, directors, and appropriate committees, and inquiring about matters dealt with at meetings for which minutes are not available, to identify matters that may affect the interim financial information.
• Obtaining reports from other accountants, if any, who have been engaged to perform a review of the interim financial information of significant components of the reporting entity or its other business units, or inquiring of those accountants if reports have not been issued. 11
• Whether the interim financial information has been prepared in conformity with generally accepted accounting principles consistently applied.
• Unusual or complex situations that may have an effect on the interim financial information. ( See Appendix B [paragraph .55] of this section for examples of unusual or complex situations about which the accountant ordinarily would inquire of management.)
• Significant transactions occurring or recognized in the last several days of the interim period.
• The status of uncorrected misstatements identified during the previous audit and interim review (that is, whether adjustments had been recorded subsequent to the prior audit or interim period and, if so, the amounts recorded and period in which such adjustments were recorded).
• Matters about which questions have arisen in the course of applying the review procedures.
• Events subsequent to the date of the interim financial information that could have a material effect on the presentation of such information.
• Their knowledge of any fraud or suspected fraud affecting the entity involving (1) management, (2) employees who have significant roles in internal control, or (3) others where the fraud could have a material effect on the financial statements.
• Whether they are aware of allegations of fraud or suspected fraud affecting the entity, for example, received in communications from employees, former employees, analysts, regulators, short sellers, or others.
• Significant journal entries and other adjustments.
• Communications from regulatory agencies.
• Significant deficiencies, including material weaknesses, in the design or operation of internal controls which could adversely affect the issuer's ability to record, process, summarize, and report financial data.
• Obtaining evidence that the interim financial information agrees or reconciles with the accounting records. For example, the accountant may compare the interim financial information to (1) the accounting records, such as the general ledger; (2) a consolidating schedule derived from the accounting records; or (3) other supporting data in the entity's records. In addition, the accountant should consider inquiring of management as to the reliability of the records to which the interim financial information was compared or reconciled.
• Reading the interim financial information to consider whether, based on the results of the review procedures performed and other information that has come to the accountant's attention, the information to be reported conforms with generally accepted accounting principles.
• Reading other information that accompanies the interim financial information and is contained in reports (1) to holders of securities or beneficial interests or (2) filed with regulatory authorities under the Securities Exchange Act of 1934 (such as Form 10-Q or 10-QSB), to consider whether such information or the manner of its presentation is materially inconsistent with the interim financial information. 12 If the accountant concludes that there is a material inconsistency, or becomes aware of information that he or she believes is a material misstatement of fact, the action taken will depend on his or her judgment in the particular circumstances. In determining the appropriate course of action, the accountant should consider the guidance in paragraphs .04 through .06 of AS 2710, Other Information in Documents Containing Audited Financial Statements .
• Inquiring of management about significant changes in the design or operation of internal control over financial reporting as it relates to the preparation of annual as well as interim financial information that could have occurred subsequent to the preceding annual audit or prior review of interim financial information;
• Evaluating the implications of misstatements identified by the auditor as part of the auditor's other interim review procedures as they relate to effective internal control over financial reporting; and
• Determining, through a combination of observation and inquiry, whether any change in internal control over financial reporting has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

.19       Many of the aforementioned review procedures can be performed before or simultaneously with the entity's preparation of the interim financial information. For example, it may be practicable to update the understanding of the entity's internal control and begin reading applicable minutes before the end of an interim period. Performing some of the review procedures earlier in the interim period also permits early identification and consideration of significant accounting matters affecting the interim financial information.

.20        Inquiry concerning litigation, claims, and assessments . A review of interim financial information does not contemplate obtaining corroborating evidence for responses to inquiries concerning litigation, claims, and assessments ( see paragraph .07 of this section). Consequently, it ordinarily is not necessary to send an inquiry letter to an entity's lawyer concerning litigation, claims, and assessments. However, if information comes to the accountant's attention that leads him or her to question whether the interim financial information departs from generally accepted accounting principles 13 with respect to litigation, claims, or assessments, and the accountant believes the entity's lawyer may have information concerning that question, an inquiry of the lawyer concerning the specific question is appropriate.

.21        Inquiry concerning an entity's ability to continue as a going concern. A review of interim financial information is not designed to identify conditions or events that may indicate substantial doubt about an entity's ability to continue as a going concern. However, such conditions or events may have existed at the date of prior-period financial statements. 14 In addition, in the course of performing review procedures on the current-period interim financial information, the accountant may become aware of conditions or events that might be indicative of the entity's possible inability to continue as a going concern. In either case, the accountant should ( a ) inquire of management as to its plans for dealing with the adverse effects of the conditions and events and ( b ) consider the adequacy of the disclosure about such matters in the interim financial information. 15 It ordinarily is not necessary for the accountant to obtain evidence in support of the information that mitigates the effects of the conditions and events.

.22        Extension of interim review procedures . If, in performing a review of interim financial information, the accountant becomes aware of information that leads him or her to believe that the interim financial information may not be in conformity with generally accepted accounting principles in all material respects, the accountant should make additional inquiries or perform other procedures that the accountant considers appropriate to provide a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information. For example, if the accountant's interim review procedures lead him or her to question whether a significant sales transaction is recorded in conformity with generally accepted accounting principles, the accountant should perform additional procedures, such as discussing the terms of the transaction with senior marketing and accounting personnel, reading the sales contract, or both, to resolve his or her questions.

.23        Coordination with the audit . The accountant performing the review of interim financial information ordinarily will also be engaged to perform an audit of the annual financial statements of the entity. Certain auditing procedures may be performed concurrently with the review of interim financial information. For example, information gained from reading the minutes of meetings of the board of directors in connection with the review also may be used for the annual audit. Also, there may be significant or unusual transactions occurring during the interim period under review for which the auditing procedures that would need to be performed for purposes of the audit of the annual financial statements could be performed, to the extent practicable, at the time of the interim review, for example, business combinations, restructurings, or significant revenue transactions.

Written Representations From Management

.24       Written representations from management should be obtained for all interim financial information presented and for all periods covered by the review. Specific representations should relate to the following matters: 16

Financial Statements

• Management's acknowledgement of its responsibility for the fair presentation of the interim financial information in conformity with generally accepted accounting principles.
• Management's belief that the interim financial information has been prepared and presented in conformity with generally accepted accounting principles applicable to interim financial information.

Internal Control

• Disclosure of all significant deficiencies, including material weaknesses, in the design or operation of internal controls which could adversely affect the issuer's ability to record, process, summarize, and report financial data.
• Acknowledgment of management's responsibility for the design and implementation of programs and controls to prevent and detect fraud.
• Knowledge of fraud or suspected fraud affecting the entity involving (1) management, (2) employees who have significant roles in internal control, or (3) others where the fraud could have a material effect on the financial statements.
• Knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, short sellers, or others.

Completeness of Information

• Availability of all financial records and related data, including the names of all related parties and all relationships and transactions with related parties.
• Completeness and availability of all minutes of meetings of stockholders, directors, and committees of directors.
• Communications with regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices.
• Absence of (1) unrecorded transactions and (2) side agreements or other arrangements (either written or oral) undisclosed to the auditor.

Recognition, Measurement, and Disclosure

• Management's belief that the effects of any uncorrected financial statement misstatements aggregated by the accountant during the current review engagement and pertaining to the interim period(s) in the current year are immaterial, both individually and in the aggregate, to the interim financial information taken as a whole. (A summary of such items should be included in or attached to the letter.) 17
• Plans or intentions that may materially affect the carrying value or classification of assets or liabilities.
• Information concerning related party transactions and amounts receivable from or payable to related parties, including support for any assertion that a transaction with a related party was conducted on terms equivalent to those prevailing in an arm's-length transaction.
• Guarantees, whether written or oral, under which the entity is contingently liable.
• Significant estimates and material concentrations known to management that are required to be disclosed in accordance with the AICPA's Statement of Position 94-6, Disclosure of Certain Significant Risks and Uncertainties .
• Violations or possible violations of laws or regulations whose effects should be considered for disclosure in the interim financial information or as a basis for recording a loss contingency.
• Unasserted claims or assessments that are probable of assertion and must be disclosed in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 5, Accounting for Contingencies .
• Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB Statement No. 5.
• Satisfactory title to all owned assets, liens or encumbrances on such assets, and assets pledged as collateral.
• Compliance with aspects of contractual agreements that may affect the interim financial information.

Subsequent Events

• Information concerning subsequent events.

The representation letter ordinarily should be tailored to include additional representations from management related to matters specific to the entity's business or industry. Appendix C [paragraph .56] of this section presents illustrative representation letters.

Evaluating the Results of Interim Review Procedures

.25       A review of interim financial information is not designed to obtain reasonable assurance that the interim financial information is free of material misstatement. However, based on the review procedures performed, the accountant may become aware of likely misstatements . In the context of an interim review, a likely misstatement is the accountant's best estimate of the total misstatement in the account balances or classes of transactions on which he or she has performed review procedures. The accountant should accumulate for further evaluation likely misstatements identified in performing the review procedures. The accountant may designate an amount below which misstatements need not be accumulated, based on his or her professional judgment. However, the accountant should recognize that aggregated misstatements of relatively small amounts could have a material effect on the interim financial information.

.26       Misstatements identified by the accountant or brought to the accountant's attention, including inadequate disclosure, 18 should be evaluated individually and in the aggregate to determine whether material modification should be made to the interim financial information for it to conform with generally accepted accounting principles. 19 The accountant should use his or her professional judgment in evaluating the materiality of any likely misstatements that the entity has not corrected. The accountant should consider matters such as ( a ) the nature, cause (if known), and amount of the misstatements; ( b ) whether the misstatements originated in the preceding year or interim periods of the current year; ( c ) materiality judgments made in conjunction with the current or prior year's annual audit; and ( d ) the potential effect of the misstatements on future interim or annual periods.

.27       When evaluating whether uncorrected likely misstatements, individually or in the aggregate, are material, the accountant also should ( a ) consider the appropriateness of offsetting a misstatement of an estimated amount with a misstatement of an item capable of precise measurement and ( b ) recognize that an accumulation of immaterial misstatements in the balance sheet could contribute to material misstatements in future periods.

.28       When an accountant is unable to perform the procedures he or she considers necessary to achieve the objective of a review of interim financial information, or the client does not provide the accountant with the written representations the accountant believes are necessary, the review will be incomplete. An incomplete review is not an adequate basis for issuing a review report. If the accountant cannot complete the review, the accountant should communicate that information in accordance with the guidance in paragraphs .29 through .31 of this section. Nevertheless, if the accountant has become aware of material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles, such matters should be communicated pursuant to paragraphs .29 through .31 of this section.

Communications to Management, Audit Committees, and Others

.29       As a result of conducting a review of interim financial information, the accountant may become aware of matters that cause him or her to believe that—

• material modification should be made to the interim financial information for it to conform with generally accepted accounting principles;
• modification to the disclosures about changes in internal control over financial reporting is necessary for the certifications to be accurate and to comply with the requirements of Section 302 of the Act and Securities Exchange Act Rule 13a-14(a) or 15d-14(a), whichever applies; and
• the entity filed the Form 10-Q or Form 10-QSB before the completion of the review.

In such circumstances, the accountant should communicate the matter(s) to the appropriate level of management as soon as practicable.

.30       If management does not respond appropriately to the accountant's communication within a reasonable period of time, the accountant should communicate these matters to the audit committee as soon as practicable and prior to the registrant filing its periodic report with the SEC. The communications to the audit committee should be made and documented in accordance with paragraph .25 of AS 1301, Communications with Audit Committees .

.31       If, in the accountant's judgment, the audit committee does not respond appropriately to the accountant's communication within a reasonable period of time, the accountant should evaluate whether to resign from the engagement to review the interim financial information and as the entity's auditor. The accountant may wish to consult with his or her attorney when making these evaluations.

.32       If the auditor becomes aware of information indicating that fraud or an illegal act has or may have occurred, the auditor must also determine his or her responsibilities under AS 2401, Consideration of Fraud in a Financial Statement Audit , AS 2405, Illegal Acts by Clients , and Section 10A of the Securities Exchange Act of 1934. 21

.33       When conducting a review of interim financial information, the accountant may become aware of matters relating to internal control that may be of interest to the audit committee. Matters that should be reported to the audit committee are referred to as significant deficiencies. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting, that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the company's financial reporting. The accountant should communicate significant deficiencies or material weaknesses of which the accountant has become aware to the audit committee or those responsible for oversight of the company's financial reporting in a timely manner and prior to the registrant filing its periodic report with the SEC.

.34       When conducting a review of interim financial information, the accountant also should determine whether any of the matters described in AS 1301 , as they relate to interim financial information, have been identified. If such matters have been identified, the accountant should communicate them to the audit committee in a timely manner and prior to the registrant filing its periodic report with the SEC. For example, the accountant should communicate a description of the process management used to develop the critical accounting estimates; a change in a significant accounting policy affecting the interim financial information; misstatements that, either individually or in the aggregate, could have a significant effect on the entity's financial reporting process; and uncorrected misstatements aggregated by the accountant that management determined to be immaterial, both individually and in the aggregate, to the interim financial statements taken as a whole. 23 As part of its communications to the audit committee, management might communicate some or all of the matters related to the company's accounting policies, practices, estimates, and significant unusual transactions described in AS 1301.12. If management communicates any of these matters, the accountant does not need to communicate them at the same level of detail as management, as long as the accountant (1) participated in management's discussion with the audit committee, (2) affirmatively confirmed to the audit committee that management has adequately communicated these matters, and (3) with respect to critical accounting policies and practices, identified for the audit committee those accounting policies and practices that the accountant considers critical. The accountant should communicate any omitted or inadequately described matters to the audit committee.

.35       The objective of a review of interim financial information differs significantly from that of an audit. Therefore, any communication the accountant may make about the entity's accounting policies, practices, estimates, and significant unusual transactions as applied to its interim financial reporting, generally would be limited to the effect of significant events, transactions, and changes in accounting estimates that the accountant considered when conducting the review of interim financial information. Further, interim review procedures do not provide assurance that the accountant will become aware of all matters that might affect the accountant's judgments about the qualitative aspects of the entity's accounting policies and practices that would be identified as a result of an audit.

.36       If the accountant has identified matters to be communicated to the audit committee, the accountant should communicate such matters to the audit committee, or at least its chair, in a timely manner and prior to the registrant filing its periodic report with the SEC. The communications to the audit committee should be made and documented in accordance with AS 1301.25.

The Accountant's Report on a Review of Interim Financial Information 24

Form of accountant's review report.

.37       The accountant's review report accompanying interim financial information must include the title, "Report of Independent Registered Public Accounting Firm."

.37A       If the accountant's review report is included in a filing with the SEC or another regulatory agency, the report must be addressed to the shareholders and the board of directors, or equivalents for companies not organized as corporations. The accountant's review report may include additional addressees.

.37B       The first section of the accountant's review report must include the section title "Results of Review of Interim Financial Information" and the following elements:

• The name of the company whose interim financial information was reviewed.
• A statement that the interim financial information identified in the report was reviewed.
• A statement about whether the accountant is aware of any material modifications that should be made to the accompanying interim financial information for it to conform with generally accepted accounting principles. The statement should include an identification of the country of origin of those accounting principles (for example, accounting principles generally accepted in the United States of America or U.S. generally accepted accounting principles).

.37C       The second section of the accountant's review report must include the section title "Basis for Review Results" and the following elements:

• A statement that the interim financial information is the responsibility of the entity's management.
• A statement that the review of interim financial information was conducted in accordance with the standards of the PCAOB.
• A description of the procedures for a review of interim financial information.
• A statement that a review of interim financial information is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is an expression of an opinion regarding the financial statements taken as a whole, and accordingly, no such opinion is expressed.
• A statement that the auditor is a public accounting firm registered with the PCAOB (United States) and is required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.

.37D       The accountant's review report must include the following elements:

• The signature of the accountant's firm. 24A
• The city and state (or city and country, in the case of non-U.S. auditors) from which the accountant's review report has been issued. 24B
• The date of the review report. (Generally, the report should be dated as of the date of completion of the review procedures. 25 )

In addition, each page of the interim financial information should be clearly marked as unaudited.

.38       The following is an example of a review report: 26

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company Results of Review of Interim [ Financial Information or Statements ] We have reviewed the accompanying [ describe the interim financial information or statements reviewed ] of ABC Company (the "Company") and consolidated subsidiaries as of September 30, 20X1, and for the three-month and nine-month periods then ended, and the related notes [ and schedules ] (collectively referred to as the "interim financial information or statements"). Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information (statements) for it (them) to be in conformity with accounting principles generally accepted in the United States of America. Basis for Review Results This (These) interim financial information (statements) is (are) the responsibility of the Company's management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. [ Signature ] [ City and State or Country ] [ Date ]

.39       An accountant may be engaged to report on a review of comparative interim financial information. The following is an example of a review report on a condensed balance sheet as of March 31, 20X1, the related condensed statements of income and cash flows for the three-month periods ended March 31, 20X1 and 20X0, and a condensed balance sheet derived from audited financial statements as of December 31, 20X0, that were included in Form 10-Q. 27

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company Results of Review of Interim [ Financial Information or Statements ] We have reviewed the condensed consolidated balance sheet of ABC Company (the "Company") and subsidiaries as of March 31, 20X1, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 20X1 and 20X0, and the related notes [ and schedules ] (collectively referred to as the "interim financial information or statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheet of the Company and subsidiaries as of December 31, 20X0, and the related consolidated statements of income, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated February 15, 20X1, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 20X0, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. 28 Basis for Review Results These financial statements are the responsibility of the Company's management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. [ Signature ] [ City and State or Country ] [ Date ]

.40       The accountant may use and make reference to another accountant's review report on the interim financial information of a significant component of a reporting entity. This reference indicates a division of responsibility for performing the review. 29 The following is an example of report including such a reference:

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of ABC Company Results of Review of Interim [ Financial Information or Statements ] We have reviewed the accompanying [ describe the interim financial information or statements reviewed ] of ABC Company (the "Company") and consolidated subsidiaries as of September 30, 20X1, and for the three-month and nine-month periods then ended, and the related notes [ and schedules ] (collectively referred to as the "interim financial information or statements"). Based on our review and the report of other accountants, we are not aware of any material modifications that should be made to the accompanying interim financial information (statements) for it (them) to be in conformity with accounting principles generally accepted in the United States of America. We were furnished with the report of other accountants on their review of the interim financial information of DEF subsidiary, whose total assets as of September 30, 20X1, and whose revenues for the three-month and nine-month periods then ended, constituted 15 percent, 20 percent, and 22 percent, respectively, of the related consolidated totals. Basis for Review Results This (These) interim financial information (statements) is (are) the responsibility of the Company's management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). A review of interim financial information (statements) consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. [ Signature ] [ City and State or Country ] [ Date ]

Modification of the Accountant's Review Report

.41       The accountant's report on a review of interim financial information should be modified for departures from generally accepted accounting principles, which include inadequate disclosure and changes in accounting principle that are not in conformity with generally accepted accounting principles. The existence of substantial doubt about the entity's ability to continue as a going concern or a lack of consistency in the application of accounting principles affecting the interim financial information would not require the accountant to add an additional paragraph to the report, provided that the interim financial information appropriately discloses such matters. Although not required, the accountant may wish to emphasize such matters in a separate explanatory paragraph of the report. See paragraphs .44 and .45 of this section for examples of paragraphs that address matters related to an entity's ability to continue as a going concern.

.42        Departure from generally accepted accounting principles. If the accountant becomes aware that the interim financial information is materially affected by a departure from generally accepted accounting principles, he or she should modify the report. The modification should describe the nature of the departure and, if practicable, should state the effects on the interim financial information. Following is an example of such a modification of the accountant's report.

Based on our review, with the exception of the matter(s) described in the following paragraph(s), we are not aware of any material modifications that should be made to the accompanying interim financial information (statements) for it (them) to be in conformity with accounting principles generally accepted in the United States of America. Based on information furnished to us by management, we believe that the company has excluded from property and debt in the accompanying balance sheet certain lease obligations that we believe should be capitalized to conform with accounting principles generally accepted in the United States of America. This information indicates that if these lease obligations were capitalized at September 30, 20X1, property would be increased by $ ______ , long-term debt by $ ______ , and net income and earnings per share would be increased (decreased) by $ ________ , $ _________ , $ ________ , and $ ________ , respectively, for the three-month and nine-month periods then ended.

.43        Inadequate disclosure . The information necessary for adequate disclosure is influenced by the form and context in which the interim financial information is presented. For example, the disclosures considered necessary for interim financial information presented in accordance with the minimum disclosure requirements of APB Opinion No. 28, paragraph 30, which is applicable to summarized financial statements of public companies, are considerably less extensive than those necessary for annual financial statements that present financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. 31 If information that the accountant believes is necessary for adequate disclosure in conformity with generally accepted accounting principles 32 is not included in the interim financial information, the accountant should modify the report and, if practicable, include the necessary information in the report. The following is an example of such a modification of the accountant's report:

Based on our review, with the exception of the matter(s) described in the following paragraph(s), we are not aware of any material modifications that should be made to the accompanying interim financial information (statements) for it (them) to be in conformity with accounting principles generally accepted in the United States of America. Management has informed us that the company is presently contesting deficiencies in federal income taxes proposed by the Internal Revenue Service for the years 20X1 through 20X3 in the aggregate amount of approximately $ _____ , and that the extent of the company's liability, if any, and the effect on the accompanying information (statements) is not determinable at this time. The information (statements) fail(s) to disclose these matters, which we believe are required to be disclosed in conformity with accounting principles generally accepted in the United States of America.

.44        Going-concern paragraph was included in the prior year's audit report; conditions giving rise to the paragraph continue to exist. If (a) the auditor's report for the prior year end contained an explanatory paragraph indicating the existence of substantial doubt about the entity's ability to continue as a going concern, (b) the conditions that raised such doubt continued to exist as of the interim reporting date covered by the review, and (c) there is adequate and appropriate disclosure about these conditions in the interim financial information, the accountant is not required to modify his or her report. However, the accountant may add an explanatory paragraph to the review report, including an appropriate title (immediately following the paragraph describing the results of the review), emphasizing the matter disclosed in the audited financial statements and the interim financial information. The following is an example of such a paragraph.

[Appropriate Title]

Note 4 of the Company's audited financial statements as of December 31, 20X1, and for the year then ended discloses that the Company was unable to renew its line of credit or obtain alternative financing at December 31, 20X1. Our auditor's report on those financial statements includes an explanatory paragraph referring to the matters in Note 4 of those financial statements and indicating that these matters raised substantial doubt about the Company's ability to continue as a going concern. As indicated in Note 3 of the Company's unaudited interim financial statements as of March 31, 20X2, and for the three months then ended, the Company was still unable to renew its line of credit or obtain alternative financing as of March 31, 20X2. The accompanying interim financial information does not include any adjustments that might result from the outcome of this uncertainty.

.45        Going-concern paragraph was not included in the prior year's audit report; conditions or events exist as of the interim reporting date covered by the review that might be indicative of the entity's possible inability to continue as a going concern. If ( a ) conditions or events exist as of the interim reporting date covered by the review that might be indicative of the entity's possible inability to continue as a going concern, and ( b ) there is adequate and appropriate disclosure about these conditions or events in the interim financial information, the accountant is not required to modify his or her report. However, the accountant may add an explanatory paragraph to the review report, including an appropriate title (immediately following the paragraph describing the results of the review), emphasizing the matter disclosed in the interim financial information. The following is an example of such a paragraph.

As indicated in Note 3, certain conditions indicate that the Company may be unable to continue as a going concern. The accompanying interim financial information does not include any adjustments that might result from the outcome of this uncertainty.

Subsequent Discovery of Facts Existing at the Date of the Accountant's Report

.46       Subsequent to the date of the accountant's review report or the completion of the interim review procedures, if a report is not issued, the accountant may become aware that facts existed at the date of the review report (or the completion of the review procedures) that might have affected the accountant's report (or conclusion, if a report is not issued) had he or she then been aware of those matters. Because of the variety of conditions that might be encountered, the specific actions to be taken by the accountant in a particular case may vary with the circumstances. In any event, the accountant should consider the guidance in AS 2905, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report .

Client's Representation Concerning a Review of Interim Financial Information

.47       If a client represents in a document filed with a regulatory agency ( see paragraph .03 of this section for the SEC requirement) or issued to stockholders or third parties, that the accountant has reviewed the interim financial information included in the document, the accountant should advise the entity that his or her review report must be included in the document. If the client will not agree to include the accountant's review report, the accountant should perform the following procedures.

• Request that the accountant's name be neither associated with the interim financial information nor referred to in the document.
• If the client does not comply with the request, advise the client that the accountant will not consent either to the use of his or her name or to reference to him or her.
• When appropriate, recommend that the client consult with its legal counsel about the application of relevant laws and regulations to the circumstances.
• Consider what other actions might be appropriate . 33

.48       If a client represents in a document filed with a regulatory agency ( see paragraph .03 of this section for the SEC requirement) or issued to stockholders or third parties that the accountant has reviewed the interim financial information included in the document, and the accountant has been unable to complete the review of the interim financial information, the accountant should refer to paragraph .28 of this section for guidance.

Interim Financial Information Accompanying Audited Financial Statements

.49       Interim financial information may be presented as supplementary information outside audited financial statements. In such circumstances, each page of the interim financial information should be clearly marked as unaudited. If management chooses or is required to present interim financial information in a note to the audited financial statements, the information also should be clearly marked as unaudited.

.50       The auditor ordinarily need not modify his or her report on the audited financial statements to refer to his or her having performed a review in accordance with this section or to refer to the interim financial information accompanying the audited financial statements because the interim financial information has not been audited and is not required for the audited financial statements to be fairly stated in conformity with generally accepted accounting principles. The auditor's report on the audited financial statements should, however, be modified in the following circumstances:

• The interim financial information included in a note to the financial statements, including information that has been reviewed in accordance with this section, is not appropriately marked as unaudited. (In these circumstances the auditor should disclaim an opinion on the interim financial information.)
• The interim financial information accompanying audited financial statements does not appear to be presented in conformity with generally accepted accounting principles ( see paragraphs .42 and .43 of this section). However, the auditor need not modify his or her report on the audited financial statements if his or her separate review report, which refers to those circumstances, is presented with the information.

The company has not presented the selected quarterly financial data specified in item 302(a) of Regulation S-K that the Securities and Exchange Commission requires as supplementary information to the basic financial statements.

The selected quarterly financial data on page xx contains information that we did not audit, and, accordingly, we do not express an opinion on that data. We attempted but were unable to review the quarterly data in accordance with the standards of the Public Company Accounting Oversight Board because we believe that the company's internal control for the preparation of interim financial information does not provide an adequate basis to enable us to complete such a review.

Documentation

.51       The accountant should prepare documentation in connection with a review of interim financial information, the form and content of which should be designed to meet the circumstances of the particular engagement. Documentation is the principal record of the review procedures performed and the conclusions reached by the accountant in performing the review. 34 Examples of documentation are review programs, analyses, memoranda, and letters of representation. Documentation may be in paper or electronic form, or other media. The quantity, type, and content of the documentation are matters of the accountant's professional judgment.

.52       Because of the different circumstances in individual engagements, it is not possible to specify the form or content of the documentation the accountant should prepare. However, the documentation should include any findings or issues that in the accountant’s judgment are significant, for example, the results of review procedures that indicate that the interim financial information could be materially misstated, including actions taken to address such findings, and the basis for the final conclusions reached. In addition, the documentation should ( a ) enable members of the engagement team 35 with supervision and review responsibilities to understand the nature, timing, extent, and results of the review procedures performed; ( b ) identify the engagement team member(s) who performed and reviewed the work; and ( c ) identify the evidence the accountant obtained in support of the conclusion that the interim financial information being reviewed agreed or reconciled with the accounting records (see paragraph .18( d ) of this section).

Effective Date

.53       This section is effective for interim periods within fiscal years beginning after December 15, 2002. Earlier application of the provisions of this section is permitted.

Appendix A - Analytical Procedures the Accountant May Consider Performing When Conducting a Review of Interim Financial Information

.54       

A1. Analytical procedures are designed to identify relationships and individual items that appear to be unusual and that may reflect a material misstatement of the interim financial information. These procedures may consist of comparing interim financial information with prior period information, actual interim results with anticipated results (such as budgets or forecasts), and recorded amounts or ratios with expectations developed by the accountant. Examples of analytical procedures an accountant may consider performing in a review of interim financial information include:

• Comparing current interim financial information with anticipated results, such as budgets or forecasts (for example, comparing tax balances and the relationship between the provision for income taxes and pretax income in the current interim financial information with corresponding information in (a) budgets, using expected rates, and (b) financial information for prior periods). 35
• Comparing current interim financial information with relevant nonfinancial information.
• Comparing ratios and indicators for the current interim period with expectations based on prior periods, for example, performing gross profit analysis by product line and operating segment using elements of the current interim financial information and comparing the results with corresponding information for prior periods. Examples of key ratios and indicators are the current ratio, receivable turnover or days' sales outstanding, inventory turnover, depreciation to average fixed assets, debt to equity, gross profit percentage, net income percentage, and plant operating rates.
• Comparing ratios and indicators for the current interim period with those of entities in the same industry.
• Comparing relationships among elements in the current interim financial information with corresponding relationships in the interim financial information of prior periods, for example, expense by type as a percentage of sales, assets by type as a percentage of total assets, and percentage of change in sales to percentage of change in receivables.
• By period, for example, financial statement items disaggregated into quarterly, monthly, or weekly amounts.
• By product line or operating segment.
• By location, for example, subsidiary, division, or branch.

A2. Analytical procedures may include such statistical techniques as trend analysis or regression analysis and may be performed manually or with the use of computer-assisted techniques.

Appendix B - Unusual or Complex Situations to Be Considered by the Accountant When Conducting a Review of Interim Financial Information

.55       

B1. The following are examples of situations about which the accountant would ordinarily inquire of management:

• Business combinations
• New or complex revenue recognition methods
• Impairment of assets
• Disposal of a segment of a business
• Use of derivative instruments and hedging activities
• Sales and transfers that may call into question the classification of investments in securities, including management's intent and ability with respect to the remaining securities classified as held to maturity
• Computation of earnings per share in a complex capital structure
• Adoption of new stock compensation plans or changes to existing plans
• Restructuring charges taken in the current and prior quarters
• The occurrence of infrequent transactions
• The occurrence of significant unusual transactions
• Changes in litigation or contingencies
• Changes in major contracts with customers or suppliers
• Application of new accounting principles
• Changes in accounting principles or the methods of applying them
• Trends and developments affecting accounting estimates, such as allowances for bad debts and excess or obsolete inventories, provisions for warranties and employee benefits, and realization of unearned income and deferred charges
• Compliance with debt covenants
• Changes in related parties or significant new related-party transactions
• Material off-balance-sheet transactions, special-purpose entities, and other equity investments
• Unique terms for debt or capital stock that could affect classification

Appendix C - Illustrative Management Representation Letters for a Review of Interim Financial Information

.56       

C1. The following illustrative management representation letters, which relate to a review of interim financial information prepared in conformity with generally accepted accounting principles, are presented for illustrative purposes only. The first letter is designed to be used in conjunction with the representation letter provided by management in connection with the audit of the financial statements of the prior year. The second illustrative representation letter may be used independently of any other representation letter.

C2. The introductory paragraph of the letters should specify the financial statements and periods covered by the accountant's report, for example, "condensed balance sheets of XYZ Company as of June 30, 20X1 and 20X2, and the related condensed statements of income and retained earnings and cash flows for the three-month and nine-month periods then ended." The written representations to be obtained should be based on the circumstances of the engagement and the nature and basis of presentation of the financial statements being reviewed. Appendix B, "Additional Illustrative Representations," of AS 2805, Management Representations , presents examples of such representations.

C3. If matters exist that should be disclosed to the accountant, they should be indicated by modifying the related representation. For example, if an event subsequent to the date of the balance sheet has been disclosed in the interim financial statements, the final paragraph could be modified as follows: "To the best of our knowledge and belief, except as discussed in Note X to the financial statements, no events have occurred. . . ." In appropriate circumstances, item 10 of the second illustrative representation letter could be modified as follows: "The company has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities, except for our plans to dispose of segment A, as disclosed in Note X to the interim financial information, which are discussed in the minutes of the June 7, 20X2, meeting of the board of directors (or disclosed to you at our meeting on June 15, 20X2)." Similarly, if management has received a communication regarding an allegation of fraud or suspected fraud, item 7 of the first illustrative representation letter and item 9 of the second illustrative representation letter could be modified as follows: "Except for the allegation discussed in the minutes of the December 7, 20X1, meeting of the board of directors (or disclosed to you at our meeting on October 15, 20X1), we have no knowledge of any allegations of fraud or suspected fraud affecting the company received in communications from employees, former employees, analysts, regulators, short sellers, or others."

C4. The qualitative discussion of materiality used in the illustrative letters is adapted from the Financial Accounting Standards Board Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of Accounting Information .

C5. Certain terms are used in the illustrative letters that are described elsewhere in authoritative literature. Examples are fraud , in AS 2401, Consideration of Fraud in a Financial Statement Audit , and related parties , in AS 2410, Related Parties . To avoid misunderstanding concerning the meaning of such terms, the accountant may wish to furnish those definitions to management or request that the definitions be included in the written representations.

C6. The illustrative letters assume that management and the accountant have reached an understanding on the limits of materiality for purposes of the written representations. However, it should be noted that a materiality limit would not apply for certain representations, as explained in AS 2805.08.

1. Illustrative Short-Form Representation Letter for a Review of Interim Financial Information (Statements)

[ This representation letter is to be used in conjunction with the representation letter for the audit of the financial statements of the prior year. Management confirms the representations made in the representation letter for the audit of the financial statements of the prior year end as they apply to the interim financial information, and makes additional representations that may be needed for the interim financial information. ]

To [ Independent Accountant ]:

We are providing this letter in connection with your review of the [ identification of interim financial information (statements) ] of [ name of entity ] as of [ dates ] and for the [ periods ] for the purpose of determining whether any material modifications should be made to the [ consolidated ] interim financial information (statements) for it (them) to conform with accounting principles generally accepted in the United States of America. We confirm that we are responsible for the fair presentation of the [ consolidated ] interim financial information (statements) in conformity with generally accepted accounting principles.

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.

We confirm, to the best of our knowledge and belief, [ as of ( date of accountant's report or completion of review ),] the following representations made to you during your review.

• The interim financial information (statements) referred to above has (have) been prepared and presented in conformity with generally accepted accounting principles applicable to interim financial information.
• All financial records and related data,  including the names of all related parties and all relationships and transactions with related parties.
• All minutes of the meetings of stockholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes have not yet been prepared. All significant board and committee actions are included in the summaries.
• We believe that the effects of any uncorrected financial statement misstatements aggregated by you during the current review engagement and pertaining to the interim period(s) in the current year, as summarized in the accompanying schedule, are immaterial, both individually and in the aggregate, to the interim financial information (statements) taken as a whole. 37
• There are no significant deficiencies, including material weaknesses, in the design or operation of internal controls which could adversely affect the company's ability to record, process, summarize, and report interim financial data.
• We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud.
• Management;
• Employees who have significant roles in internal control; or
• Others where the fraud could have a material effect on the interim financial information.
• We have no knowledge of any allegations of fraud or suspected fraud affecting the company in communications from employees, former employees, analysts, regulators, short sellers, or others.

[ Indicate any changes. ]

• [ Add any representations related to new accounting or auditing standards that are being implemented for the first time. ]

To the best of our knowledge and belief, no events have occurred subsequent to the balance-sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned interim financial information (statements).

____________________________________________

[ Name of chief executive officer and title ]

[ Name of chief financial officer and title ]

[ Name of chief accounting officer and title ]

2. Illustrative Representation Letter for a Review of Interim Financial Information (Statements)

[ This representation letter is similar in detail to the management-representation letter used for the audit of the financial statements of the prior year and thus need not refer to the written management representations received in the most recent audit. ]

We confirm, to the best of our knowledge and belief, [ as of ( date of accountant's report or the completion of the review )], the following representations made to you during your review.

• The interim financial information (statements) referred to above has (have) been prepared and presented in conformity with generally accepted accounting principles applicable to interim financial information (statements).
• There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices.
• There are no material transactions that have not been properly recorded in the accounting records underlying the interim financial information.
• We believe that the effects of any uncorrected financial statement misstatements aggregated by you during the current review engagement and pertaining to the interim period(s) in the current year, as summarized in the accompanying schedule, are immaterial, both individually and in the aggregate, to the interim financial information (statements) taken as a whole. 38
• We have no knowledge of any allegations of fraud or suspected fraud affecting the company received in communications from employees, former employees, analysts, regulators, short sellers, or others.
• The company has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.
• Related-party transactions, including sales, purchases, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties.
• Guarantees, whether written or oral, under which the company is contingently liable.
• Significant estimates and material concentrations known to management that are required to be disclosed in accordance with the AICPA's Statement of Position 94-6, Disclosure of Certain Significant Risks and Uncertainties . [ Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year. ]
• Violations or possible violations of laws or regulations whose effects should be considered for disclosure in the interim financial information (statements) or as a basis for recording a loss contingency.
• Unasserted claims or assessments that are probable of assertion and must be disclosed in accordance with Financial Accounting Standards Board (FASB) Statement No. 5, Accounting for Contingencies .
• Side agreements or other arrangements (either written or oral) that have not been disclosed to you.
• The company has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets; nor has any asset been pledged as collateral.
• The company has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance.
• [ Add additional representations that are unique to the entity's business or industry. See paragraph .21 of this section and paragraph .17 of AS 2805, Management Representations .]
• [ Add any representations related to new accounting or auditing standards that are being implemented for the first time .]

Footnotes (AS 4105 - Reviews of Interim Financial Information):

1A See AS 1005, Independence , AS 1010, Training and Proficiency of the Independent Auditor , and AS 1015, Due Professional Care in the Performance of Work .

1 The Securities and Exchange Commission (SEC) requirement is set forth in Rule 10-01(d) of Regulation S-X for Form 10-Q and item 310(b) of Regulation S-B for Form 10-QSB.

2 See Section 302 of the Sarbanes-Oxley Act of 2002, and Securities Exchange Act Rule 13a-14(a) or 15d-14(a), (17 C.F.R. § 240.13a-14a or 17 C.F.R. § 240.15d-14a), whichever applies.

2A Statements on Standards for Accounting and Review Services provide guidance for review engagements for which this section is not applicable.

3 This section also is applicable to a review of the interim financial information of a subsidiary, corporate joint venture, or investee of an SEC registrant, when that review is performed in the context of the review of the interim financial information of the SEC registrant itself.

4 For purposes of this section, a regulatory agency is the SEC and the following agencies with which an entity files periodic reports pursuant to the Securities Exchange Act of 1934: Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve System, and Office of Thrift Supervision.

5 Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting , outlines the application of U.S. generally accepted accounting principles to the determination of income when interim financial information is presented, provides for the use of estimated effective income tax rates, and specifies certain disclosure requirements for summarized interim financial information issued by public companies.

6 See paragraph .16 of QC sec. 20, System of Quality Control for a CPA Firm's Accounting and Auditing Practice .

7 Paragraphs .10 through .23 of AS 2810, Evaluating Audit Results , require the auditor to accumulate and evaluate the misstatements identified during the audit. Paragraphs .25 and .26 of this section describe the accountant's consideration of such misstatements in a review of interim financial information.

8 The accountant also may consider reviewing the predecessor accountant's documentation related to reviews of interim period(s) in the prior year.

9 See paragraph .28 of this section.

10 See paragraph .22 of this section.

11 In these circumstances, the accountant ordinarily is in a position similar to that of, as applicable, a lead auditor that obtains the results of the work of an other auditor ( see generally AS 1201, Supervision of the Audit Engagement , and AS 2101, Audit Planning ), or an investor’s auditor that obtains a report from an investee’s auditor ( see generally Appendix B of AS 1105, Audit Evidence ).

12 The principal accountant also may request other accountants involved in the engagement, if any, to read the other information.

13 In accordance with APB Opinion No. 28 and Article 10 of Regulation S-X, contingencies and other uncertainties that could be expected to affect the fairness of the presentation of financial data at an interim date should be disclosed in interim reports in the same manner required for annual reports. Such disclosures should be repeated in interim and annual reports until the contingencies have been removed, resolved, or become immaterial. The significance of a contingency or uncertainty should be judged in relation to annual financial statements.

14 For purposes of this section, "conditions or events that existed at the date of prior-period financial statements" include ( a ) substantial doubt about the entity's ability to continue as a going concern that existed at the preceding year end, regardless of whether the substantial doubt was alleviated by the auditor's consideration of management's plans, or ( b ) conditions and events disclosed in the immediately preceding interim period.

15 Information that might be disclosed is set forth in paragraph .10 of AS 2415, Consideration of an Entity's Ability to Continue as a Going Concern . If the accountant determines that the disclosure about the entity's possible inability to continue as a going concern is inadequate, a departure from generally accepted accounting principles exists.

16 For additional guidance regarding written management representations, see paragraphs .08 through .12 of AS 2805, Management Representations .

17 If a summary of uncorrected misstatements is unnecessary because there were no uncorrected misstatements identified, this representation should be eliminated.

18 Rule 10-01 of Regulation S-X states—

The interim financial information shall include disclosures either on the face of the financial statements or in accompanying footnotes sufficient so as to make the interim information presented not misleading. Registrants may presume that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnote disclosure which would substantially duplicate the disclosure contained in the most recent annual report to security holders or latest audited financial statements, such as a statement of significant accounting policies and practices, details of accounts which have not changed significantly in amount or composition since the end of the most recently completed fiscal year, and detailed disclosures prescribed by Rule 4-08 of this Regulation, may be omitted. However, disclosure shall be provided where events subsequent to the end of the most recent fiscal year have occurred which have a material impact on the registrant. Disclosures should encompass for example, significant changes since the end of the most recently completed fiscal year in such items as: accounting principles and practices; estimates inherent in the preparation of the financial statements; status of long-term contracts; capitalization including significant new borrowings or modification of existing financing arrangements; and the reporting entity resulting from business combinations or dispositions. Notwithstanding the above, where material contingencies exist, disclosure of such matters shall be provided even though a significant change since year end may not have occurred.

19 APB Opinion No. 28 describes the applicability of generally accepted accounting principles to interim financial information and indicates the types of disclosures necessary to report on a meaningful basis for a period of less than a full year. Paragraph 29 of Opinion No. 28 provides guidance on assessing materiality in interim periods. For example, the Opinion states, "In determining materiality for the purpose of reporting the cumulative effect of an accounting change or correction of an error, amounts should be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings."

[20] [Footnote deleted.]

21 See 15 U.S.C. § 78j-1.

[22] [Footnote deleted.]  

23 The schedule of uncorrected misstatements related to accounts and disclosures provided to the audit committee should be the same schedule that was included in or attached to the management representation letter that is described in paragraph .24( k ) of this section.

24 Paragraphs .37 through .46 of this section provide reporting guidance for a review of interim financial information; however, an accountant is not required to issue a report on such engagements.

24A See SEC Rule 2-02(a) of Regulation S-X, 17 C.F.R. § 210.2-02(a).

25 Other reporting issues related to the dating of reports or subsequent events are similar to those encountered in an audit of financial statements. See AS 3110, Dating of the Independent Auditor's Report , and AS 2801, Subsequent Events .

26 If interim financial information of a prior period is presented with that of the current period and the accountant has conducted a review of that information, the accountant should report on his or her review of the prior period. An example of the first sentence of such a report follows: "We have reviewed … of ABC Company and consolidated subsidiaries as of September 30, 20X1 and 20X2, and for the three-month and nine-month periods then ended...."

27 Regulation S-X specifies that the following financial information should be provided in filings on Form 10-Q:

a . An interim balance sheet as of the end of the most recent fiscal quarter and a balance sheet as of the end of the preceding fiscal year that may be condensed to the same extent as the interim balance sheet. b . Interim condensed statements of income for the most recent fiscal quarter, for the period between the end of the preceding fiscal year and the end of the most recent fiscal quarter, and for the corresponding periods of the preceding fiscal year. c . Interim condensed cash flow statements for the period between the end of the preceding fiscal year and the end of the most recent fiscal quarter and for the corresponding period for the preceding fiscal year.

28 If the auditor’s report on the preceding year-end financial statements was other than unqualified, made reference to an audit and report of another public accounting firm, or included an explanatory paragraph because of a going-concern matter or an inconsistency in the application of accounting principles, the second paragraph of the illustrative report in paragraph .39 should be appropriately modified.

29 See AS 1206, Dividing Responsibility for the Audit with Another Accounting Firm .

[30]  [Footnote deleted.]  

31 APB Opinion No. 28, paragraph 32, states that "there is a presumption that users of summarized interim financial data will have read the latest published annual report, including the financial disclosures required by generally accepted accounting principles and management's commentary concerning the annual financial results, and that the summarized interim data will be viewed in that context." See footnote 18 of this section for additional disclosure requirements.

32 Such disclosures include those set forth in AS 2415.10. If the accountant determines that disclosure about the entity's possible inability to continue as a going concern is inadequate, a departure from generally accepted accounting principles exists.

33 In considering what actions, if any, may be appropriate in these circumstances, the accountant should consider consulting his or her legal counsel.

34 However, an accountant would not be precluded from supporting his or her conclusions by other means in addition to the documentation.

35 The term “engagement team,” as used in this standard for review engagements, has a meaning analogous to the term’s definition in Appendix A of AS 2101 for audit engagements.

Footnote (Appendix A - Analytical Procedures the Accountant May Consider Performing When Conducting a Review of Interim Financial Information):

35 The accountant should exercise caution when comparing and evaluating current interim financial information with budgets, forecasts, or other anticipated results because of the inherent lack of precision in estimating the future and susceptibility of such information to manipulation and misstatement by management to reflect desired interim results.

Footnote (Appendix B - Unusual or Complex Situations to Be Considered by the Accountant When Conducting a Review of Interim Financial Information):

36 [Footnote deleted.]

Footnotes (Appendix C - Illustrative Management Representation Letters for a Review of Interim Financial Information):

37 If a summary of uncorrected misstatements is unnecessary because no uncorrected misstatements were identified, this representation should be eliminated.

38 If a summary of uncorrected misstatements is unnecessary because no uncorrected misstatements were identified, this representation should be eliminated.

Financial Statement Review Management Representation Letter (What is it?)

The financial statement review management representation letter is designed to complete managements responsibilities in the review. The letter is signed at the end of the engagement and is dated at the time of the review report. The management representation letter has three basic parts, the introduction, statements about the financials and declarations on the information management has provided.

Care should be taken in producing this letter. It contains many items that if left out, increase liability on the CPA. In addition, the standards of SSARS (Statements on Standards for Accounting and Review) require certain elements to be included.

Also, please review our Ultimate Guide to Financial Statement Review and Compilation for information on the review process from beginning to end.

If you need help with a financial statement review or audit, contact me now!

The Introduction

This section lays out the basis of the representations. Management states what has been performed, the review. They also state that matters are generally limited to items that are material in nature. The following is the standard wording provided by the American Institute of Certified Public Accountants (AICPA ).

This representation letter is provided in connection with your review of the financial statements of ABC Company, which comprise the balance sheets as of December 31, 20X2 and 20X1, and the related statements of income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the financial statements, for the purpose of obtaining limited assurance as a basis for reporting whether you are aware of any material modifications that should be made to the financial statements in order for the statements to be in accordance with accounting principles generally accepted in the United States of America.

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.

Statements About the Financials

This is one of the two sections of the document that contain the meat. In this section management takes responsibility for a number of things, it covers fair presentation according to GAAP, responsibility for internal controls and more. The following is a section form the AICPA approved wording.

• We acknowledge our responsibility and have fulfilled our responsibilities for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America.
• We acknowledge our responsibility and have fulfilled our responsibilities for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
• We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.
• Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.
• Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America.
• Guarantees, whether written or oral, under which the company is contingently liable have been properly accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America.
• Significant estimates and material concentrations known to management that are required to be disclosed in accordance with FASB Accounting Standards Codification (ASC) 275, Risks and Uncertainties, have been properly accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America.
• All events occurring subsequent to the date of the financial statements and for which accounting principles generally accepted in the United States of America requires adjustment or disclosure have been properly accounted for.
• The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements as a whole.
• The effects of all known actual or possible litigation and claims have been accounted for and disclosed in accordance with accounting principles generally accepted in the United States of America.

Declaration of the Information Provided

Finally, management states certain things about the information it has provided during the engagement. Things such as: We have responded fully and truthfully to all inquiries made to us by you during your review.

We have provided you with:

• access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters
• minutes of meetings of stockholders, directors, and committees of directors or summaries of actions of recent meetings for which minutes have not yet been prepared; additional information that you have requested from us for the purpose of the review; and unrestricted access to persons within the entity from whom you determined it necessary to obtain review evidence.
• All transactions have been recorded in the accounting records and are reflected in the financial statements.
• We have [no knowledge of any] [disclosed to you all information that we are aware of regarding] fraud or suspected fraud that affects the entity and involves
• management, employees who have significant roles in internal control, or others when the fraud could have a material effect on the financial statements.
• We have [no knowledge of any] [disclosed to you all information that we are aware of regarding] allegations of fraud, or suspected fraud, affecting the entity’s financial statements as a whole communicated by employees, former employees, analysts, regulators, or others.
• We have no plans or intentions that may materially affect the carrying amounts or classification of assets and liabilities.
• We have disclosed to you all known instances of noncompliance or suspected noncompliance with laws or regulations whose effects should be considered when preparing financial statements.
• We [have disclosed to you all known actual or possible] [are not aware of any pending or threatened] litigation and claims whose effects should be considered when preparing the financial statements [and we have not consulted legal counsel concerning litigation or claims]
• We have disclosed to you any other material liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB ASC 450, Contingencies.
• We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware.
• We have disclosed to you all information relevant to the use of the going concern assumption in the financial statements.
• No material losses exist (such as from obsolete inventory or purchase or sale commitments) that have not been properly accrued or disclosed in the financial statements.
• The company has satisfactory title to all owned assets, and no liens or encumbrances on such assets exist, nor has any asset been pledged as collateral, except as disclosed to you and reported in the financial statements. We have complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance.
• We are in agreement with the adjusting journal entries that you have recommended, and they have been posted to the company’s accounts (if applicable).

In total the management representation letter sums up the company responsibilities for the engagement. It outlines the various factors taken into account during a review or audit. Care should be used when preparing this letter to assure it is in compliance with accounting regulations. Below is a link to a properly formatted financial statement review management representation letter.

Sample Management Representation Letter

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• PRACTICE MONITORING

Peer Review For Small Firms

The aicpa has revised the standards for performing and reporting on peer reviews..

• Audit & Assurance
• Peer Review

and reporting on peer reviews for firms that do not audit SEC registrants. The new rules, which become effective January 1, 2001, are designed to improve the quality of financial reporting and to protect members of the public that use and rely on those reports. to all of the more than 30,000 firms enrolled in the AICPA peer review program, they most notably affect nearly 18,000 small firms that perform only review or compilation engagements and do not perform audits. The revised standards also affect regulators, CPAs who perform peer reviews and state CPA societies. types of peer reviews—system, engagement and report. They replace the two existing types (on-site and off-site). The engagements in a firm’s accounting and auditing practice currently covered under peer review also will be covered under the revised standards. members practicing in organizations not eligible to enroll in an AICPA practice-monitoring program (a non-CPA-owned entity) to enroll individually in a peer review program if the services they perform and the reports they issue are subject to peer review.

GARY FREUNDLICH, CPA, is a senior technical manager in the AICPA practice monitoring division. His e-mail address is . WALTER H. WEBB, CPA, is a partner of Call, Barrick, Ethridge, Webb & Co. LLP in Cushing, Oklahoma, and chairman of the AICPA peer review board. Mr. Freundlich is an employee of the American Institute of CPAs and his views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.

Almost 18,000 of the 30,000-plus firms in the AICPA peer review program perform reviews or compilations as their highest level of service as follows:
Reviews only	393
Reviews and full-disclosure compilations only	467
Reviews and omit-disclosure compilations only	2,355
Reviews and full- and omit-disclosure compilations only	4,106
Full-disclosure compilations only	500
Full- and omit-disclosure compilations only	2,540
Omit-disclosure compilations only	7,404

*Does not include firms performing engagements under the SASs, examinations of prospective financial statements under the SSAEs or under Government Auditing Standards (the yellow book).

Source: AICPA practice monitoring division, 2000.

While at least some of the changes apply to all of the more than 30,000 firms enrolled in the AICPA peer review program, they most notably affect the nearly 18,000 small firms (mostly sole practitioners) that perform only review or compilation engagements and not audits. The revised standards also affect regulators (such as state boards of accountancy, which require peer review for licensure), CPAs who perform the peer reviews and state CPA societies, which administer the peer review program (see the box). This article focuses on how the key revisions will affect the peer reviews of small firms.

TYPES OF PEER REVIEWS

The most significant change is that there will be three types of peer reviews (system, engagement and report) instead of two (on-site and off-site). The engagements in a firm’s accounting and auditing practice currently covered under peer review still will be covered under the revised standards. For purposes of the standards, an accounting and auditing practice is defined as all of a CPA firm’s engagements (with few exceptions) that are covered by AICPA statements on auditing standards (SASs), statements on standards for accounting and review services (SSARSs) and statements on standards for attestation engagements (SSAEs) as well as by Government Auditing Standards (the yellow book), issued by the U.S. General Accounting Office.

System review. This type of review is for firms that perform engagements under the SASs, or the yellow book or examinations of prospective financial information under the SSAEs. Essentially it is the same as an on-site peer review with a name change. A system review is intended to provide the reviewer with a reasonable basis for expressing an opinion whether—for the year under review—the reviewed firm

Has designed its system of quality control for its accounting and auditing practice in accordance with AICPA quality control standards.

Is complying with its quality control policies and procedures in a way that will provide the firm with reasonable assurance of conforming with professional standards.

On-site peer review was renamed system review to more accurately describe the type of peer review since the reviewer expresses an opinion on the firm’s system of quality control. Approximately 15,000 firms are likely to have a system review over the next three years.

So the AICPA can focus its efforts on establishing standards, programs, checklists and procedures, the Institute annually asks each of the 54 state CPA societies (including those in the District of Columbia, Guam, Puerto Rico and the Virgin Islands) to administer the AICPA peer review program or to arrange to have the peer reviews of firms with their main offices in that state administered by another state CPA society. Currently there are 41 administering entities for the 54 jurisdictions. All are state CPA societies except New England Peer Review, Inc., an approved entity that administers the AICPA peer review program for Vermont, Rhode Island, Maine and New Hampshire.

Engagement review. This type of review is for firms that are not required to have system reviews (and are not eligible to have report reviews,which are discussed below). An engagement review’s objectives are to provide the peer reviewer with a reasonable basis for expressing limited assurance that

The financial statements or information and the related accountant’s report on the accounting, review and attestation engagements the firm submits for review conform in all material respects with professional standards (the same as an off-site peer review).

The reviewed firm’s documentation conforms with the requirements of the SSARSs and the SSAEs, as applicable, in all material respects (new under the revised standards).

This type of review does not cover the firm’s system of quality control, so the reviewer cannot express an opinion on the firm’s compliance with its own quality control policies and procedures or with AICPA quality control standards. The reviewer can express only limited assurance on the firm’s conformity with the SSARSs and the SSAEs.

An engagement review does not require the reviewed firm to document any work other than that required by the SSARSs and the SSAEs, so the peer reviewer expresses limited assurance on whether the firm’s documentation conforms with those standards. Some examples of documentation include

Management representation letters on a review engagement.

Working papers documenting the matters covered in the accountant’s inquiry and analytical procedures on a review of financial statements.

The engagement review also encompasses documentation required under the SSAEs, such as might be the case on a WebTrust engagement. Currently, there are no documentation requirements for compilation engagements under the SSARSs. If a firm has an engagement review and performs only compilations under the SSARSs, the review will not include any of the firm’s documentation.

These changes should improve the quality of engagements—protecting the public that uses and relies on those reports—without imposing any additional burden on reviewed firms. The new procedures peer reviewers must perform are based on the minimal documentation requirements under the SSARSs and the SSAEs. More than 10,000 firms are likely to have an engagement review over the next three years.

Report review. Firms performing only compilations that omit substantially all disclosures will have report reviews. However, a firm must have an engagement review if it performs—as its highest level of service—compilations referred to in the SSARSs as “selected information—substantially all disclosures required are not included.” A report review retains the overall integrity of peer review through a streamlined process.

A report review’s objective is to help a firm that performs omit-disclosure compilation engagements as its highest level of service improve the overall quality of its practice. To accomplish this, the peer reviewer selects a sample of engagements and gives the firm a report listing comments and recommendations based on whether the financial statements and the related accountant’s reports appear to conform with the requirements of professional standards in all material respects.

A peer reviewer’s comments should be relevant and supportable by professional standards, giving the firm sound guidance for improving the overall quality of its omit-disclosure compilation engagements. Although materiality and relevance are sometimes subjective, peer reviewers should not establish their own professional standards or impose their own personal preferences on the firms they review. The comments and recommendations should be reasonably detailed so that a firm can determine what actions it should take.

An authorized member of the reviewed firm is required to sign the report—whether or not there are comments—acknowledging that there are no disagreements on significant matters and that the firm agrees to correct the matters commented on. The firm then must submit the signed copy of the report to the entity administering the peer review. There is no separate letter of comment or letter of response (as is the case with system and engagement reviews). However, a firm will not be prohibited from attaching a response to the copy of the peer review report it signed.

The administering entity must technically review all peer reviews. On report reviews, however, the entity’s peer review committee does not always need to be directly involved in accepting peer review documents. The technical reviewer, selected by the administering entity, normally helps the committee by reviewing the documents the peer reviewer submits. In a report review, however, the technical reviewer generally should have the authority to accept report reviews on the committee’s behalf when the technical reviewer determines there are no significant issues. This process is allowed only on report reviews.

By streamlining the process, including not requiring a formal response, the technical reviewer may be able to accept 85% or more of report reviews on the committee’s authority within 30 days of receiving the signed peer review report. Currently, the process often takes between three and six months. The AICPA peer review board is asking the 41 entities that administer the program to reevaluate the current scheduling, administrative and other related fees they charge firms based on this streamlined process.

If the technical reviewer finds significant deficiencies or issues with the peer review, that reviewer may not accept the report review. He or she should submit it for peer review committee consideration. Examples of such deficiencies include matters material to understanding the report, financial statements or other concerns such as significant repeat comments from the firm’s previous peer review or problems with the peer reviewer’s performance. Since a report review’s objective is to enable the firm to improve its omit-disclosure compilation engagements, the committee may need to ask the firm for evidence that it has taken corrective action to the committee’s satisfaction.

The technical reviewer alone may not impose corrective actions on the firm or peer reviewer; the committee must determine any corrective actions. The AICPA peer review board, state boards of accountancy and other interested parties responding to the revisions in the exposure draft stressed the importance of ensuring that firms with significant deficiencies have their corrective actions monitored by the committee. Since more than 7,000 firms are likely to have report reviews over the next three years, this is a significant improvement to the process.

STEP-UP IN PEER REVIEW

If a firm is required to have only a report review, it may elect to have an engagement or system review; a firm required to have an engagement review may elect to have a system review. A firm can make such an election to qualify its members to be peer reviewers or peer review committee members. Although nearly 18,000 firms are not required to have system reviews, every CPA firm must have a system of quality control in place. Some of those firms, therefore, may find it useful to have peer reviews covering that system.

AICPA BYLAW CHANGE

The AICPA amended its bylaws to require members practicing public accounting in organizations not eligible to enroll in an Institute-approved practice-monitoring program (a non-CPA-owned entity) to enroll individually if the services they perform and the reports they issue are subject to peer review. Currently, the only services covered by this situation are compilations performed and reported on under the SSARSs. Those individual members will be subject to engagement or report reviews.

EFFECTIVE DATE

The revised standards are effective for all peer reviews commencing on or after January 1, 2001. Early implementation is not allowed either in part or whole primarily because the entire AICPA peer review computer system, used to administer the program for more than 30,000 firms, is being rewritten.

EVERYBODY WINS

The goal of the AICPA peer review program is quality in the performance of accounting and auditing engagements by program members. The revised peer review standards have not changed this goal. Creating new, efficient and less burdensome ways to conduct and administer peer reviews for the many small CPA firms required to have them benefits everyone—clients, practitioners, regulators and reviewers. In the end, everyone wins, particularly CPA firms that can spend more time serving their clients.

CPAs who have questions about peer review should call the state CPA society that administers their reviews or the AICPA peer review program staff (201-938-3030). The revised standards can be obtained on the AICPA peer review Web site at .

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Understanding the Representation Letter

Written by David T. Schwindt, CPA

What is a Representation Letter? As a Board member or manager of a community management company, you may be asked to sign a representation letter at the conclusion of an audit or a reviewed financial statement engagement.  Although the letter is from the Association/management company to the CPA, the CPA will generally draft the letter on behalf of the Association.   The letter includes certain assertions about the Association during the period covered by the financial statements.  Those assertions include but are not limited to the following:

• The Association/management company has provided the CPA with all requested financial information.
• The Association/management company has disclosed all related party transactions.
• The Association/management company has disclosed all existing and potential litigation.
• The Association/management company has disclosed any knowledge of fraud or financial irregularities.
• The Association takes responsibility for the design and implementation of a system of internal controls.  These controls include but are not limited to safeguarding assets, approving transactions and minimizing the risk of someone perpetrating a theft of money or information and not being discovered in a reasonable amount of time. Although the Board is ultimately responsible for this activity, it is common that Boards rely upon the management company to assist in this responsibility.

In some instances, the management company may sign a different representation letter because the responsibilities are slightly different.

Why is the Representation Letter necessary? The American Institute of Certified Public Accounts has determined that those charged with governance (the board of directors and the community management company) should take responsibility for the assertions in the representation letter.  CPAs are mandated to obtain the signed representation letter before issuing the final financial statements.

Who should sign the representation letter? Most often, the Board Chair, Board Treasurer and community manager signs the letter.

When does the Representation Letter need to be signed? The letter needs to be signed at the end of the engagement generally after a draft of the financial statements are issued.  Schwindt & Co combines the representation letter with the management letter comments and proposed adjusting journal entries for ease of review.  When the signed document is received by our office, we are then able to issue the final financial statements.

Should a new Board member or community manager who was not involved with Association management or governance during the period under audit or review be hesitant about signing the representation letter? This is a common question and the answer is simple.  No!  The first paragraph of the representation states that whoever signs the letter does so based on the best knowledge and belief of the person signing.  This means that even though you may be new to the Board or management company, it is perfectly fine to sign the letter because you will only be asserting to issues that you have knowledge.  It is very common for Board members/managers to sign a representation letter even though they were not involved during the period being audited or reviewed.

• Representation letters are normal and required before the issuance of audited/reviewed financial statements.
• Board members are only asserting to issues that they are aware of and new board members and managers frequently are required to sign representation letters.
• The Board Chair, Board Treasurer and community manager are generally required to sign the representation letter.

Questions regarding this article may be directed to David T. Schwindt, CPA at Schwindt & Co. (503) 227-1165.

12300 SE Mallard Way, Suite 275 Milwaukie, OR 97222 (503) 227-1165

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Monday-Thursday, 9 am – 3 pm Friday, By Appointment Only

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03 Apr What are Management Representation Letters?

In the world of assurance engagements, a management representation letter is a formal document that represents management’s agreement with the financial statements that are being audited or reviewed. This letter is a critical part of the assurance engagement process and is required by the auditor or reviewer as evidence that management acknowledges and accepts responsibility for the financial statements.

A management representation letter is typically issued by senior management, such as the CEO or CFO, and is addressed to the CPA firm performing the audit or review. It contains a series of statements that confirm certain facts and assurances about the company’s financial information, including the completeness and accuracy of financial records, disclosures of relevant information, and adherence to accounting principles.

The letter serves several purposes, including:

• Confirming the accuracy of financial information : The management representation letter is used to confirm that the financial statements are accurate and complete. This helps provide assurance to stakeholders that the financial statements are reliable.
• Demonstrating management’s responsibility : By signing the letter, management acknowledges its responsibility for the accuracy and completeness of the financial statements. This helps to provide accountability and transparency to stakeholders.
• Providing evidence for auditors and reviewer s: The management representation letter provides evidence to the CPA firm that management has taken responsibility for the financial statements, which helps to support the audit opinion or review conclusion.
• Reducing the risk of misstatements : The letter helps to reduce the risk of misstatements by requiring management to review the financial statements and provide assurance that they are accurate and complete.

Overall, the management representation letter is a critical part of the assurance engagement process, as it helps to provide assurance that the financial statements are accurate and complete, and that management takes responsibility for them. Without this letter, CPA firms would not have the necessary evidence to support their opinions and conclusions, which could lead to a lack of confidence in the financial statements and potential legal and financial consequences for the company. In fact, CPA firms are not permitted to complete their engagement and issue an audit or review engagement report until management provides a signed management representation letter.

If you require an audit or review and would like to speak to someone about these processes, please contact us to set up a free consultation.

Annelie Vistica

Cpa, ca – principal.

Annelie Vistica, a Principal at Clearline, is a CPA and CA with a strong background in private enterprise and assurance. With a Bachelor of Accountancy from the University of Stellenbosch in South Africa and extensive experience in tax, Annelie brings expertise in business setup, growth planning, and estate transitioning. She is passionate about engaging with clients to support them through various business stages, from inception to succession planning. Annelie values the supportive environment at Clearline, where she appreciates colleagues’ assistance in tax and assurance. Outside work, she enjoys spending time with her family and dog, exploring nature, visiting family in the Okanagan, and travelling the world.

Jennifer Scott

Cpa, cga – senior manager.

Jennifer Scott, a Senior Manager at Clearline brings a wealth of expertise in Private Enterprise and Assurance, holding designations as a CPA and CGA. Jennifer’s focus at Clearline includes conducting reviews, compilations, and providing tax services tailored to owner-manager businesses and partnerships, with a keen interest in industries such as professionals, manufacturing, real estate, and services. Her commitment to exceptional client service is evident through her proactive approach to staying updated on evolving accounting standards and tax legislation, thereby making her clients’ lives easier Jennifer’s educational background includes a Bachelor of Commerce from UBC with a major in Accounting, followed by over 15 years of experience in public practice, specializing in private enterprise. She appreciates the supportive environment at Clearline and enjoys various activities outside of work, including travelling, cheering on her children in sports like soccer, baseball, and volleyball, indulging in long walks with her dog while listening to podcasts, spending quality time with loved ones, and exploring her passion for baking through experimenting with new recipes.

Charmaine Pirrie

Cpa, ca(sa) – senior manager.

Charmaine Pirrie, a Senior Manager at Clearline is a CPA and CA (SA) with a background in audit and review engagements. With experience from Grant Thornton and D&Co, she brings expertise in private company audits and values Clearline’s supportive environment and technical resources. Charmaine also finds fulfillment in delving into her clients’ businesses to provide tailored services, ensuring meticulous audit and review procedures. Outside of work, she enjoys spending time with family, going for walks, and swimming.

Deepeka Dhillon

Cpa – manager.

Deepeka Dhillon, a Manager at Clearline, holds a CPA designation with a focus in Private Enterprise and Tax. Her primary responsibilities include compliance, corporate restructuring, and, estate and succession planning. Deepeka’s passion lies in continuous learning, enabling her to provide tailored solutions to clients’ unique needs. With a CPA designation and completion of the CPA in-depth tax program, she brings a strong educational background to her role at Clearline. Deepeka values the countless opportunities at Clearline to expand her knowledge in the complex world of tax. Outside work, she enjoys spending time with her beloved Jack Russell Terrier, Opie.

Raj Momrath

Cpa, ca, senior tax manager.

Raj Momrath, a Senior Tax Manager at Clearline, is a CPA, CA specializing in Canadian Tax. With a focus on Canadian tax planning, corporate reorganizations, estate planning, and providing business advice, Raj caters to a diverse clientele, including small owner-manager companies, high-net-worth individuals and large privately held multinational firms. His passion lies in helping Canadian owner-manager businesses and their shareholders minimize their overall tax obligations while navigating disputes with the Canada Revenue Agency and ensuring compliance with the complex Canadian tax system. Raj’s professional journey includes prior experience in PwC’s tax group, where he obtained his Chartered Accountant designation and then some time at some mid-sized firms. Raj completed the CPA Canada InDepth Tax course in 2017 strengthening his knowledge of Canadian tax. At Clearline, Raj appreciates working alongside knowledgeable colleagues and enjoys spending quality time with his wife and two sons and attending and volunteering with their sports activities. In his leisure time, Raj indulges in barbequing, golfing, and spending time outdoors, finding relaxation and enjoyment in these pursuits.

Julia Wallis

Julia Wallis, a Senior Manager at Clearline, holds designations as a CPA, CGA, and also holds a BA. Working within the Private Enterprise Group, her primary focus revolves around assisting entrepreneurs in understanding their personal and business finances while ensuring compliance with tax reporting requirements. Julia finds fulfillment in learning about her clients’ businesses and providing financial insights to enhance their management effectiveness while optimizing tax strategies. With a diverse career spanning various companies and public practice roles, including as a controller, Julia’s progression has equipped her with invaluable skills and insights into different business operations. She chose Clearline for its respected partners and staff, aligned philosophy on client service, and flexibility to balance demanding tax filing periods with leisure time for travel and personal interests such as gardening, wine exploration, reading, and relaxation.

Bilal Kathrada

Cpa, ca, principal.

Bilal, a Principal at Clearline Chartered Professional Accountants, primarily focuses on income tax and succession planning for Canadian owner-managed businesses in various industries. Bilal received his Bachelor of Commerce degree from the University of Victoria and obtained his CA designation in 2005.

Prior to Clearline, he worked in the tax group of a large international accounting firm in Vancouver and a mid-sized accounting firm located in the Fraser Valley.

Outside of the office, he enjoys spending time with his wife and three children. He enjoys outdoor activities such as golf and spending time with his family and friends.

Danny Sandhu

Cpa, manager.

Bio coming soon.

Shehzel Saif

Cpa, tax manager.

As Clearline’s Tax Manager, Shehzel focuses on tax planning, corporate reorganizations and succession and estate planning. She’s passionate about continuous learning and staying up to date on tax legislation changes and helping clients with succession. In addition to her CPA designation, Shehzel also has a Bachelor of Business Administration and has completed the CPA In-Depth Taxation Program. Outside of work, she enjoys spending time with family and friends, traveling and trying out new recipes.

Ameeta Randhawa

As Clearline’s HR Manager, Ameeta supports our firm’s greatest resource—our staff. With a Bachelor of Business Administration in Human Resources and over 7 years of HR experience in various industries, she ensures all employees have a positive experience at Clearline. Ameeta’s focuses include recruitment, performance management, employee relations, program and policy development, and employee engagement. Outside of work, she enjoys traveling and spending time with friends and family.

CPA, CA, Senior Manager

Michael is a Senior Manager in Private Enterprise, carrying out reviews, compilations, and tax services for small- to medium-sized businesses. With a Bachelor of Commerce specializing in finance and a Diploma in Accounting, backed by over a decade of accounting experience, Michael is a trusted advisor who helps clients’ businesses succeed. Outside of the office, Michael enjoys spending time with family, trying out different restaurants in the city, and building and collecting mechanical keyboards.

CPA, CGA, Manager

Victor K. Yoshida

Victor was born and raised in Vancouver and obtained his Bachelor of Commerce from the University of British Columbia. He articled with Deloitte & Touche and received his CA designation in 1984. Victor was accepted to the firm’s tax group and went on to complete the Canadian Institute of Chartered Accountants In-Depth Tax course.

Victor specializes in Canadian income tax issues for professional and owner-managed businesses. He has extensive experience with business succession, estate planning, wealth preservation issues, corporate reorganizations, as well as mergers and acquisitions.

Victor was a member of the education committee of the Institute of Chartered Accountants of British Columbia and has held executive positions with various amateur sport organizations.

In his free time, Victor enjoys training for marathons, travelling, and spending time with his family.

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Csrs 4200 compilation engagements: management representation letter vs. management acknowledgement letter.

• February 28, 2022

As we continue to work through implementation of CSRS 4200 Compilation Engagements , we are sharing our frequently asked questions (FAQs).  If you missed my first post, we addressed CSRS 4200 Compilation Engagements : Financial Statements vs. Financial Information .

Here we are with FAQ#2. “If we choose to document management acknowledgements formally in a letter should it be titled a Management Representation Letter or Management Acknowledgement Letter. The answer is you are probably okay with either, however here @Clearline CPA we are using the later. I suspect that the use of Representation Letter will be a ‘non-reportable’ deficiency upon technical review to ensure the terminology used in assurance engagements and compilation engagements differs.

The standard itself notes the specific areas where management acknowledgements are required to be documented, which may be obtained in writing or through documentation of discussions. As the issuance of a formal letter is not mandated to meet the documentation requirements, the name of any such letter is also not mandated. As an assurance practitioner I will not use these terms interchangeably.  The term representation is synonymous with assurance engagements (reviews and audits), and is required to be supported by a written statement provided by management to the practitioner or auditor.

Under CSRS 4200 Compilation Engagements , the Audit and Assurance Standards Board (AASB) changed the originally wording use in the exposure draft from ‘making inquiries of management’ to ‘obtain an acknowledgement from management’.  This provides me with options, that may or may not involve a written letter.  

Please share this blog with your colleagues as we continue to work through the implementation of the new standard. 

Visit our online store if you are looking for CSRS 4200 Compilation Engagement resources or contact us if we can be of assistance. 

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What is a Management Representation Letter?

Getting through financial audits can be frustrating for companies, especially when asked to provide management representation letters.

This article will clarify exactly what a management representation letter is, why auditors request them, what should be included, and provide examples to make the process smooth and compliant.

You'll learn the purpose of these letters, see template examples, understand international audit standards, and gain key takeaways to improve financial reporting at your organization.

Introduction to Management Representation Letters

A management representation letter is a formal document signed by a company's senior management that is provided to external auditors. It contains certain written representations that auditors require in order to complete an audit and form an opinion on the company's financial statements.

Defining the Management Representation Letter in Audit Context

The management representation letter serves an important role within the financial statement audit process. Auditors use it as audit evidence to support their assessment of whether the financial statements are free of material misstatement. Specifically, auditors request written confirmation from management regarding the accuracy and completeness of information provided during the audit. This includes representations related to:

• The financial statements and adequacy of disclosures
• Proper recording of transactions and account balances
• Internal controls over financial reporting
• Compliance with laws and regulations

By obtaining these written representations from management, auditors gain additional audit evidence to complete their testing and analysis. The management representation letter also outlines management's responsibilities under the audit engagement.

Essential Components of a Management Representation Letter

A standard management representation letter contains certain key statements that auditors rely upon. These include:

• Financial statement disclosures : Confirmation that management has provided the auditors with all relevant information and access needed to perform the audit.
• Recognition, measurement and disclosure : Assertion that the financial statements comply with the applicable financial reporting framework and standards.
• Non-compliance : Disclosure of any non-compliance with laws and regulations.
• Litigation and claims : Details of any actual, pending or threatened litigation and claims that could impact the financial statements.

The letter will also typically list areas of significant estimates and judgments made by management in preparing the financial statements. For example, allowances for doubtful accounts, asset impairment assessments , and assumptions used in valuation models.

By obtaining written representation on these matters, auditors gain evidence to issue their audit opinion. The management representation letter should be signed by the CEO and CFO or equivalent members of senior management.

Legal and Ethical Implications of Management Representations

Signing a management representation letter has legal and ethical implications. Management must ensure representations made to the auditors are accurate and made in good faith. Intentionally misrepresenting information or omitting relevant details could constitute fraud and result in legal liability.

Auditors also have a duty to assess the reasonableness of management representations and corroborate them with other audit evidence. Relying solely on management representations without further verification could call into question the quality of the audit.

Overall, the management representation letter facilitates open and transparent communication between management and auditors. It serves as a legally binding confirmation of management's fulfillment of its financial reporting responsibilities.

What is the main purpose of a management representation letter?

The main purpose of a management representation letter is to obtain written confirmation from management that they have fulfilled their responsibility for the fair presentation of the financial statements. This letter documents that management has provided the auditors with all relevant information and access needed to conduct the audit.

Some key purposes of the management representation letter include:

Confirming management's responsibility for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework (e.g. GAAP or IFRS).

Affirming that management has provided the auditors with all relevant information and access to records, documentation and personnel that is necessary for the audit.

Disclosing any instances of fraud involving management, employees with significant internal control roles, or those that cause a material misstatement of the financial statements.

Presenting details on matters that impact the financial statements - such as plans or intentions that may affect asset/liability carrying values, information about related parties, contingencies, subsequent events, etc.

Stating that all transactions have been recorded and are reflected in the financial statements. This helps confirm completeness and cut-off assertions.

So in summary, the management representation letter serves as important audit evidence that validates information provided by management to the auditors. It also formally documents management's responsibilities and representations concerning the financial statements.

What is the meaning of management representation?

Management representation refers to written confirmation provided by management of an entity to the auditors regarding the accuracy and completeness of financial statements and adequacy of internal controls.

The management representation letter is a key audit evidence prepared at the completion of the audit process. It contains management's assertions regarding:

• Fair presentation of financial statements
• Completeness of information provided to auditors
• Proper accounting policies used
• Reasonableness of significant estimates made

Essentially, through this letter, management takes responsibility for the fair presentation of the financial statements. They confirm to the auditors that they have fulfilled their financial reporting responsibilities.

The management representation letter covers all periods encompassed by the audit report and is dated the same date as the completion of audit fieldwork. It is addressed to the engagement partner and signed by those with appropriate responsibilities for the financial statements, usually the Chief Executive Officer and Chief Financial Officer.

By obtaining written representations from management, the auditors demonstrate they have obtained sufficient appropriate audit evidence to support their audit opinion. The representations serve as necessary supplementary corroboration of management's oral assertions made during the audit.

In summary, the management representation letter is a written statement from management provided to the auditors as part of the audit evidence. It confirms management's compliance with financial reporting responsibilities to enable auditors to form their audit opinion.

What is an example of a management representation letter?

We are providing this letter in connection with your audit of the cost representation statement of USAID resources managed by (Client Name) under Contract No. XXX “Project Name” for the period MM/DD/YY to MM/DD/YY.

We confirm, to the best of our knowledge and belief, the following representations made to you during your audit:

• We have made available to you all financial records and related data, including service auditor reports.
• There have been no communications from regulatory agencies concerning noncompliance with or deficiencies on financial reporting practices.
• We have no knowledge of any known or suspected fraudulent financial reporting or misappropriation of assets involving management or employees with significant roles in internal control.
• We have disclosed to you the results of our assessment of risk that the cost representation statement may be materially misstated as a result of fraud.
• There are no material transactions that have not been properly recorded in the accounting records.
• We believe the effects of any uncorrected financial statement misstatements aggregated by you are immaterial.
• We have disclosed all liabilities, both actual and contingent.
• There are no violations or possible violations of laws or regulations whose effects should be considered.

We confirm that the representations we have made to you during your audit are complete, truthful, and accurate.

Sincerely, [Signature] [Client Representative Name and Title]

What is the difference between management letter and management representation letter?

The key differences between a management letter and a management representation letter in an audit are:

Focus : The management letter focuses on identifying weaknesses and areas of improvement in the company's financial reporting process and internal controls. Management representation, on the other hand, focuses on providing evidence of management's understanding and support of the audit process.

Purpose : The purpose of a management letter is to communicate deficiencies in internal control and make suggestions for improvements. The purpose of a management representation letter is to confirm certain information that the auditors have requested from management.

Content : A management letter contains comments and recommendations from the auditor about issues encountered during the audit. A management representation letter contains specific statements by management regarding matters such as the fairness of financial statements.

Timing : A management letter is typically issued after the audit report while a management representation letter is obtained during the audit.

In summary, while both letters relate to the audit process, the management letter aims to provide suggestions for improvement while the management representation letter serves as audit evidence regarding management's assertions. The management representation letter supports the audit by confirming the accuracy of the financial statements.

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The purpose and importance of management representation letters.

Management representation letters serve several key purposes in the audit process. Most importantly, they provide additional audit evidence to support the auditor's opinion on the financial statements.

Reinforcing the Auditor's Collection of Audit Evidences

Management representation letters reinforce the audit evidence the auditor has already obtained throughout the audit. As outlined in ISA 500 Audit Evidence, auditors must obtain sufficient appropriate evidence to support their opinion. The letter serves as written representation from management on important assertions related to the financial statements. This includes the completeness and accuracy of information provided to the auditor.

Management's Accountability for Financial Reporting

Additionally, the letter highlights management's responsibilities over financial reporting. Management, not the auditor, is responsible for the preparation and fair presentation of the financial statements. The representation letter formally documents that management has fulfilled these duties, a key assertion needed to issue an audit opinion.

Assurance on Contingent and Off-Balance-Sheet Liabilities

Auditors also rely on management's representations on significant estimates and disclosures. This includes assurance from management that the financial statements appropriately reflect contingent liabilities and off-balance-sheet liabilities in accordance with the applicable financial reporting framework.

In summary, representation letters serve as a final confirmation from management that they have fulfilled their financial reporting responsibilities. The letters provide key audit evidence and accountability to support the auditor's work in accordance with auditing standards.

Drafting a Management Representation Letter: Best Practices

A management representation letter is an important part of the audit process. It documents certain written representations made by management to the auditors regarding the company's financial statements.

Drafting an effective management representation letter requires following several best practices:

Management Representation Letter Template: A Starting Point

When creating a management representation letter, it's best to start with a template. This ensures all relevant topics are covered such as:

• Management's responsibility for the preparation and fair presentation of the financial statements
• Availability of all financial records and related data
• Completeness of information provided regarding transactions and events
• Disclosure of all liabilities, both actual and contingent
• Non-existence of any fraud or illegal acts

Tailor the template to the specific circumstances and transactions of the business. But the template establishes a solid foundation.

Who Should Sign the Management Representation Letter

Typically the management representation letter should be signed by:

• The CEO or Managing Director
• The CFO or Financial Controller

This demonstrates the company's overall governance has reviewed the representations and attests to their validity and completeness.

In some cases, representation from heads of divisions or departments may also be necessary regarding transactions or activities under their specific purview.

Customizing Representations to Reflect Unique Organizational Circumstances

While a template is useful, each management representation letter must be customized to reflect the distinct transactions and activities of the organization. Specifically call out areas the auditors have highlighted as potential risks or requiring further representations.

For example, if the company underwent a major acquisition, restructuring, or system implementation, representations would be needed to address the associated impacts and risks regarding financial reporting.

The management representation letter is not a mere formality. It serves as an indispensable record of the critical dialogue between management and auditors. Following these best practices helps craft letters that clearly communicate important representations.

Management Representation Letter Samples and Examples

Management representation letters are important documents in the financial audit process. They contain written confirmation from management about the accuracy and completeness of financial statements and disclosures. Reviewing examples can help companies understand what to include in their own letters.

Analyzing a Management Representation Letter Sample

Here is an excerpt from a sample management representation letter:

We acknowledge our responsibility for the fair presentation in the financial statements of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (GAAP). We have provided you with unrestricted access to persons within the Company...

This excerpt demonstrates several key elements:

• Acknowledgment of management's responsibility for financial statements conforming to GAAP
• Confirmation that auditors had full access to people and information

Other standard inclusions are statements around contingent liabilities, litigation matters, plans or intentions that may affect assets or liabilities, and confirmation that appropriate disclosures have been made.

Analyzing examples helps identify customary terms to include.

Management Representation Letter PDF: Accessibility and Format

Management representation letters are often provided to auditors as PDF files. This locked, uneditable format:

• Facilitates easy sharing of the definitive final version
• Allows clear version control with digital signatures
• Enables reliable long-term archival storage

PDF format removes ambiguity around which representation letter version was relied upon.

Real-World Examples: Complex Issues

Consider these excerpts from real-world representation letters:

"The restructuring provision of $20 million represents our best estimate of costs to complete the plant closure based on current plans..."

"We confirm that we have properly recorded and disclosed the acquisition of Company XYZ in the financial statements..."

These excerpts demonstrate how companies transparently address complex real situations like restructurings or major transactions in the representation letter.

Real examples provide assurance that the company has appropriately considered complex accounting matters.

Comparing Management Letters and Management Representation Letters

Management letters and management representation letters serve important but distinct purposes in the audit process.

Management Letter vs Management Representation Letter: Clarifying the Distinction

A management letter communicates deficiencies or recommendations for improvement identified by the auditor during the audit. These may relate to internal controls, processes, or compliance issues that could be made more effective.

In contrast, a management representation letter obtained near the end of an audit contains specific written representations from management about the accuracy and completeness of the financial statements and disclosures. Common representations confirm that:

• Financial statements are fairly presented
• Significant assumptions used by management are reasonable
• All relevant information has been provided to the auditor
• There are no undisclosed side agreements or contingencies

While management letters offer suggestions, representation letters confirm critical facts underlying the audit.

The Role of the Auditor in Relation to Management Representations

Auditors use both tools to fulfill their responsibilities:

Management letters reflect the auditor's duty to communicate control deficiencies to those charged with governance. This allows the entity to take timely remedial action.

Representation letters provide audit evidence as part of the auditor's risk assessment procedures under auditing standards. They represent a form of documentary evidence about management's intents, knowledge and accuracy of the financial statements.

If management were unwilling to sign the representation letter, the auditor would need to reconsider their audit opinion.

Impact on Audit Opinions and Auditor's Reports

The management letter has no direct bearing on the auditor's opinion, unless the issues it raises cast doubt on the fairness of the financial statements.

However, matters raised in the representation letter directly relate to the audit evidence obtained. If management refuses to sign the letter, the auditor would likely issue a qualified opinion or disclaimer of opinion on the financial statements due to the limitation on audit scope and evidence.

In summary, while management letters offer helpful recommendations, representation letters provide the auditor written confirmation of critical information pertinent to the audit itself. Both play key roles in the audit process.

International Standards on Auditing: ISA 580 Management Representations

The International Standards on Auditing (ISA) provide a framework for conducting high quality external audits. ISA 580 specifically focuses on obtaining appropriate written representations from management to support the audit evidence gathered.

Understanding ISA 580 and Its Relevance to Management Representation Letters

ISA 580 outlines the auditor's responsibilities for obtaining written representations from management to confirm certain matters or to support other audit evidence. Some key points:

• Requires auditors to obtain written representations from management that they have fulfilled their financial reporting responsibilities
• Covers areas like recognition, measurement, presentation, and disclosure of information as per the financial reporting framework
• Helps auditors obtain confirmation on matters material to the financial statements, like the completeness of information provided
• Allows for detection of material misstatements due to fraud

By adhering to ISA 580, auditors can ensure management representation letters align with the necessary audit evidence requirements.

Compliance with International Standards on Auditing

It is critical that management representation letters comply with ISA guidelines, including:

• Obtaining representations from appropriate individuals : Those with overall responsibility for financial reporting, such as the CEO and CFO
• Written format : Printed on the organization's letterhead and signed by hand
• Date : No earlier than the date of the audit report
• Wording : Clear acknowledgement of responsibilities, accuracy of information provided, etc.

Strict compliance ensures the representations constitute valid and appropriate audit evidence as per ISA 500.

Case Studies: Adherence to ISA 580 in Practice

Company A - Drafted a management representation letter that was vague, unsigned, and outdated. By not adhering to ISA 580, they had to invest additional time and resources to obtain proper representations.

Company B - Carefully followed ISA 580 requirements. The CFO and CEO signed off on a letter confirming completeness of information and awareness of responsibilities. This aligned smoothly with the audit process.

As exemplified, non-compliance ultimately wastes time and resources. Whereas alignment with ISA 580 standards helps streamline external audits.

Conclusion and Key Takeaways

Management representation letters are important, standard audit evidence that reduce risk. They signify management's representations concerning the financial statements and accountability for internal controls, fraud, and information provided to auditors.

Summarizing the Role of Management Representation Letters in Audits

Management representation letters summarize key information and representations from management to auditors. They serve several key functions:

• Confirm management's responsibility for the preparation and fair presentation of the financial statements
• Disclose any issues or deficiencies in internal controls
• Affirm that all relevant information has been provided to auditors
• Highlight any fraud, illegal acts, or noncompliance with laws and regulations

By obtaining these written representations, auditors reduce engagement risk and confirm their understanding of management's views and positions.

Final Thoughts on Best Practices and Compliance

It is critical that management representation letters adhere to regulations and professional standards. Key best practices include:

• Ensuring the letter is dated as of the date of the auditor's report
• Having the letter signed by those with appropriate responsibilities and authority
• Disclosing all relevant issues completely and accurately
• Following the guidelines and requirements outlined in ISA 580 and other applicable standards

Diligent compliance promotes accuracy, transparency, and accountability.

Encouraging Diligence and Transparency in Financial Reporting

At their core, management representation letters aim to foster diligent, truthful, and transparent financial reporting. By eliciting key written representations from management, auditors promote an environment of responsibility, compliance, and ethical practice. This ultimately supports the accuracy and reliability of financial statements for all stakeholders.

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Management Representation Letter: Format, Content, Signature

Home » Bookkeeping » Management Representation Letter: Format, Content, Signature

As of 2019, the FASB requires publicly traded companies to prepare financial statements following the Generally Accepted Accounting Principles (GAAP). Auditors are required by professional standards to report, in writing, internal control matters that they believe should be brought to the attention of those charged with governance (the board). Generally, if your auditor is going to put an internal control matter in a letter, they have assessed that the matter was the result of a deficiency in internal controls. This is an important part of that audit that the profession does not take lightly.

One common example of a deficiency in internal control that’s severe enough to be considered a material weakness or significant deficiency is when an organization lacks the knowledge and training to prepare its own financial statements, including footnote disclosures. The “SAS 115” letter is usually issued when any significant deficiencies or material weaknesses would have been discussed with management during the audit, but are not required to be communicated in written form. In performing an audit of your Plan’s internal controls and plan financials, your auditors are required to obtain an understanding of the Plan’s operations and internal controls.

A management representation letter is a form letter written by a company’s external auditors, which is signed by senior company management. The letter attests to the accuracy of the financial statements that the company has submitted to the auditors for their analysis. The CEO and the most senior accounting person (such as the CFO) are usually required to sign the letter. The letter is signed following the completion of audit fieldwork, and before the financial statements are issued along with the auditor’s opinion. External auditors follow a set of standards different from that of the company or organization hiring them to do the work.

In doing so, they may become aware of matters related to your Plan’s internal control that may be considered deficiencies, significant deficiencies, or material weaknesses. Audits performed by outside parties can be extremely helpful in removing any bias in reviewing the state of a company’s financials. Financial audits seek to identify if there are any material misstatements in the financial statements. An unqualified, or clean, auditor’s opinion provides financial statement users with confidence that the financials are both accurate and complete. External audits, therefore, allow stakeholders to make better, more informed decisions related to the company being audited.

The representation should reaffirm your client’s understanding of all significant terms in the engagement letter. A relevant assertion is a financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated.

The purpose of an internal audit is to ensure compliance with laws and regulations and to help maintain accurate and timely financial reporting and data collection. It also provides a benefit to management by identifying flaws in internal control or financial reporting prior to its review by external auditors.

Depending on materiality and other qualitative factors, the auditors will consider the deficiency to be an “other” matter, significant deficiency, or material weakness. The auditor has discretion on which category the deficiency falls into, but are otherwise required to use the standard wording and definitions in the letter.

It serves to document management’s representations during the audit, reducing misunderstandings of management’s responsibilities for the financial statements. The definition of good internal controls is that they allow errors and other misstatements to be prevented or detected and corrected by (the nonprofit’s) employees in the normal course of performing their duties.

Material weaknesses or significant deficiencies may exist that were not identified during the audit, and auditors are required to disclose this in their written communication. The auditor’s report contains the auditor’s opinion on whether a company’s financial statements comply with accounting standards. The results of the internal audit are used to make managerial changes and improvements to internal controls.

What is a management representation letter?

A management representation letter is a form letter written by a company’s external auditors, which is signed by senior company management. The letter attests to the accuracy of the financial statements that the company has submitted to the auditors for their analysis.

A control objective provides a specific target against which to evaluate the effectiveness of controls. Management representation is a letter issued by a client to the auditor in writing as part of audit evidences. The representations letter must cover all periods encompassed by the audit report, and must be dated the same date of audit work completion.

These types of auditors are used when an organization doesn’t have the in-house resources to audit certain parts of their own operations. The assertion of completeness is an assertion that the financial statements are thorough and include every item that should be included in the statement for a given accounting period. The assertion of completeness also states that a company’s entire inventory, even inventory that may be temporarily in the possession of a third party, is included in the total inventory figure appearing on a financial statement. The compilation standards do not require practitioners to obtain a management representation letter, but this does not mean that it’s not a prudent thing to do. Obtaining a representation letter helps to ensure your client understands the services that you have provided, the limitations on the work you have completed, and that they are ultimately responsible for their financial statements.

The biggest difference between an internal and external audit is the concept of independence of the external auditor. When audits are performed by third parties, the resulting auditor’s opinion expressed on items being audited (a company’s financials, internal controls, or a system) can be candid and honest without it affecting daily work relationships within the company. Auditors evaluate each internal control deficiency noted during the audit to determine whether the deficiency, or a combination of deficiencies, is severe enough to be considered a material weakness or significant deficiency. In assessing the deficiency, auditors consider the magnitude of potential misstatements of your financial statements as well as the likelihood that internal controls would not prevent or detect and correct the misstatements.

Representation to Management

• In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit.
• written confirmation from management to the auditor about the fairness of various financial statement elements.
• Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk.

The idea behind a management representation letter is to take away some of the legal burdens of delivering wrong financial statements from the auditor to the company. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Internal auditors are employed by the company or organization for whom they are performing an audit, and the resulting audit report is given directly to management and the board of directors. Consultant auditors, while not employed internally, use the standards of the company they are auditing as opposed to a separate set of standards.

If the auditors detect an unexpected material misstatement during your audit, it could indicate that your internal controls are not functioning properly. Conversely, lack of an actual misstatement doesn’t necessarily mean that your internal controls are working.

The determination of whether an assertion is a relevant assertion is based on inherent risk, without regard to the effect of controls. Financial statements and related disclosures refers to a company’s financial statements and notes to the financial statements as presented in accordance with generally accepted accounting principles (“GAAP”). References to financial statements and related disclosures do not extend to the preparation of management’s discussion and analysis or other similar financial information presented outside a company’s GAAP-basis financial statements and notes.

External audits can include a review of both financial statements and a company’s internal controls. When a company’s financial statements are audited, the principal element an auditor reviews is the reliability of the financial statement assertions. In the United States, the Financial Accounting Standards Board (FASB) establishes the accounting standards that companies must follow when preparing their financial statements.

In an audit of financial statements, professional standards require that auditors obtain an understanding of internal controls to the extent necessary to plan the audit. Auditors use this understanding of internal controls to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures to minimize that risk. written confirmation from management to the auditor about the fairness of various financial statement elements. The purpose of the letter is to emphasize that the financial statements are management’s representations, and thus management has the primary responsibility for their accuracy.

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This letter is useful for setting the expectations of both parties to the arrangement. Almost all companies receive a yearly audit of their financial statements, such as the income statement, balance sheet, and cash flow statement. Lenders often require the results of an external audit annually as part of their debt covenants. For some companies, audits are a legal requirement due to the compelling incentives to intentionally misstate financial information in an attempt to commit fraud.

Management representation letter

As long as there’s a reasonable possibility for material misstatement of account balances or financial statement disclosures, your internal controls are considered to be deficient. An auditor typically will not issue an opinion on a company’s financial statements without first receiving a signed management representation letter. An audit engagement is an arrangement that an auditor has with a client to perform an audit of the client’s accounting records and financial statements. The term usually applies to the contractual arrangement between the two parties, rather than the full set of auditing tasks that the auditor will perform. To create an engagement, the two parties meet to discuss the services needed by the client.

As a result of the Sarbanes-Oxley Act (SOX) of 2002, publicly traded companies must also receive an evaluation of the effectiveness of their internal controls. As noted above, an internal control letter is usually the result of a deficiency in internal controls discovered during the audit, most commonly from a material audit adjustment. The letter includes required language regarding the severity of the deficiency.

Real Business Owners,

The parties then agree on the services to be provided, along with a price and the period during which the audit will be conducted. This information is stated in an engagement letter, which is prepared by the auditor and sent to the client. If the client agrees with the terms of the letter, a person authorized to do so signs the letter and returns a copy to the auditor. By doing so, the parties indicate that an audit engagement has been initiated.

Also, the letter provides supplementary audit evidence of an internal nature by giving formal management replies to auditor questions regarding matters that did not come to the auditor’s attention in performing audit procedures. Some auditors request written representations of all financial statement items. All auditors require representations regarding receivables, inventories, plant and equipment, liabilities, and subsequent events. The letter is required at the completion of the audit fieldwork and prior to issuance of the financial statements with the auditor’s opinion.

Auditors spend a lot of time assessing how material audit adjustments and immaterial adjustments that have the potential to be material will be communicated in the internal control letter. The Representation Letter is issued with the draft audit and is required by auditing standards to finalize the audit. The Representation Letter is a letter from the Association to our firm confirming responsibilities of the board and management for the financial statements, as well as confirming information provided to us during the audit. The President or Treasurer and Management need to sign the Representation Letter and return it back to our office within 60 days from the date the draft audit was issued. Representation Letters received after the 60-day mark may result in additional auditing procedures in order to finalize the audit and comply with auditing standards at an additional expense to the Association.

   

Client representation letters: optional or required? (Quality Review)

Your Ask Joey ™ Answer

What is a management representation letter?

A “rep” letter is the audit teams’ formal evidence that management understands their responsibilities and that management has performed all of their responsibilities.

Management should provide the auditor with a representation letter in writing that outlines the following characteristics:

A) Managements acceptance for its responsibility in the establishment and maintenance of an effective internal control systems.

B) Managements performance of its assessment of the effectiveness of its internal control systems.

C) A statement of management’s assessment and the criteria that has been used and implemented as of a specified period in time.

D) A statement that management has disclosed all deficiencies both in design and operation of its system of internal controls.

E) A statement that management confirms that all significant deficiencies and material weaknesses have been disclosed to the independent external auditor.

F) A statement the management confirms whether or not previously identified deficiencies have been resolved or remain unresolved.

G) Illustrates all fraudulent activities that result in material misstatements specifically involving senior management or other employees that have a significant role in ICFR.

H) Illustrates whether or not there are any significant changes to internal controls after the “as of” date of the report as well as any corrective action that has been taken by management in regard to significant deficiencies and material weaknesses that have been identified.

I) Any failure to obtain written representations for management will result in scope limitations which might include the auditor’s withdrawal from the engagement altogether.

DoMyEssay Review: Quality, Pricing and a New Detailed Outline Feature

If you’ve ever felt overwhelmed by assignments, you’re certainly not the only one facing this uphill battle in college. That’s where DoMyEssay comes in. It is a well-known academic writing service that’s been helping students navigate the stress of deadlines for years. Whether you’re juggling multiple essays or a single daunting paper, having a reliable academic service for assistance can make a big difference. Before jumping in, it’s crucial to check the quality it offers. We’ll be taking a close look at DoMyEssay, with a particular focus on its new detailed outline feature. This tool is designed to help you structure your essays more effectively, giving you a clear path from introduction to conclusion. Curious if it’s worth it? Stick around as we explore both the feature and the overall service to see if DoMyEssay is up to the task of meeting your academic needs. Easy Navigation and Simple Design When you first land on DoMyEssay’s website, it’s obvious that simplicity and functionality were top priorities. The design is intuitive, with a clean layout that’s easy on the eyes and a visually appealing color scheme that enhances the user experience. Tech-savvy or not, you’ll find the site easy to navigate. It’s logically organized, making it simple to locate what you need without any fuss or extra clicks. The site functions smoothly on all devices, whether you’re at home on a desktop or checking in from your phone between classes. The order placement process is straightforward and clearly explained, with step-by-step instructions that make it simple for anyone to get started, even if it’s their first time using the service. In addition to its ease of use, the website’s design contributes to an overall positive experience. It’s clear that DoMyEssay was built with students in mind, ensuring that getting the academic help you need is quick, efficient, and stress-free. The convenience and user-friendly nature of the site make it an excellent choice for students looking for reliable academic support. The Potential of the Detailed Outline Feature One of the most impressive offerings from DoMyEssay is its detailed outline feature. This tool is truly a game-changer for anyone aiming to take their essay writing to the next level. Here’s how it works: you team up with an expert writer to craft a customized outline that’s tailored to your specific assignment. Unlike generic templates, this outline is a detailed roadmap, ensuring comprehensive coverage of all the key points you want to explore. The advantages of having such a tailored outline are substantial. It helps keep your essay focused, ensures logical flow, and guarantees that all essential arguments are well-organized. Plus, before the writing process even begins, you get to review and approve the outline, making sure it aligns perfectly with your expectations and goals. This feature doesn’t just save time—it enhances the overall quality of your work by providing a clear structure from the start. Imagine cutting down on revisions because your ideas are already well-ordered and coherent. To enhance your academic performance, trying the detailed outline feature is essential. It’s designed to help you produce well-structured, high-quality essays with less stress and more confidence. How DoMyEssay’s Bidding System Keeps Costs Low When it comes to affordability, DoMyEssay offers some of the most competitive pricing in the academic writing market. The bidding system is a standout, letting users choose their ideal writer based on budget and expertise. This system gives you more control over who works on your paper and how much you’re willing to spend. Here’s an example to put it into perspective: let’s say you need a 2-page college-level essay with a 7-day deadline. With DoMyEssay, you could get that done for around $22. The price might vary slightly depending on urgency, academic level, and number of pages, but it’s a great deal considering the quality of work you’re getting. Plus, discounts are available when ordering more than one page. DoMyEssay’s pricing shines in its balance of affordability and quality. You’re not just getting a cheap service—you’re getting value for your money, with the added bonus of selecting a writer who matches your academic needs. It’s a great choice for students seeking quality work without overspending. Efficient and Professional Customer Support DoMyEssay’s customer support team is the backbone of the service, ensuring that your experience is smooth from start to finish. They’re not just professional; they’re also incredibly efficient, handling inquiries with speed and precision. Their 24/7 availability truly stands out. Whether it’s early morning or late at night, help is always on hand. Support agents respond thoroughly, ensuring every question is answered. Whether you’re having trouble placing an order or need help finding the perfect writer for your assignment, they guide you through the process with patience and clarity. Their ability to match you with a writer who fits your specific needs is particularly impressive, ensuring that your paper is in the best hands. Overall, the support team at DoMyEssay creates a truly supportive experience. They’re not just there to solve problems; they’re there to make sure you feel confident and comfortable throughout your entire interaction with the service. It’s this level of dedication that leaves you feeling taken care of, no matter what academic challenges you’re facing. Final Thoughts: A Balanced Look at DoMyEssay DoMyEssay offers a comprehensive range of services that are both reliable and user-friendly. The intuitive website design makes placing orders hassle-free for students. Despite offering competitive pricing, the quality of work remains high, thanks to the platform’s bidding system, which allows users to choose writers who best match their needs. Customer support is a strong suit, with a professional team available 24/7 to address any questions or concerns. It extends to helping you find the right writer and guiding you through the ordering process. The detailed outline feature is particularly useful for structuring your writing projects, ensuring that your essays are well-organized from the start. In summary, DoMyEssay strikes a good balance between affordability, quality, and convenience, making it a reliable choice for students....

EssayHub Innovates Again: A Review of the New Homework Planner

Have you ever felt overwhelmed by a mountain of assignments and wished for a magic tool to organize it all? EssayHub’s new Homework Planner is a fresh innovation designed to help you juggle your academic tasks with ease. You must have already heard about the service because it has made a buzz in recent years. A lot of EssayHub reviews praise the platform for its helpful writing services, but now it’s branching out. Let’s see if the new Homework Planner is capable of improving your study routine. Is it just another planner, or is it the secret weapon you’ve been waiting for to tackle your studies head-on? Keep reading to find out how well EssayHum bridges the gap between writing support and organizational tools, including a review of its support, pricing, quality, and new features. Does it live up to the hype? 24/7 Customer Support Experience When you are stuck on a late-night study session, and you hit a snag, EssayHub’s customer support is there to help. These folks understand how stressful student life can be and offer round-the-clock help. Whether it’s a question about how to use the Homework Planner or how to place an order, they’re just a quick chat away. I put the service to the test by asking for help on a complex research topic. The support team responded swiftly and was incredibly helpful. They walked me through how to find the top writer for my task, showing genuine interest and commitment. In general, the website is easy to navigate, and I was able to get all the information I needed. Is EssayHub Budget-Friendly? Getting help with your schoolwork shouldn’t break the bank. EssayHub offers some of the best pricing in the market, making it a standout choice. Its team understands that students are often on a tight budget, and they’ve structured their prices to ease that burden. For instance, a 4-page essay with a 6-day deadline at EssayHub? Just $42. That’s it. When you stack EssayHub up against other writing services, you’ll find they often come out ahead with the lowest prices. This makes EssayHub not just a wise choice for quality but also for your wallet. So, if you’re looking for a service that combines affordability with academic integrity, EssayHub might just be your new go-to. EssayHub’s Quality Standards When you order from EssayHub, you’re signing up for top-notch work without AI-generated and plagiarized writing. The writers are not just throwing around promises; they deliver essays that meet high academic standards and exceed expectations. Their dedication to quality means every student gets personalized, detailed care for their assignments. I can vouch for their quality first-hand. I was thoroughly impressed with the essay I received. It was well-crafted and 100% original. I even checked it with a plagiarism tool—zero hits. It’s this level of dedication to producing authentic and high-quality work that sets EssayHub apart. EssayHub Homework Planner: Your New Study Buddy? Say hello to the newest tool in your academic arsenal: the Homework Planner by EssayHub. This innovative feature is designed to help students like you manage their study tasks more effectively. Whether you’re juggling multiple assignments or need to keep tabs on upcoming exams, the Homework Planner is your go-to resource for staying organized and on track. What makes the Homework Planner stand out? For starters, it offers customizable task lists. You can adjust your tasks as your priorities shift, ensuring your planner always matches your real-time needs. Then there’s the deadline tracking feature, which shows you at a glance what’s due and when, so you never miss a beat. But it doesn’t stop there. The Homework Planner also includes progress monitoring, allowing you to see exactly how far you’ve come and what remains to be tackled. Having a clear view of your deadlines helps you plan better and avoids last-minute panic. Plus, if you’re feeling overwhelmed, you can assign tasks to professionals directly through the platform, giving you a helping hand when you need it most. The benefits? Using the tool can enhance your productivity, cut down on stress, and ultimately improve your academic performance. Why not give it a try? Head over to EssayHub and see for yourself how this tool can transform your study routine and help you excel in your courses. EssayHub Wrap-Up: My Comprehensive Take Let’s break it down: why should you consider EssayHub as your go-to academic partner? After digging into what EssayHub has to offer, it’s clear that its combination of stellar customer support, wallet-friendly pricing, and top-notch, original work makes it a standout choice. Every aspect of the service, from the AI-free and plagiarism-free papers to customer support, is designed with your academic success in mind. The Homework Planner alone is a major win—it’s not just another digital tool but a strategic asset that can significantly enhance your organizational skills, reduce stress, and improve your overall academic performance. So, if you’re looking for a reliable, affordable, and high-quality educational support system, EssayHub definitely deserves your attention.

The Benefits of Using the HMRC Digital Assistant for Tax Assistance

The  HMRC Digital Assistant is more than a traditional chatbot: it is an advanced virtual assistant created to guide the clients affected by the UK specificities of tax requirements. Having dependable assistance within a few minutes, this AI-controlled chatbot changes the perspective on handling taxes. Here are some of the key benefits of using the HMRC Digital Assistant for tax assistance:Here are some of the key benefits of using the HMRC Digital Assistant for tax assistance:   1. Instant Access to Information   The HMRC Digital Assistant offers on the spot answers to queries on a great number of tax issues. Whether the user is interested in learning about filing deadlines, tax codes or how to complete a self-assessment, the assistant will always be on hand to provide the correct information.   24/7 Availability: As opposed to the conventional customer support which may perhaps restrict its operations and availability, the Digital Assistant is available at all times, and therefore one can be able to seek help where and when necessary.   Quick Responses: Query response is provided by the assistant to enable users access answers promptly and thereby eliminating the stress involved in seeking tax assistance.   2. User-Friendly Interface   Some of the most valuable assets of the HMRC Digital Assistant are that it is very user-friendly, even for people who are not adept at using any type of digital technology. The navigation is simple, it informs the user on how to get to the required data set.   Simple Interaction: You can pose your queries in simple language and the assistant will well comprehend your corn queries.   3. Tailored Assistance   There is a HMRC Digital Assistant that sends advice to you according to the particular taxes you have. This is because the assistant is programmed in such a way that it provides you with the general advice whether you are a self-employed, business person or an individual taxpayer .   4. Reduction of Errors   Engaging the HMRC Digital Assistant can be helpful in that it reduces errors when it comes to the taxes that are paid. As the assistant, the knowledge of correct information and clearing up ambiguous tax laws minimizes the chances of making mistakes that may cause fines or penalties.   Accurate Information: Using data from the latest HMRC, the assistant provides you undeniable and valid recommendations.   5. Enhanced Efficiency   The HMRC Digital Assistant enhances the process of handling taxes and makes the process faster. If for instance you want to file a return, verify your tax code or seek advice in relation to certain deductions that you intend to make, the assistant can assist in the completion of these tasks.   Time-Saving: Instant replies and a direct-link provision for more details make you search less for the information the assistant offers.   Task Automation: Another way that the assistant can be an added benefit is by providing other shortcuts, for instance with regard to tax calendar, where the assistant can send a reminder of vital tax dates.   6. Confidentiality and Security   To preserve confidentiality and security in your interactions, HMRC Digital Assistant has been designed. HMRC has put in place various measures of security and encryption to ensure that the data entered by you is safe.   Data Protection: Your interactions with the Digital Assistant are private and therefore your data privacy and protection is ensured and complied with.   Secure Access: HMRC’s environment is secure and your private filing information, which the assistant uses, cannot be accessed by other people.   7. Cost-Effective Support   Seeking tax advice through the HMRC Digital Assistant is free of charge. It offers reliable assistance in preparing taxes and does not require the payment of big sums to specialists in the field.   Free Service: The Digital Assistant is free of charge and gives users a free tool with which to manage their tax responsibilities.   Savings on Professional Fees: Professional advice may still be required for sophisticated tax queries though the ‘assistant’ can answer many of the ordinary queries making paid consultations manageable.   Conclusion   The objective of the HMRC Digital Assistant is to provide help and support to individuals who wish to make managing their taxes easier. Here are some advantages for the assistant that make it easier to adhere to the proper flow of tax obligations, which include availability of information; simple layout of the assistant; personalized support as well as enhanced security. No matter whether it is time to deal with personal taxes or the matters related to the company’s finances, one can turn to the UK’s HMRC Digital Assistant with confidence. 

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Can someone explain why this is wrong?

I am 100% sure that all SSARs (Preparations, Compilations, and Reviews) require a management representation letter.

Why this is wrong? how tricky is the exam compared to this?

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• Budget 2024
• CA, CS, CMA

Format of Management Representation Letter (MRL) for Audit

In this article author has shared the format of the Management Representation Letter or Written Representation (MRL/WR)  to be obtained from the management during various professional engagements:

M/s XYZ & Co.

Gurgaon, Haryana

Sub: Management Representation in course of Statutory Audit for F.Y. 2021-22 .

This representation letter is provided in connection with your audit of the financial statements of M/s Private Limited, Delhi for the year ended March 31, 20XX  for the purpose of expressing an opinion as to whether the financial statements are presented fairly, in all material respects, (or give a true and fair view) in accordance with the applicable accounting standards in India.

We confirm that (to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves):

Financial Statements

• We have fulfilled our responsibilities, as set out in the terms of the audit engagement, for the preparation of the financial statements in accordance with Financial Reporting Standards; in particular the financial statements are fairly presented (or give a true and fair view) in accordance with the applicable accounting standards in India.
• Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.
• Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of applicable accounting standards in India.
• All events subsequent to the date of the financial statements and for which applicable accounting standards in India require adjustment or disclosure have been adjusted or disclosed.
• The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements as a whole.

Information Provided

• We have provided you with:

Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;

Additional information that you have requested from us for the purpose of the audit; and

Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.

• All transactions have been recorded in the accounting records and are reflected in the financial statements.
• We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves:

Management;

Employees who have significant roles in internal control; or

Others where the fraud could have a material effect on the financial statements.

• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entity’s financial statements communicated by employees, former employees, analysts, regulators or others.
• We have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements.
• We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware.

For and on Behalf Board of Directors

For any inquiry you may write us on:  [email protected]

Disclaimer:  The information provided by the author in the article is for general informational purposes only. All information provided is in the good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information in the article.

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Name: CA. Ramanujan Sharma

Qualification: ca in practice, company: n k r s and co. (chartered accountants), location: gurugram, haryana, india, member since: 25 apr 2022 | total posts: 18, my published posts, join taxguru’s network for latest updates on income tax, gst, company law, corporate laws and other related subjects..

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