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Peer
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Report and
LOC Guide > Engagement Review Reports
Engagement Reviews: Report Examples
Reports: Unmodified | Modified | Adverse
Letter of comments: Unmodified | Modified
Letter of response:
Unmodified
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Adverse
Unmodified Report for an Engagement Review
August 31, 20XX
To the Partners [or other appropriate terminology] Able, Baker & Co. or To
John B. Able, CPA
We have performed a peer review of selected engagements (engagement review)
of the accounting practice of [Name of firm] for the year ended June 30, 20XX,
in accordance with standards established by the Peer Review Board of the
American Institute of Certified Public Accountants. [Name of firm] has
represented to us that the firm performed no services under the Statements on
Auditing Standards, Government Auditing Standards or examinations of prospective
financial statements under the Statements on Standards for Attestation
Engagements (SSAEs)* during the year ended June 30, 20XX.
An engagement review consists of reading selected financial statements or
information and the accountant’s report thereon, together with certain
representations provided by the firm on the engagements submitted for review,
and reviewing limited working papers for the purpose of considering whether the
financial statements or information and the accountant’s report appear to be in
conformity with professional standards in all material respects and whether the
firm’s documentation conforms with the requirements of professional standards applicable to those
engagements in all material respects. An engagement review also includes reading
required representations provided by the firm but does not provide the reviewer
with a basis for expressing any assurance as to the firm’s system of quality
control for its accounting practice, and we express no opinion or any form of
assurance on that system.
In connection with our engagement review, nothing came to our attention that
caused us to believe that the financial statements or information and the
related accountant’s reports submitted for review by [Name of firm] for the year
ended June 30, 20XX, did not conform with the requirements of professional
standards in all material respects (or that the documentation on those
engagements did not conform with the applicable requirements of professional
standards in all material respects.) / (and there was no documentation required for
the engagements submitted for review.)
(As is customary in an engagement review, we have issued a letter under this
date that sets forth comments that were not considered to be of sufficient
significance to affect the limited assurance expressed in this report.)
John Brown, Reviewer [or Name of reviewing firm]
* Insert the following into paragraph 1, if applicable:
"or review or compilation engagements with full or selected disclosures
under the Statements on Standards for Accounting and Review Services
(SSARS)"
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Modified Report on an Engagement Review
August 31, 20XX
To the Partners [or other appropriate terminology] Able, Baker & Co. or To
John B. Able, CPA
We have performed a peer review of selected engagements (engagement review)
of the accounting practice of [Name of firm] for the year ended June 30, 20XX,
in accordance with standards established by the Peer Review Board of the
American Institute of Certified Public Accountants. [Name of firm] has
represented to us that the firm performed no services under the Statements on
Auditing Standards, Government Auditing Standards or examinations of prospective
financial statements under the Statements on Standards for Attestation
Engagements (SSAEs) during the year ended June 30, 20XX.
An engagement review consists of reading selected financial statements or
information and the accountant’s report thereon, together with certain
representations provided by the firm on the engagements submitted for review,
and reviewing limited working papers for the purpose of considering whether the
financial statements or information and the accountant’s report appear to be in
conformity with professional standards in all material respects and whether the
firm’s documentation conforms with the requirements of professional standards applicable to those
engagements in all material respects. An engagement review also includes reading
required representations provided by the firm but does not provide the reviewer
with a basis for expressing any assurance as to the firm’s system of quality
control for its accounting practice, and we express no opinion or any form of
assurance on that system.
In connection with our engagement review, except for the effect of the
deficiency(ies) described below, nothing came to our attention that caused us to
believe that the financial statements or information and the related
accountant’s reports submitted for review by [Name of firm] for the year ended
June 30, 20XX, did not conform with the requirements of professional standards
in all material respects (or that the documentation on those engagements did not
conform with the applicable requirements of professional standards in all material
respects.)/(and there was no documentation required for the engagements
submitted for review.)
Reasons for Modified Report and Recommendations
Deficiencies - During our review of the accountant’s reports issued by
the firm, we noted numerous instances in which the accompanying financial
statements departed from professional standards and the accompanying
accountant’s reports were not appropriately modified. These included failure to
do the following:
• Disclose material inter-company transactions. • Appropriately recognize
revenue. • Present the financial statements in a proper format. • Recognize
conflicting or incorrect information within the financial statements presented.
In one instance, on a review of a manufacturing client, the firm discussed
the departures with the client and decided to recall its report and restate the
accompanying financial statements in order to comply with professional standards
in all material respects. This engagement was deemed substandard.
Recommendation - We recommend that the firm establish a means of
ensuring its conformity with professional standards on accounting engagements.
Such means might include continuing professional education in accounting and
reporting, use of a comprehensive reporting and disclosure checklist on
accounting engagements, or a cold review of reports and financial statements
prior to issuance.
Deficiencies – During our review we noted that the firm failed to
obtain a management representation letter and its working papers failed to
document the matters covered in the accountant’s inquiry and analytical
procedures on a review engagement. The construction industry engagement referred
to in this deficiency was deemed substandard. This deficiency was identified on
the firm’s previous review.
Recommendation – The firm should review and implement the requirements
for obtaining management representation letters and the content of the
accountant’s working papers on review engagements.
Deficiencies - On substantially all the engagements that we reviewed,
we noted that the firm did not conform with the AICPA Statements on Standards
for Accounting and Review Services for reporting on comparative financial
statements and going concern issues. As previously mentioned, these engagements
were deemed substandard.
Recommendation - We recommend that the firm review the requirements
for reporting on comparative financial statements and revise the standard
reports used by the firm to conform with these requirements. Also, the firm
should review the requirements governing reporting on going concern issues and
provide guidance to the staff in this area.
(As is customary in an engagement review, we have issued a letter under this
date that sets forth comments that were not considered to be of sufficient
significance to affect the limited assurance expressed in this report.)
John Brown, Reviewer [or Name of reviewing firm]
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Adverse Report on an Engagement Review
August 31, 20XX To the Partners [or other appropriate terminology] Able,
Baker & Co. or To John B. Able, CPA
We have performed a peer review of selected engagements (engagement review)
of the accounting practice of [Name of firm] for the year ended June 30, 20XX,
in accordance with standards established by the Peer Review Board of the
American Institute of Certified Public Accountants. [Name of firm] has
represented to us that the firm performed no services under the Statements on
Auditing Standards, Government Auditing Standards or examinations of prospective
financial statements under the Statements on Standards for Attestation
Engagements (SSAEs) during the year ended June 30, 20XX.
An engagement review consists of reading selected financial statements or
information and the accountant’s report thereon, together with certain
representations provided by the firm on the engagements submitted for review,
and reviewing limited working papers for the purpose of considering whether the
financial statements or information and the accountant’s report appear to be in
conformity with professional standards in all material respects and whether the
firm’s documentation conforms with the requirements of professional standards applicable to those
engagements in all material respects. An engagement review also includes reading
required representations provided by the firm but does not provide the reviewer
with a basis for expressing any assurance as to the firm’s system of quality
control for its accounting practice, and we express no opinion or any form of
assurance on that system.
Because of the deficiencies described below, we believe that the engagements
submitted for review by [Name of firm] for the year ended June 30, 20XX, do not
conform with the requirements of professional standards in all material
respects.
Reasons for Adverse Report and Recommendations
Deficiencies - Our review disclosed several failures to adhere to
professional standards in reporting on material departures from GAAP and in
conforming with standards for accounting and review services. Specifically, the
firm did not disclose in certain compilation and review reports failures to
conform with GAAP in accounting for leases, in accounting for revenue from
construction contracts, and in disclosures made in the financial statements or
the notes thereto concerning various matters important to an understanding of
those statements. In addition, the firm did not obtain management representation
letters on review engagements. The engagements in the construction and
manufacturing industries were deemed substandard.
Recommendation - We recommend the firm establish a means of ensuring
its conformity with professional standards. In addition, we recommend the firm
review and implement the requirements for obtaining management representation
letters on review engagements. The firm should either participate in continuing
professional education in financial statement disclosures, use of a reporting
and disclosure checklist on accounting engagements, or conduct a pre-issuance
review of the report and accompanying financial statements by an individual not
associated with the engagement prior to issuance.
Deficiencies - During our review, we noted that the firm did not
modify its reports on financial statements when neither the financial statements
nor the footnotes noted that the statements were presented on a comprehensive
basis of accounting other than generally accepted accounting principles. The
engagements in the professional services industry were deemed substandard. This
deficiency was noted in the firm’s previous reviews.
Recommendation - We recommend that the firm review the reports issued
during the last year and identify those reports that should have been modified
to reflect a comprehensive basis of accounting other than generally accepted
accounting principles. A memorandum should then be prepared highlighting the
changes to be made in the current year and placed in the files of the client for
whom a report must be changed.
Deficiencies - In the engagements that we reviewed, disclosures of
related-party transactions and lease obligations as required by generally
accepted accounting principles were not included in the financial statements,
and the omissions were not disclosed in the accountant’s reports. As indicated
in the previous deficiency the engagement was deemed substandard.
Recommendation - We recommend that the firm review the professional
standards governing disclosures of related-party transactions and lease
obligations and disseminate information regarding the disclosure requirements to
all staff involved in reviewing or compiling financial statements. In addition,
we recommend that the firm establish appropriate policies to ensure that all
necessary related-party transactions and lease obligations are disclosed in
financial statements reported on by the firm. For example, a step might be added
to compilation and review work programs requiring that special attention be
given to these areas.
Deficiencies - During our review of the financial statements prepared
under SSARS No. 8, we noted that the engagement letter did not include all of
the required information. This construction industry engagement was deemed
substandard.
Recommendation - The firm should review the professional standards
governing the information to be included in engagement letters for financial
statements prepared under SSARS No. 8 and make sure it conforms to those
standards.
John Brown, Reviewer [or Name of reviewing firm]
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Letter of Comments to an Unmodified Report on an
Engagement Review
August 31, 20XX
To the Partners [or other appropriate terminology] Able, Baker & Co. or To
John B. Baker, CPA
We have performed a peer review of selected engagements (engagement review)
of the accounting practice of [Name of firm] for the year ended June 30, 20XX,
and have issued our report thereon dated August 31, 20XX. That report should be
read in conjunction with the comments in this letter. These matters described
below were not considered to be of sufficient significance to affect the limited
assurance expressed in that report.
Comment - During our review of computer-generated compiled financial
statements prepared by the firm, we noted that the firm failed to indicate the
level of responsibility it was taking for supplemental data presented with the
basic financial statements.
Recommendation - The firm should revise the standard reports used by
the firm to conform with professional standards governing reporting on
supplemental data presented with basic financial statements.
Comment - We noted that computer-generated compiled financial
statements prepared on a basis of accounting other than generally accepted
accounting principles (GAAP) were properly reported on, but they used titles
normally associated with a GAAP presentation.
Recommendation - The firm should review the professional standards
governing the titles to be used if financial statements are prepared on a
comprehensive basis of accounting other than GAAP and make sure that the
software used by the firm is adjusted to conform with these standards. Until the
software is revised, the firm should manually prepare the compiled financial
statements in accordance with professional standards.
Comment - During our review of the financial statements prepared under
SSARS No. 8, we noted that the engagement letter did not refer to supplementary
information, which was presented along with the basic financial statements.
Recommendation - The firm should review the professional standards
governing the information to be included in engagements letters for financial
statements prepared under SSARS No. 8 and make sure it conforms to those
standards.
[Same signature as on the report on the engagement review]
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Letter of Comments to a Modified
Report on an Engagement Review
August 31, 20XX
To the Partners [or other appropriate terminology] Able, Baker & Co. or To
John B. Baker, CPA
We have performed a peer review of selected engagements (engagement review)
of the accounting practice of [Name of firm] for the year ended June 30, 20XX,
and have issued our report thereon dated August 31, 20XX that was modified as
described therein. That report should be read in conjunction with the comments
in this letter. These matters described below were not considered to be of
sufficient significance to affect the limited assurance expressed in that
report.
Comment - On an engagement submitted for review the financial statements
disclosures were omitted in the areas of advertising and concentration of credit
risk.
Recommendation - The firm should review the professional standards for
financial statement disclosures and consider establishing a means to comply with
those standards. Such means might include the use of a comprehensive disclosure
checklist.
Comment - During our review of a nonprofit engagement, we noted that the
statement of activities did not present the change in total net assets of the
entity for the reporting period as required by professional standards. The
statement did report the changes in the applicable categories of net assets
required by professional standards.
Recommendation - The firm should review the presentation requirements of
professional standards and communicate information regarding those requirements
to appropriate staff.
Comment – The firm represented to us that it did not possess a firm license
as required by the state board of accountancy to perform engagements and issue
reports for two months of the year under review.
Recommendation – The partners of the firm should ensure that they renew their
firm license in a timely manner.
[Same signature as on the report on the engagement review]
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Peer
Review Guide >
Report and
LOC Guide > Engagement Review Reports |