Report Reviews: Report Examples

No comments or recommendations

With comments and recommendations

Sample Report – No Comments or Recommendations

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 compilation engagements (report review) of the accounting practice of [Name of Firm] (the firm) for the year ended June 30, 20XX. A report review is available to firms that only perform compilation engagements under Statements on Standards for Accounting and Review Services (SSARS) where the compiled financial statements omit substantially all disclosures. [Name of Firm] has represented to us that the firm performed no services under the Statements on Auditing Standards, no services under the Statements on Standards for Attestation Engagements, no review engagements and no compilation engagements with selected or substantially all disclosures under SSARS during the year ended June 30, 20XX.

Our review was conducted in conformity with Standards established by the Peer Review Board of the American Institute of Certified Public Accountants (AICPA). A report review consists only of reading selected financial statements and the accountant’s report thereon, together with certain representations provided by the firm and other representations on the engagements submitted for review. The objective of a report review is to enable the reviewed firm to improve the overall quality of its compilation engagements that omit substantially all disclosures. To accomplish this objective, the reviewer provides comments and recommendations based on whether the submitted financial statements and related accountant’s reports appear to conform with the requirements of professional standards in all material respects. A report review 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.

As a result of our report review, we have no comments or recommendations.

John Brown, Reviewer [or Name of Reviewing Firm]

Authorized acknowledgment for the reviewed firm:

I acknowledge that there are no disagreements on significant matters.

Signature:_____________________ Title:________________ Date:________

Report -- With Comments and Recommendations
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If you have noted comments and have recommendations to offer the firm, you should use a format in a style such as the one that follows. Note that the last sentence before the signature has additional language that asks the firm to represent that it “agrees to correct all comments by implementing the above recommendations..” Note that the captions in the report use the term “comment” and not the term “finding” and that comments are labeled “significant” where appropriate.

[Separate paragraphs following the first two standard paragraphs]

As a result of our report review, we have the following comments and recommendations:

Significant Comment - During our review, we noted that the firm did not modify its reports on financial statements when the financial statements did not note that the statements were presented on a comprehensive basis of accounting other than generally accepted accounting principles (GAAP).

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 GAAP. 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.

Significant Comment - 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 on which the accountant’s reports were not appropriately modified. These included failure to do the following.

• Appropriately recognize revenue. • Present financial statements in a proper format. • Recognize conflicting or incorrect information within the financial statements presented.

In one instance, the firm has discussed the departures with its client and decided to recall its report and restate the accompanying financial statements.

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 reporting checklist on accounting engagements> <cold review of reports and financial statements prior to issuance>.

Significant Comment - In 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.

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.

Significant Comment - On one of the compilation engagements submitted for review, we noted that the accountant’s report was not modified to disclose the presentation of the accompanying financial statements on a comprehensive basis of accounting other than generally accepted accounting principles. Specifically, the financial statements were prepared on the <cash basis> <modified cash basis> <income tax basis> of accounting and omitted substantially all disclosures, but did not describe the basis of accounting in a footnote or in a note on the face of the financial statements. In these circumstances, Statement on Standards for Accounting and Review Services require disclosure of the basis of accounting in the accountant’s report.

Recommendation - We recommend that the firm review the financial statements that it compiles and identify those prepared using 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 the accountant’s report, footnote or note on the face of the financial statements must be revised or created. The memorandum should indicate that a report should describe the basis of accounting and state that it is a comprehensive basis of accounting other than generally accepted accounting principles, unless the firm’s client prefers to add a separate footnote to the financial statements or include a note on the face of the financial statements that describes the basis of accounting.

Significant Comment - On one of the engagements that we reviewed, we noted that the firm’s compilation report did not disclose the firm’s lack of independence with respect to the financial statements as required by the AICPA Statements on Standards for Accounting and Review Services.

Recommendation - We recommend that all members of the firm review the situations that can impair independence and determine if there are any engagements where the firm’s independence may be impaired. Independence should also be considered during the final engagement review process.

Significant Comment - The reports on compiled financial statements for the engagements selected for review did not indicate that the financial statements omitted substantially all disclosures required by <generally accepted accounting standards> <cash basis of accounting> <income tax basis of accounting>.

Recommendation - We recommend that the firm review its compilation engagements that are prepared with substantially all disclosures omitted and determine that the accountant’s report includes a reference to the omission of substantially all disclosures.

Significant Comment – Our review also identified instances in the engagements selected for review where the firm’s compilation reports did not contain all reporting elements required by professional standards. Specifically, the reports did not:

• Refer to Statements on Standards for Accounting and Review Services • Refer to either periods covered by the financial statements • Describe the responsibility taken on the supplementary information

Recommendation - We recommend that the firm review the current requirements for reporting on financial statements and revise the standard reports used by the firm to conform with these requirements. In addition, the firm should revise its reports to conform with professional standards governing reporting on comparative periods and supplemental information presented with the 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. The basis of accounting was readily determinable.

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 - We noted that the accountant’s reports for compiled financial statements, prepared on the <cash basis> <income tax basis> of accounting, did indicate the basis of accounting, but did not indicate that "the <cash> <income tax> basis of accounting is a comprehensive basis of accounting other than generally accepted accounting principles,” as required by Statements of Standards for Accounting and Review Services. A similar comment was noted on the firm’s prior peer review.

Recommendation - The firm should review its standard accountant’s reports for compiled financial statements prepared on an other comprehensive basis of accounting. The reports should then be modified, as necessary, to include that the basis of accounting is a comprehensive basis of accounting other than generally accepted accounting principles.

Comment - The firm represented to us that it did not possess the required firm state license to perform compilation engagements and issue reports thereon for the period when the reviewed engagements were issued.

Recommendation - The firm should obtain the required firm state license.

John Brown, Reviewer [or Name of Reviewing Firm]

Authorized acknowledgement for the reviewed firm:

I acknowledge receipt of the report (and that there are no disagreements on the comments above and that the firm agrees to correct all comments by implementing the above recommendation(s)).

Signature:_____________________ Title:________________ Date:________

The firm may, at its option, attach a separate response to this letter, although such a response is not required.

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