Objective
Objective
The objective of this project was to establish standards and provide guidance for auditors that review interim financial information issued by their audit clients.
Scope
ISRE 2400, Review of Interim Financial Information Performed by the Independent Auditor of the Entity applies when:
- The review is performed by the entity's auditor, and
- The interim financial information is prepared in accordance with an applicable financial reporting framework.
Issues
The ISRE requires the auditor to:
- Comply with ethical requirements relevant to an audit of annual financial statements;
- Implement quality control procedures that are applicable to the individual engagement;
- Plan and perform the review with an attitude of professional skepticism recognizing that circumstances may exist that cause the interim financial information to require a material adjustment for it to be in accordance with the applicable financial reporting framework;
- Agree on the terms of the engagement with the client;
- Have an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both annual and interim financial information, sufficient to plan and conduct the engagement so as to be able to (a) identify the types of potential material misstatement and consider the likelihood of their occurrence; and (b) select the inquiries, analytical and other review procedures that will provide the auditor with a basis for reporting whether anything has come to the auditor's attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework;
- Make inquiries, primarily of persons responsible for financial and accounting matters, and perform analytical and other review procedures to enable the auditor to conclude whether, on the basis of the procedures performed, anything has come to the auditor's attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework;
- Obtain evidence that the interim financial information agrees or reconciles with the underlying accounting records;
- Inquire whether management has identified all events up to the date of the review report that may require adjustment to or disclosure in the interim financial information;
- Inquire whether management has changed its assessment of the entity's ability to continue as a going concern;
- Evaluate, individually and in the aggregate, whether uncorrected misstatements that have come to the auditor's attention are material to the interim financial information;
- Obtain written representation from management;
- Read the other information that accompanies the interim financial information to consider whether any such information is materially inconsistent with the interim financial information;
- Issue a written report in accordance with the ISRE; and
- Prepare review documentation that is sufficient and appropriate to provide a basis for the auditor's conclusion and to provide evidence that the review was performed in accordance with this ISRE and applicable legal and regulatory requirements.
Task Force progress / Board discussions to date
The IAASB approved ISRE 2400 in June 2005. The ISRE is effective for the review of interim financial information for periods beginning on or after December 15, 2006. Earlier adoption of the ISRE is permissible.