One of the many valued services provided by accountants for their corporate clients is the performance of a Review Engagement of the entity's financial statements. 

Although a Review Engagement does not require as detailed an examination as an Audit Engagement, it is does provide the user of the entity's financial statements with limited assurance regarding the contents of the statements. This level of assurance is often required for small to medium sized entities with multiple owners, or requested by the bank or other lender of this same category of enterprises.

If your entity requires such an engagement, you have become used to the analysis of and management inquiry from your accountants. But these standards will soon be changing with the adoption of more stringent Review Engagement standards effective for financial statements with December 31, 2017 or subsequent year ends. 

The changes to these standards are twofold:

The first change is the implementation of more clarity to the user of the financial statements about the work performed by the accountant and the level of assurance being provided. This is achieved through standards that require the accountant to consider the appropriateness of a Review Engagement for their client and to communicate this to management along with an explicit statement about the limited assurance provided – reiterated at the beginning and end of the engagement. For example, the new Review Engagement report will include the following statement that is clearer than the message in the existing report:

"The procedures performed in a review are substantially less in extent than, and vary in nature from, those performed in an audit conducted in accordance with Canadian generally accepted auditing standards. Accordingly, we do not express an audit opinion on these financial statements."

The second change encompasses requirements that the accountant obtain a better understanding of the entity's operations, systems and business risks. Owners, management and staff of entities will see this achieved through an increased level of communication with and inquiry from their accountants – notably in the areas of business cycles, related party relationships and transactions, possible fraud and non-compliance with laws or regulations.Ultimately, these changes will help to provide the client entity and the user of the financial statements with a better understanding of the purpose and scope of a Review Engagement and a superior end product.

If you would like to know more about how these changing standards will impact your entity's Review Engagement, please contact our team.