Conformity with International Standards Conformity with International Standards on Review Engagements

Conformity with International Standards on Review Engagements

This Auditing Standard on Review Engagements conforms with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).

The underlying standard is extant ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity. The underlying standard to extant ASRE 2410 is ISRE 2410 which has not been drafted in “clarity” format by the IAASB.

Following consultation with constituents in Australia in accordance with normal exposure draft processes, the AUASB has decided that:

 due to the nature of reviews of other historical financial information, a separate Standard is more appropriate than ASRE 2410 being adapted by the auditor for this purpose; and

 ASRE 2405 Review of Historical Financial Information Other than a Financial Report, developed by the AUASB, deals with reviews of other historical financial information.

Accordingly, ASRE 2410 is intended to conform, with the exceptions listed below, to ISRE 2410 to the extent that ISRE 2410 deals with the review of financial statements by the auditor of the entity.

Except as noted below, this Auditing Standard conforms, to the extent described above, with International Standard ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the IAASB. The main differences between this Auditing Standard and ISRE 2410 are:

1. This Auditing Standard contains the following requirements that are not contained in ISRE 2410:

 This Auditing Standard applies to:

1. a review, by the independent auditor of the entity, of a financial report for a half‑year in accordance with the Corporations Act 2001; and
2. a review, by the independent auditor of the entity, of a financial report, or a complete set of financial statements, comprising historical financial information, for any other purpose (Ref: Para. 1(a) and (b)).

 Where in rare and exceptional circumstances, factors outside the auditor’s control prevent the auditor from complying with an essential procedure contained within a relevant requirement, the auditor shall:

 if possible, perform appropriate alternative procedures; and

 document in the working papers:

o the circumstances surrounding the inability to comply;

o the reasons for the inability to comply; and

o justification of how alternative procedures achieve the objectives of the requirement.

When the auditor is unable to perform appropriate alternative procedures, the auditor shall consider the implications for the auditor’s review report (Ref: Para. 7).

 The auditor shall, prior to agreeing the terms of the engagement, determine whether the financial reporting framework is acceptable and obtain agreement from management and, where appropriate, those charged with governance, that it acknowledges and understands its responsibility:

 for the preparation and fair presentation of the financial report;

 for such internal controls as management and, where appropriate, those charged with governance, deems necessary to enable the preparation of the financial report that is free from material misstatement; and

 to provide the auditor with:

o access to information relevant to the preparation of the financial report;

o additional information that the auditor may request for the purposes of the review engagement; and

o unrestricted access to persons from whom the auditor determines it necessary to obtain evidence (Ref: Para. 11).

 The auditor shall agree the terms of the engagement with the entity, which shall be recorded in writing by the auditor and forwarded to the entity. When the review engagement is undertaken pursuant to legislation, the minimum applicable terms are those contained in the legislation (Ref: Para. 12).

 The auditor shall consider materiality, using professional judgement, when:

 determining the nature, timing and extent of review procedures; and

 evaluating the effect of misstatements (Ref: Para. 15).

 When comparative information is included for the first time in a financial report, an auditor shall perform similar procedures on the comparative information as applied to the current period financial report (Ref: Para. 21).

 If management and, where appropriate, those charged with governance refuse to provide a written representation that the auditor considers necessary, this constitutes a limitation of the scope of the auditor’s work and the auditor shall express a qualified conclusion or a disclaimer of conclusion, as appropriate (Ref: Para. 24).

 When, as a result of performing the review of a financial report, a matter comes to the auditor’s attention that causes the auditor to believe in the existence of fraud or
non‑compliance by the entity with laws and regulations, the auditor shall communicate the matter as soon as practicable to those charged with governance and shall consider the implications for the review (Ref: Para. 30).

 The auditor shall express a qualified or adverse conclusion when a matter has come to the auditor’s attention that causes the auditor to believe a material adjustment should be made to the financial report for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework. The auditor shall include a basis for modification paragraph in the report, that describes the nature of the departure and, if practicable, states the effects on the financial report. If the effects or possible effects are incapable of being measured reliably, a statement to that effect and the reasons therefor shall be included in the basis for modification paragraph. The conclusion paragraph shall be headed “Qualified Conclusion” or “Adverse Conclusion”, whichever is relevant (Ref: Para. 33).

 When the effect of the departure is so material and pervasive to the financial report that the auditor concludes a qualified conclusion is not adequate to disclose the misleading or incomplete nature of the financial report, the auditor shall express an adverse conclusion (Ref: Para. 34).

 Unless required by law or regulation, an auditor shall not accept an engagement to review a financial report when management has imposed a limitation on the scope of the auditor’s review (Ref: Para. 36).

 If, after accepting the engagement, management imposes a limitation on the scope of the review, the auditor shall request management to remove the limitation. If management refuses the auditor’s request to remove the limitation, the auditor shall communicate, in writing, to the appropriate level of management and those charged with governance, the reasons why the review cannot be completed (Ref: Para. 37).

 If management and, where appropriate, those charged with governance, refuses the auditor’s request to remove a limitation that has been imposed on the scope of the review, but there is a legal or regulatory requirement for the auditor to issue a report, the auditor shall issue a disclaimer of conclusion or qualified conclusion report, as appropriate, containing the reason(s) why the review cannot be completed
(Ref: Para. 38).

 The auditor shall express a qualified conclusion when, in rare circumstances, there is a limitation on the scope of the auditor’s work that is confined to one or more specific matters, which while material, is not in the auditor’s judgement pervasive to the financial report, and when the auditor concludes that an unqualified opinion cannot be expressed. A qualified conclusion shall be expressed as being “except for” the effects of the matter to which the qualification relates. The conclusion paragraph shall be headed “Qualified Conclusion” (Ref: Para. 39).

1. The following requirements in ISRE 2410, paragraph 43(e) and paragraph 43(j), are not contained in this Auditing Standard:

Paragraph 43(e)

“In other circumstances, a statement that management is responsible for the preparation and presentation of the interim financial information in accordance with the applicable financial reporting framework”.

Paragraph 43(j)

“In other circumstances, a conclusion as to 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 (including a reference to the jurisdiction or country of origin of the financial reporting framework when the financial reporting framework used is not International Financial Reporting Standards).”

Requirements and guidance on the review of financial statements that are prepared in accordance with a financial reporting framework that is not designed to achieve fair presentation are included in ASRE 2405 Review of Historical Financial Information Other than a Financial Report.

1. This Auditing Standard includes explanatory guidance not contained within ISRE 2410 on:

 Materiality (Ref: Para. A14 to A18); and

 Comparatives (Ref: Para. A28 to A31).

1. This Auditing Standard provides illustrative examples that differ in form and content from those contained in ISRE 2410, namely:

 An engagement letter (Appendix 1).

 A written representation letter (Appendix 1).

 The auditor’s unmodified review reports
(Appendices 3 and 4).

 The auditor’s modified review reports (Appendix 4).

1. This Auditing Standard provides illustrative detailed procedures that may be performed in an engagement to review a financial report that are not contained in ISRE 2410 (Appendix 2).

Compliance with this Auditing Standard on Review Engagements enables compliance with ISRE 2410 to the extent described above.