ASRE 2410 - Review of an Interim Financial Report Performed by the Independent Auditor of the Entity - April 2006
AN AUDITOR’S REVIEW REPORT UNDER THE CORAN AUDITOR’S REVIEW REPORT UNDER THE CORPORATIONS ACT 2001
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AN AUDITOR’S REVIEW REPORT UNDER THE CORPORATIONS ACT 2001
Introduction
This Appendix has been prepared to assist an auditor, engaged to undertake a review engagement, by providing an example of an auditor’s review report on a review of a financial report for a half-year prepared in accordance with Part 2M.3 of the Corporations Act 2001 (“The Act”). The example reflects both requirements of this Auditing Standard and the Act, but are not intended to require standard wording for the circumstances of particular modifications.
This Appendix contains limited extracts from the Act and the Australian Accounting Standards in order to provide a context for the example report included in this Appendix. These selected extracts are included in this Appendix only for the purpose stated and accordingly are not intended to be an exhaustive summary of an auditor’s obligations and requirements which are found elsewhere in this Auditing Standard, the Act, the Australian Accounting Standards and other relevant mandates.
This Appendix:
Includes selected extracts from the Act and Australian Accounting Standards, and references to other relevant information, to provide a contextual framework; and
Provides an example of a review report.
Contextual Framework
Corporations Act 2001
The following selected extracts from the Act are included in this Appendix only to point to some of the important requirements of the Act that affect auditors engaged to undertake a review engagement in accordance with the Act.
(a) prepare a financial report and directors’ report for each half-year; and
(b) have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor’s report; and
(c) lodge the financial report, the director’s report and the auditor’s report on the financial report with ASIC;
unless the entity is not a disclosing entity when lodgement is due”.
5. Section 303(1) states:
“The financial report for a half-year consists of:
(a) the financial statements for the half-year;
(b) the notes to the financial statements; and
(c) the directors’ declaration about the statements and notes”.
Section 304 states:
“The financial report for a half-year must comply with the accounting standards and any further requirements in the regulations”.
Section 305 states:
“The financial statements and notes for a half-year must give a true and fair view of:
(a) the financial position and performance of the disclosing entity; or
(b) if consolidated financial statements are required the financial position and performance of the consolidated entity.
This section does not affect the obligation under section 304 for financial reports to comply with accounting standards.
Note: If the financial statements prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 303(3)(c)”.
Section 309(4) states:
“An auditor who reviews the financial report for a half-year must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe the financial report does not comply with Division 2”.
Section 309(5) states:
“A report under subsection (4) must:
(a) Describe any matter referred to in subsection (4); and
(b) Say why that matter makes the auditor believe that the financial report does not comply with Division 2”.
Section 309(5A) states:
“The auditor’s report must include any statements or disclosures required by the auditing standards”.
Section 320 states:
“A disclosing entity that has to prepare or obtain a report for a half-year under Division 2 must lodge the report with ASIC within 75 days after the end of the half-year”.
Other Information – ASIC and ASX
An auditor, in the role of auditor, is required by section 311 of the Act to notify ASIC if the auditor is aware of certain circumstances. ASIC Practice Note 34 Auditors’ Obligations: Reporting to ASIC, provides guidance to help auditors comply with their obligations under section 311 of the Act.
ASIC and the ASX have agreed that listed entities can satisfy the requirements of the Act by lodging the half-year financial report, the directors’ report, and the review report on the financial report with the ASX. Details are provided in ASIC Practice Note 61 Relief from Dual Lodgement of Financial Reports and Class Order 98/104 (as amended by Class Orders 99/90 and 99/837).
Australian Accounting Standards
Minimum Components of an Interim Financial Report - AASB 134 Interim Financial Reporting, paragraph 8 states:
“An interim financial report shall include, at a minimum, the following components:
(a) a condensed balance sheet;
(b) a condensed income statement;
(c) a condensed statement of changes in equity showing either:
(i) all changes in equity; or
(ii) changes in equity other than those arising from transactions with equity holders acting in their capacity as equity holders;
(d) a condensed cash flow statement; and
(e) selected explanatory notes”.
Form and Content of Interim Financial Reports - AASB 134 paragraph 9 states:
“If an entity publishes a complete financial report as its interim financial report, the form and content of that report shall conform to the requirements of AASB 101 for a financial report”.
Form and Content of Interim Financial Reports - AASB 134 paragraph 10 states:
“If an entity publishes a condensed financial report as its interim financial report, that condensed report shall include, at a minimum, each of the headings and subtotals that were included in its most recent annual financial report and the selected explanatory notes as required by this Standard. Additional line items or notes shall be included if their omission would make the condensed interim financial report misleading”.
Materiality - AASB 134 paragraph 23 states:
“In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality shall be assessed in relation to the interim period financial data. In making assessments of materiality, it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data”.
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