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AR-C Section 90
Review of Financial Statements
Source: SSARS No. 21; SSARS No. 23; SSARS No. 24; SSARS No. 25.
Effective for reviews of nancial statements for periods ending on or
after December 15, 2015, unless otherwise indicated.
Introduction
Scope and Applicability of This Section
.01 This section applies when the accountant is engaged to perform a re-
view of nancial statements. This section also applies when the accountant is
engaged to review other historical nancial information, excluding pro forma
nancial information. Reviews of pro forma nancial information are to be
performed in accordance with Statements on Standards for Attestation En-
gagements. (Ref: par. .A1–.A3) [As amended, effective October 2016, by SSARS
No. 23.]
.02 This section does not apply when the accountant is engaged to review
interim nancial information when
a. the entity's latest annual nancial statements have been audited
by the accountant or a predecessor;
b. the accountant either
i. has been engaged to audit the entity's current year nan-
cial statements or
ii. audited the entity's latest annual nancial statements
and, in situations in which it is expected that the current
year nancial statements will be audited, the engagement
of another accountant to audit the current year nancial
statements is not effective prior to the beginning of the pe-
riod covered by the review; and
c. the entity prepares its interim nancial information in accor-
dance with the same nancial reporting framework as that used
to prepare the annual nancial statements.
AU-C section 930, Interim Financial Information, provides guidance for review
engagements when the conditions in a–c are met.
The Engagement to Review Financial Statements
.03 In a review of nancial statements, the accountant expresses a conclu-
sion regarding the entity's nancial statements in accordance with an appli-
cable nancial reporting framework. The accountant's conclusion is based on
the accountant obtaining limited assurance. The accountant's report includes
a description of the nature of a review engagement as context for the readers of
the report to be able to understand the conclusion. [Paragraph added, effective
for reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
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4578 Statements on Standards for Accounting and Review Services
.04 The accountant performs primarily analytical procedures and in-
quiries to obtain sufcient appropriate review evidence as the basis for a con-
clusion on the nancial statements as a whole, expressed in accordance with
the requirements of this section. [Paragraph added, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.05 If the accountant becomes aware of a matter that causes the accoun-
tant to believe the nancial statements may be materially misstated, the ac-
countant designs and performs additional procedures, as the accountant con-
siders necessary in the circumstances, to be able to conclude on the nancial
statements in accordance with this section. [Paragraph added, effective for re-
views of nancial statements for periods ending on or after December 15, 2021,
by SSARS No. 25.]
Effective Date
.06 This section is effective for reviews of nancial statements for peri-
ods ending on or after December 15, 2015. Early implementation is permitted.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Objectives
.07 In conducting a review of nancial statements, the objectives of the
accountant are to
a. obtain limited assurance, primarily by performing analytical pro-
cedures and inquiries, as a basis for reporting whether the ac-
countant is aware of any material modications that should be
made to the nancial statements for them to be in accordance
with the applicable nancial reporting framework and (Ref: par.
.A4)
b. report on the nancial statements as a whole and communicate,
as required by this section.
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
Definitions
.08 For purposes of Statements on Standards for Accounting and Review
Services (SSARSs), the following terms have the meanings attributed as fol-
lows:
Analytical procedures. Evaluations of nancial information through
analysis of plausible relationships among both nancial and nonnan-
cial data. Analytical procedures also encompass such investigation, as
is necessary, of identied uctuations or relationships that are incon-
sistent with other relevant information or that differ from expected
values by a signicant amount.
Comparative nancial statements. A complete set of nancial state-
ments for one or more prior periods included for comparison with the
nancial statements of the current period.
Emphasis-of-matter paragraph. A paragraph included in the accoun-
tant's review report that is required by SSARSs, or is included at the
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accountant's discretion, and that refers to a matter appropriately pre-
sented or disclosed in the nancial statements that, in the accountant's
professional judgment, is of such importance that it is fundamental to
the users' understanding of the nancial statements.
Error. Mistakes in the nancial statements, including arithmetical or cler-
ical mistakes, and mistakes in the application of accounting principles,
including inadequate disclosures.
Experienced accountant. An individual (whether internal or external
to the rm) who has practical review experience and a reasonable un-
derstanding of
a. review processes;
b. SSARSs and applicable legal and regulatory requirements;
c. the business environment in which the entity operates; and
d. review and nancial reporting issues relevant to the entity's
industry.
Fraud. An intentional act that results in a misstatement in nancial state-
ments.
Generally accepted accounting principles (GAAP). References to
GAAP in SSARSs means generally accepted accounting principles pro-
mulgated by bodies designated by the Council of the AICPA pursuant
to the "Compliance With Standards Rule" (ET sec. 1.310.001) and the
"Accounting Principles Rule" (ET sec. 1.320.001) of the AICPA Code of
Professional Conduct.
Historical nancial information. Information expressed in nancial
terms regarding a particular entity, derived primarily from that en-
tity's accounting system, about economic events occurring in past time
periods or about economic conditions or circumstances at points in
time in the past.
Inquiry. Inquiry consists of seeking information of knowledgeable persons
within or outside the entity.
Limited assurance. A level of assurance that is less than the reasonable
assurance obtained in an audit engagement but is at an acceptable
level as the basis for the conclusion expressed in the accountant's re-
view report. (Ref: par. .A10)
Management. The person(s) with executive responsibility for the con-
duct of the entity's operations. For some entities,management includes
some or all of those charged with governance, for example, executive
members of a governance board or an owner-manager.
Misstatement. A difference between the amount, classication, presen-
tation, or disclosure of a reported nancial statement item and the
amount, classication, presentation, or disclosure that is required for
the item to be presented fairly in accordance with the applicable -
nancial reporting framework. Misstatements can arise from fraud or
error.
Misstatements also include those adjustments of amounts, classica-
tions, presentations, or disclosures that, in the accountant's profes-
sional judgment, are necessary for the nancial statements to be pre-
sented fairly, in all material respects.
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4580 Statements on Standards for Accounting and Review Services
Modied conclusion. A qualied conclusion or an adverse conclusion.
Noncompliance. Acts of omission or commission by the entity, either in-
tentional or unintentional, which are contrary to the prevailing laws
or regulations. Such acts include transactions entered into, by, or in
thenameof,theentityoronitsbehalfbythosechargedwithgov-
ernance, management, or employees. Noncompliance does not include
personal misconduct (unrelated to the business activities of the entity)
by those charged with governance, management, or employees of the
entity.
Other-matter paragraph. A paragraph included in the accountant's re-
view report that is required by SSARSs, or is included at the ac-
countant's discretion, and that refers to a matter other than those
presented or disclosed in the nancial statements that, in the accoun-
tant's professional judgment, is relevant to users' understanding of the
review, the accountant's responsibilities, or the accountant's review re-
port.
Pervasive. A term used, in the context of misstatements, to describe the
effects on the nancial statements of misstatements. Pervasive effects
on the nancial statements are those that, in the accountant's judg-
ment
•
are not conned to specic elements, accounts, or items
of the nancial statements;
•
if so conned, represent or could represent a substantial
portion of the nancial statements; or
•
with regard to disclosures, are fundamental to users' un-
derstanding of the nancial statements.
Professional skepticism. An attitude that includes a questioning mind,
being alert to conditions that may indicate possible misstatement due
to fraud or error, and a critical assessment of review evidence.
Reasonable period of time. The period of time required by the appli-
cable nancial reporting framework or, if no such requirement exists,
within one year after the date that the nancial statements are issued
(or within one year after the date that the nancial statements are
available to be issued, when applicable). (Ref: par. .A11)
Report release date. The date the accountant grants the entity permis-
sion to use the accountant's review report in connection with the -
nancial statements.
Required supplementary information. Information that a designated
accounting standards-setter requires to accompany an entity's basic
nancial statements. Required supplementary information is not part
of the basic nancial statements; however, a designated accounting
standards-setter considers the information to be an essential part of
nancial reporting for placing the basic nancial statements in an ap-
propriate operational, economic, or historical context. In addition, au-
thoritative guidelines for the methods of measurement and presenta-
tion of the information have been established.
Review documentation. The record of review procedures performed,
relevant review evidence obtained, and conclusions the accountant
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reached (terms such as working papers or workpapers arealsosome-
times used).
Review evidence. Information used by the accountant to provide a rea-
sonable basis for obtaining limited assurance. Review evidence in-
cludes both information contained in the accounting records under-
lying the nancial statements and other information, which primarily
consists of the results of analytical procedures and inquiries. Suf-
ciency of review evidence is the measure of the quantity of review evi-
dence. Appropriateness of review evidence is the measure of the qual-
ity of review evidence, that is, its relevance and reliability in providing
support for the conclusions on which the accountant's review report is
based.
Specied parties. The intended users of the accountant's review report.
Subsequent events. Events occurring between the date of the nancial
statements and the date of the accountant's review report.
Subsequently discovered facts. Facts that become known to the accoun-
tant after the date of the accountant's review report that, had they
been known to the accountant at that date, may have caused the ac-
countant to revise the accountant's review report.
Supplementary information. Information presented outside the basic
nancial statements, excluding required supplementary information,
that is not considered necessary for the nancial statements to be
fairly presented in accordance with the applicable nancial report-
ing framework. Such information may be presented in a document
containing the reviewed nancial statements or separate from the re-
viewed nancial statements. (Ref: par. .A13–.A14)
Those charged with governance. The person(s) or organization(s) (for
example, a corporate trustee) with responsibility for overseeing the
strategic direction of the entity and the obligations related to the ac-
countability of the entity. This includes overseeing the nancial report-
ing process. Those charged with governance may include management
personnel (for example, executive members of a governance board or
an owner-manager).
Updated report. A report issued by a continuing accountant that takes
into consideration information that the accountant becomes aware of
during the accountant's current engagement and that re-expresses the
accountant's previous conclusions or, depending on the circumstances,
expresses different conclusions on the nancial statements of a prior
period reviewed by the accountant as of the date of the accountant's
current report.
Written representation. A written statement by management provided
to the accountant to conrm certain matters or to support other re-
view evidence. Written representations in this context do not include
nancial statements, the assertions therein, or supporting books and
records.
[As amended, effective October 2016, by SSARS No. 23. As amended, effective
for reviews of nancial statements for periods ending on or after June 15, 2019,
by SSARS No. 24. Paragraph renumbered and amended, effective for reviews
of nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
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4582 Statements on Standards for Accounting and Review Services
Requirements
General Principles for Performing and Reporting on
Review Engagements
.09 In addition to complying with this section, an accountant is required
to comply with section 60, General Principles for Engagements Performed in
Accordance With Statements on Standards for Accounting and Review Services.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Independence
.10 The accountant must be independent of the entity when performing
a review of nancial statements in accordance with SSARSs. If, during the
performance of the review engagement, the accountant determines that the
accountant's independence is impaired, the accountant should withdraw from
the review engagement. (Ref: par. .A15–.A16) [Paragraph renumbered by the
issuance of SSARS No. 25, February 2020.]
Professional Skepticism
.11 The accountant should plan and perform the review with professional
skepticism, recognizing that circumstances may exist that cause the nancial
statements to be materially misstated. (Ref: par. .A17–.A21) [Paragraph added,
effective for reviews of nancial statements for periods ending on or after De-
cember 15, 2021, by SSARS No. 25.]
Acceptance and Continuance of Client Relationships and
Review Engagements
.12 The accountant should not accept a review engagement if, in addi-
tion to the requirements in paragraph .25 of section 60, management or those
charged with governance impose a limitation on the scope of the accountant's
work in terms of a proposed review engagement such that the accountant be-
lieves the limitation will result in the accountant being unable to perform re-
view procedures to provide an adequate basis for issuing a review report. [Para-
graph renumbered by the issuance of SSARS No. 25, February 2020.]
.13 As a condition for accepting an engagement to review an entity's nan-
cial statements, in addition to the requirements in paragraph .26 of section 60,
the accountant should obtain the agreement of management that it acknowl-
edges and understands its responsibility
a. for the preparation and fair presentation of the nancial state-
ments in accordance with the applicable nancial reporting
framework and the inclusion of all informative disclosures that
are appropriate for the applicable nancial reporting framework
used to prepare the entity's nancial statements. If the nancial
statements are prepared in accordance with a special purpose
framework, this includes (Ref: par. .A22)
i. a description of the special purpose framework, including
a summary of signicant accounting policies, and how the
framework differs from GAAP, the effect of which need not
be quantied, and informative disclosures similar to those
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Review of Financial Statements 4583
required by GAAP in the case of special purpose nan-
cial statements that contain items that are the same as,
or similar to, those in nancial statements prepared in ac-
cordance with GAAP; (Ref: par. .A126)
ii. a description of any signicant interpretations of the con-
tract on which the special purpose nancial statements are
based in the case of nancial statements prepared in ac-
cordance with a contractual basis of accounting; and
iii. additional disclosures beyond those specically required
by the framework that may be necessary for the special
purpose framework to achieve fair presentation.
b. to provide the accountant, at the conclusion of the engagement,
with a letter that conrms certain representations made during
the review.
c. to include the accountant's review report in any document con-
taining nancial statements that indicates that such nancial
statements have been reviewed by the entity's accountant unless
a different understanding is reached. (Ref: par. .A23)
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.14 If the accountant is not satised about any of the matters set out in
paragraph .26 of section 60 or paragraph .13 of this section as preconditions for
accepting a review engagement, the accountant should discuss the matter with
management or those charged with governance. If changes cannot be made to
satisfy the accountant about those matters, the accountant should not accept
the proposed engagement. [Paragraph renumbered by the issuance of SSARS
No. 25, February 2020.]
.15 If it is discovered after the engagement has been accepted that the
accountant is not satised regarding any of the preconditions in paragraph .26
of section 60 or paragraph .13 of this section, the accountant should discuss
the matter with management or those charged with governance and should
determine the following:
a. Whether the matter can be resolved
b. Whether it is appropriate to continue with the engagement
c. Whether and how to communicate the matter in the accountant's
report
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Agreement on Engagement Terms
.16 The accountant should agree upon the terms of the engagement with
management or those charged with governance, as appropriate, prior to per-
forming the engagement. The agreed-upon terms of the engagement should be
documented in an engagement letter or other suitable form of written agree-
ment between the parties and should include the following: (Ref: par. .A24–
.A29)
a. The objectives of the engagement
b. The responsibilities of management set forth in paragraph .26b
of section 60 and paragraph .13 of this section
c. The responsibilities of the accountant
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4584 Statements on Standards for Accounting and Review Services
d. The limitations of a review engagement, including a statement
that a review is substantially less in scope than an audit and that
the accountant will not express an opinion on the nancial state-
ments
e. Identication of the applicable nancial reporting framework for
the preparation of the nancial statements
f. The expected form and content of the accountant's review report
and a statement that there may be circumstances in which the
report may differ from its expected form and content
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
and amended, effective for reviews of nancial statements for periods ending
on or after December 15, 2021, by SSARS No. 25.]
.17 The engagement letter or other suitable form of written agreement
should be signed by
a. the accountant or the accountant's rm and
b. management or those charged with governance, as appropriate.
(Ref: par. .A25)
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
by the issuance of SSARS No. 25, February 2020.]
Communication With Management and Those
Charged With Governance
.18 The accountant should communicate with management or those
charged with governance, as appropriate, on a timely basis during the course
of the review engagement, all matters concerning the review engagement that,
in the accountant's professional judgment, are of signicant importance to
merit the attention of management or those charged with governance, as appro-
priate. (Ref: par. .A30–.A36) [Paragraph renumbered by the issuance of SSARS
No. 25, February 2020.]
Performing the Engagement
Materiality in a Review of Financial Statements
.19 The accountant should determine materiality for the nancial state-
ments as a whole and apply this materiality in designing the procedures and
evaluating the results obtained from those procedures. (Ref: par. .A37–.A40)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.20 The accountant should revise materiality for the nancial statements
as a whole if the accountant becomes aware of information during the re-
view that would have caused the accountant to have determined a different
amount initially. (Ref: par. .A41) [Paragraph added, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Understanding of the Industry
.21 To perform the review engagement, the accountant should possess or
obtain an understanding of the industry in which the entity operates, includ-
ing the accounting principles and practices generally used in the industry,
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Review of Financial Statements 4585
sufcient to enable the accountant to review nancial statements that are ap-
propriate for an entity operating in that industry. (Ref: par. .A42) [Paragraph
renumbered by the issuance of SSARS No. 25, February 2020.]
Knowledge of the Entity
.22 The accountant should obtain knowledge about the entity, including
an understanding of
a. the entity's business and
b. the accounting principles and practices used by the entity
sufcient to identify areas in the nancial statements in which there is a
greater likelihood that material misstatements may arise and to be able to
design procedures to address those areas. (Ref: par. .A43–.A44) [Paragraph
renumbered by the issuance of SSARS No. 25, February 2020.]
.23 In obtaining the understanding of the entity's accounting policies and
practices, the accountant should be alert to accounting policies and procedures
that, based on the accountant's knowledge of the industry, are unusual. [Para-
graph renumbered by the issuance of SSARS No. 25, February 2020.]
Designing and Per forming Review Procedures
.24 The accountant should design and perform analytical procedures and
make inquiries and perform other procedures, as appropriate, to obtain suf-
cient appropriate review evidence as a basis for reporting whether the accoun-
tant is aware of any material modications that should be made to the nancial
statements in order for the statements to be in accordance with the applicable
nancial reporting framework based on the accountant's (Ref: par. .A45)
a. understanding of the industry,
b. knowledge of the entity, and
c. awareness of the risk that the accountant may unknowingly issue
an inappropriate accountant's review report. (Ref: par. .A46)
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.25 In obtaining sufcient appropriate review evidence as the basis for a
conclusion on the nancial statements as a whole, the accountant should design
and perform the analytical procedures and inquiries to address the following:
(Ref: par. .A47)
a. All material items in the nancial statements, including disclo-
sures
b. Areas in the nancial statements where the accountant believes
there are increased risks of material misstatements
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
Analytical Procedures
.26 The accountant should apply analytical procedures to the nancial
statements to identify and provide a basis for inquiry about the relationships
and individual items that appear to be unusual and that may indicate a ma-
terial misstatement. Such analytical procedures should include the following:
(Ref: par. .A48–.A50)
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4586 Statements on Standards for Accounting and Review Services
a. Comparing the nancial statements with comparable informa-
tion for the prior period, giving consideration to knowledge about
changes in the entity's business and specic transactions
b. Considering plausible relationships among both nancial and,
when relevant, nonnancial information (Ref: par. .A51)
c. Comparing recorded amounts or ratios developed from recorded
amounts to expectations developed by the accountant through
identifying and using relationships that are reasonably expected
to exist, based on the accountant's understanding of the entity
and the industry in which the entity operates (Ref: par. .A52)
d. Comparing disaggregated revenue data, as applicable (Ref: par.
.A53)
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
.27 When designing and performing analytical procedures, the accountant
should (Ref: par. .A54)
a. determine the suitability of particular analytical procedures;
b. consider the reliability of data from which the accountant's ex-
pectation of recorded amounts or ratios is developed, taking into
account the source, comparability, and nature and relevance of
information available;
c. develop an expectation of recorded amounts or ratios and evalu-
ate whether the expectation is sufciently precise to provide the
accountant with limited assurance that a misstatement will be
identied that, either individually or when aggregated with other
misstatements, may cause the nancial statements to be materi-
ally misstated; and
d. determine the amount of any difference of recorded amounts from
expected values that is acceptable without further investigation
as required by paragraph .28 and compare the recorded amounts,
or ratios developed from recorded amounts, with the expectations.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Investigating Results of Analytical Procedures
.28 If analytical procedures identify uctuations or relationships that are
inconsistent with other relevant information or that differ from expected values
by a signicant amount, the accountant should investigate such differences by
a. inquiring of management and
b. performing other review procedures if considered necessary in the
circumstances. (Ref: par. .A55)
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Inquiries of Members of Management Who Have Responsibility
for Financial and Accounting Matters
.29 The accountant should inquire of members of management who have
responsibility for nancial and accounting matters concerning the nancial
statements, and others within the entity, as appropriate, about (Ref: par. .A56)
a. whether the nancial statements have been prepared and fairly
presented in accordance with the applicable nancial reporting
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Review of Financial Statements 4587
framework consistently applied, including how management de-
termined that signicant accounting estimates are reasonable in
the circumstances.
b. the identication of related parties and related party transac-
tions, including the purpose of those transactions
c. whether there are signicant, unusual, or complex transactions,
events, or matters that have affected or may affect the entity's
nancial statements, including the following: (Ref: par. .A57)
i. Signicant changes in the entity's business activities or
operations
ii. Signicant changes to the terms of contracts that mate-
rially affect the entity's nancial statements, including
terms of nance and debt contracts or covenants
iii. Signicant journal entries or other adjustments to the -
nancial statements
iv. Signicant transactions occurring or recognized during
the period, particularly those in the last several days of
the reporting period
v. The status of any uncorrected misstatements identied
during the previous review (that is, whether adjust-
ments were recorded subsequent to the periods covered
by the prior review and, if adjustments were recorded, the
amounts recorded and period in which such adjustments
were recorded)
vi. Effects or possible implications for the entity of transac-
tions or relationships with related parties
d. matters about which questions have arisen in the course of apply-
ing the review procedures.
e. the existence of any actual, suspected, or alleged
i. fraud or noncompliance with laws and regulations affect-
ing the entity and (Ref: par. .A58)
ii. noncompliance with provisions of laws and regulations
that are generally recognized to have a direct effect on
the determination of material amounts and disclosures in
the nancial statements, such as tax and pension laws and
regulations.
f. whether management has identied and addressed events subse-
quent to the date of the nancial statements that require adjust-
ment of, or disclosure in, the nancial statements.
g. the basis for management's assessment of the entity's ability to
continue as a going concern.
h. whether there are events or conditions that appear to cast doubt
on the entity's ability to continue as a going concern.
i. material commitments, contractual obligations, or contingencies
that have affected or may affect the entity's nancial statements,
including disclosures.
j. material nonmonetary transactions or transactions for no consid-
eration in the nancial reporting period under consideration.
k. communications from regulatory agencies, if applicable.
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4588 Statements on Standards for Accounting and Review Services
l. any litigation, claims, and assessments that existed at the date of
the balance sheet being reported on and during the period from
the balance sheet date to the date of management's response to
the accountant's inquiry.
m. actions taken at meetings of stockholders, the board of directors,
committees of the board of directors, or comparable meetings that
may affect the nancial statements. (Ref: par. .A59)
n. any other matters that the accountant may consider necessary.
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.30 The accountant should consider the reasonableness and consistency of
management's responses in light of the results of other review procedures and
the accountant's knowledge of the entity's business. However, the accountant
is not required to corroborate management's responses with other evidence.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Reading the Financial Statements
.31 The accountant should read the nancial statements and consider
whether any information has come to the accountant's attention to indicate
that such nancial statements do not conform to the applicable nancial re-
porting framework. [Paragraph renumbered by the issuance of SSARS No. 25,
February 2020.]
Procedures to Address Specific Circumstances
Related Parties
.32 During the review, the accountant should remain alert for arrange-
ments or information that may indicate the existence of related party rela-
tionships or transactions that management has not previously identied or
disclosed to the accountant. [Paragraph added, effective for reviews of nan-
cial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.33 If the accountant identies signicant transactions outside the entity's
normal course of business when performing the review procedure required by
paragraph .32 or through other review procedures, the accountant should in-
quire of management about the following:
a. The nature of these transactions (Ref: par. .A60)
b. Whether related parties could be involved
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Fraud and Noncompliance With Laws or Regulations
.34 When there is an indication that fraud or noncompliance with laws
or regulations has occurred, or is suspected to have occurred, the effects of
which should be considered when preparing nancial statements, the accoun-
tant should do the following:
a. Communicate identied or suspected fraud as soon as practical to
the appropriate level of senior management (at a level above those
involved with the suspected fraud, if possible) or those charged
with governance, as appropriate.
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Review of Financial Statements 4589
b. Communicate to management identied or suspected noncompli-
ance with laws and regulations whose effects should be consid-
ered when preparing nancial statements, other than matters
that are clearly inconsequential. (Ref: par. .A61)
c. Request management's assessment of the effects, if any, on the
nancial statements.
d. Consider the effect, if any, of management's assessment of the ef-
fects of fraud or noncompliance with laws or regulations commu-
nicated to the accountant on the accountant's conclusion on the
nancial statements and on the accountant's report.
e. Determine whether there is a responsibility to report the occur-
rence or suspicion of fraud or noncompliance with laws and regu-
lations to a party outside the entity. (Ref: par. .A62)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.35 If the fraud or noncompliance with laws or regulations involves senior
management or results in a material misstatement of the nancial statements,
the accountant should communicate the matter directly to those charged with
governance. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
.36 The accountant should consider the need to obtain legal advice and
take appropriate action, including potential withdrawal, if management or, as
appropriate, those charged with governance do not provide sufcient informa-
tion that supports either of the following: (Ref: par. .A63)
a. The nancial statements are not materially misstated due to
fraud.
b. The entity is in compliance with laws and regulations, and in the
accountant's professional judgment, the effect of the suspected
noncompliance may be material to the nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Going Concern
.37 If the applicable nancial reporting framework includes requirements
for management to evaluate the entity's ability to continue as a going con-
cern for a reasonable period of time in preparing nancial statements, the ac-
countant should perform review procedures related to the following: (Ref: par.
.A64–.A65)
a. Whether the going concern basis of accounting is appropriate
b. Management's evaluation of whether there are conditions or
events that raise substantial doubt about the entity's ability to
continue as a going concern
c. If there are conditions or events that raise substantial doubt
about the entity's ability to continue as a going concern, manage-
ment's plans to mitigate those matters
d. The adequacy of the related disclosures in the nancial state-
ments
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
©2021, AICPA AR-C §90.37
4590 Statements on Standards for Accounting and Review Services
.38 If the applicable nancial reporting framework does not include a re-
quirement for management to evaluate the entity's ability to continue as a go-
ing concern for a reasonable period of time in preparing nancial statements,
and conditions or events that raise substantial doubt about an entity's ability to
continue as a going concern for a reasonable period of time existed at the date
of the prior period nancial statements (regardless of whether the substantial
doubt was alleviated by the accountant's consideration of management's plans)
or, in the course of performing review procedures on the current period nancial
statements, the accountant becomes aware of conditions or events that raise
substantial doubt about the entity's ability to continue as a going concern, the
accountant should do the following: (Ref: par. .A66–.A67)
a. Inquire of management whether the going concern basis of ac-
counting is appropriate.
b. Inquire of management about its plans for addressing the adverse
effects of the conditions and events. (Ref: par. .A68)
c. Consider the adequacy of the disclosure about such matters in the
nancial statements. (Ref: par. .A69)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Using the Work of Others
.39 In performing the review, it may be necessary for the accountant to
use work performed by other accountants, or the work of an individual or or-
ganization possessing expertise in a eld other than nancial reporting. If the
accountant uses work performed by another accountant or an expert in the
course of performing the review, the accountant should take appropriate steps
to be satised that the work performed is adequate for the accountant's pur-
poses. [Paragraph added, effective for reviews of nancial statements for peri-
ods ending on or after December 15, 2021, by SSARS No. 25.]
.40 If other accountants have issued a report on the nancial statements
of signicant components, such as subsidiaries and investees, the accoun-
tant should obtain and read reports from such other accountants. [Paragraph
renumbered by the issuance of SSARS No. 25, February 2020.]
Reconciling the Financial Statements to the Underlying
Accounting Records
.41 The accountant should obtain evidence that the nancial statements
agree or reconcile with the accounting records. (Ref: par. .A70) [Paragraph
renumbered by the issuance of SSARS No. 25, February 2020.]
Additional Procedures When the Accountant Becomes Aware
That the Financial Statements May Be Materially Misstated
.42 If the accountant becomes aware of a matter or matters that cause the
accountant to believe the nancial statements may be materially misstated,
the accountant should design and perform additional procedures sufcient to
enable the accountant to (Ref: par. .A71–.A75)
a. conclude that the matter or matters are not likely to cause the
nancial statements as a whole to be materially misstated or
b. determine that the matter or matters cause the nancial state-
ments as a whole to be materially misstated.
AR-C §90.38 ©2021, AICPA
Review of Financial Statements 4591
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Evaluating Review Evidence Obtained From the
Procedures Performed
[.43–.44] [Paragraphs renumbered and deleted by the issuance of SSARS
No. 25, February 2020.]
.45 If, during the performance of review procedures, the accountant be-
comes aware that information coming to the accountant's attention is incorrect,
incomplete, or otherwise unsatisfactory, the accountant should
a. request that management consider the effect of those matters on
the nancial statements and communicate the results of its con-
sideration to the accountant and
b. consider the results communicated to the accountant by manage-
ment and whether such results indicate that the nancial state-
ments may be materially misstated.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
[.46] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
.47 The accountant should evaluate whether sufcient appropriate review
evidence has been obtained from the procedures performed and, if sufcient
appropriate review evidence has not been obtained from the procedures per-
formed, the accountant should perform other procedures that, in the accoun-
tant's professional judgment, are necessary in the circumstances to be able
to form a conclusion on the nancial statements. (Ref: par. .A78) [Paragraph
renumbered and amended, effective for reviews of nancial statements for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
.48 If the accountant is not able to obtain sufcient appropriate review
evidence to form a conclusion, the accountant should withdraw from the en-
gagement. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
Subsequent Events and Subsequently Discovered Facts
Subsequent Events
.49 When evidence or information that subsequent events that require ad-
justment of, or disclosure in, the nancial statements comes to the accountant's
attention, the accountant should request that management consider whether
each such event is appropriately reected in the nancial statements in accor-
dance with the applicable nancial reporting framework. (Ref: par. .A79) [Para-
graph added, effective for reviews of nancial statements for periods ending on
or after December 15, 2021, by SSARS No. 25.]
.50 If the accountant determines that the subsequent event is not ade-
quately accounted for in the nancial statements or disclosed in the notes,
the accountant should follow the guidance in paragraphs .69–.72. [Paragraph
added, effective for reviews of nancial statements for periods ending on or af-
ter December 15, 2021, by SSARS No. 25.]
©2021, AICPA AR-C §90.50
4592 Statements on Standards for Accounting and Review Services
Subsequently Discovered Facts That Become Known to the Accountant
Before the Report Release Date
.51 The accountant is not required to perform any review procedures re-
garding the nancial statements after the date of the accountant's review re-
port. However, if a subsequently discovered fact becomes known to the accoun-
tant before the report release date, the accountant should
a. discuss the matter with management and, when appropriate,
those charged with governance and
b. determine whether the nancial statements need revision and, if
revision is needed, inquire how management intends to address
the matter in the nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.52 If management revises the nancial statements,the accountant should
perform the review procedures necessary in the circumstances on the revision.
The accountant should also do either of the following:
a. Date the accountant's review report as of a later date.
b. Include an additional date in the accountant's review report on
the revised nancial statements that is limited to the revision
(that is, dual-date the accountant's review report for that revi-
sion), thereby indicating that the accountant's review procedures
subsequent to the original date of the accountant's review report
are limited solely to the revision described in the relevant note to
the nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.53 If management does not revise the nancial statements in circum-
stances in which the accountant believes they need to be revised, the accoun-
tant should modify the accountant's review report or withdraw, as appropriate.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Subsequently Discovered Facts That Become Known to the Accountant
After the Report Release Date
.54 If a subsequently discovered fact becomes known to the accountant
after the report release date, the accountant should (Ref: par. .A80–.A81)
a. discuss the matter with management and, when appropriate,
those charged with governance and
b. determine whether the nancial statements need revision and, if
revision is needed, inquire how management intends to address
the matter in the nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.55 If management revises the nancial statements,the accountant should
do the following:
a. Apply the requirements of paragraph .52.
b. If the reviewed nancial statements (before revision) have been
made available to third parties, assess whether the steps taken
AR-C §90.51 ©2021, AICPA
Review of Financial Statements 4593
by management are timely and appropriate to ensure that any-
one in receipt of those nancial statements is informed of the sit-
uation, including that the reviewed nancial statements are not
to be used. If management does not take the necessary steps, the
accountant should apply the requirements of paragraph .56. (Ref:
par. .A82)
c. If the accountant's conclusion on the revised nancial statements
differs from the accountant's conclusion on the original nancial
statements, disclose in an emphasis-of-matter paragraph, in ac-
cordance with paragraphs .89–.90,
i. the date of the accountant's previous report,
ii. a description of the revisions, and
iii. the substantive reasons for the revisions.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.56 If management does not revise the nancial statements in circum-
stances in which the accountant believes they need to be revised, then the ac-
countant should do the following:
a. If the reviewed nancial statements have not been made avail-
able to third parties, notify management and those charged with
governance (unless all of those charged with governance are in-
volved in managing the entity) not to make the reviewed nancial
statements available to third parties before the necessary revi-
sions have been made and a new accountant's review report on the
revised nancial statements has been provided. If the reviewed
nancial statements are, nevertheless, subsequently made avail-
able to third parties without the necessary revisions, the accoun-
tant should apply the requirements of paragraph .56b.
b. If the reviewed nancial statements have been made available
to third parties, assess whether the steps taken by management
are timely and appropriate to ensure that anyone in receipt of
the reviewed nancial statements is informed of the situation,
including that the reviewed nancial statements are not to be
used. If management does not take the necessary steps, the ac-
countant should apply the requirements of paragraph .57. (Ref:
par. .A81)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.57 If management does not take the necessary steps to ensure that anyone
in receipt of the nancial statements is informed of the situation, as provided by
paragraph .55b or paragraph .56b, the accountant should notify management
and those charged with governance (unless all of those charged with gover-
nance are involved in managing the entity) that the accountant will seek to
prevent future use of the accountant's review report. If, despite such notica-
tion, management or those charged with governance do not take the necessary
steps, the accountant should take appropriate action to seek to prevent use of
the accountant's review report. (Ref: par. .A83–.A86) [Paragraph added, effec-
tive for reviews of nancial statements for periods ending on or after December
15, 2021, by SSARS No. 25.]
©2021, AICPA AR-C §90.57
4594 Statements on Standards for Accounting and Review Services
Written Representations
Written Representations as Review Evidence
.58 Written representations are necessary information that the accountant
requires in connection with a review of the entity's nancial statements. Ac-
cordingly, similar to responses to inquiries, written representations are review
evidence. (Ref: par. .A87) [Paragraph renumbered by the issuance of SSARS No.
25, February 2020.]
Management From Whom Written Representations Are Requested
.59 The accountant should request written representations from members
of management who have appropriate responsibilities for the nancial state-
ments and knowledge of the matters concerned. (Ref: par. .A88–.A90) [Para-
graph renumbered by the issuance of SSARS No. 25, February 2020.]
Specific Written Representations
.60 For all nancial statements presented and all periods covered by the
review, the accountant should request management to provide written repre-
sentations that are dated as of the date of the accountant's review report and
that indicate that it has fullled its responsibilities, as set out in the terms of
the engagement, including the following: (Ref: par. .A91–.A97)
a. Management has fullled its responsibility for the preparation
and fair presentation of the nancial statements in accordance
with the applicable nancial reporting framework.
b. Management acknowledges its responsibility for designing, im-
plementing, and maintaining internal control relevant to the
preparation and fair presentation of nancial statements, includ-
ing its responsibility to prevent and detect fraud.
c. All transactions have been recorded and are reected in the -
nancial statements.
d. Management has provided the accountant with all relevant infor-
mation and access to information, as agreed upon in the terms of
the engagement.
e. Management has responded fully and truthfully to all of the ac-
countant's inquiries
f. Management has disclosed to the accountant the identity of the
entity's related parties and all the related party relationships and
transactions of which it is aware, and it has appropriately ac-
counted for and disclosed such relationships and transactions.
g. Management has disclosed to the accountant signicant facts re-
lating to any fraud or suspected fraud known to management that
may have affected the entity involving
i. management,
ii. employees who have signicant roles in internal control,
or
iii. others, when the fraud could have a material effect on the
nancial statements.
h. Management has disclosed to the accountant signicant facts re-
lating to any allegations of fraud or suspected fraud known to
AR-C §90.58 ©2021, AICPA
Review of Financial Statements 4595
management that may have affected the entity's nancial state-
ments communicated by employees, former employees, regula-
tors, or others.
i. Management has disclosed to the accountant all known actual
or possible instances of noncompliance with laws and regula-
tions whose effects should be considered when preparing nancial
statements.
j. Management has disclosed to the accountant all information rel-
evant to the use of the going concern assumption in the nancial
statements.
k. Management has properly accounted for all events occurring sub-
sequent to the date of the nancial statements and for which the
applicable nancial reporting framework requires adjustment or
disclosure, and it has made the necessary adjustments or disclo-
sures.
l. Management has disclosed to the accountant whether it believes
that the effects of uncorrected misstatements are immaterial, in-
dividually and in the aggregate, to the nancial statements as a
whole. A summary of such items should be included in, or attached
to, the written representation.
m. Management has disclosed to the accountant all known actual
or possible litigation and claims whose effects should be consid-
ered when preparing the nancial statements, and it has appro-
priately accounted for and disclosed such litigation and claims in
accordance with the applicable nancial reporting framework.
n. Management has disclosed to the accountant whether it believes
that signicant assumptions it used in making accounting esti-
mates are reasonable.
[As amended, effective for reviews of nancial statements for periods ending on
or after June 15, 2019, by SSARS No. 24. Paragraph renumbered and amended,
effective for reviews of nancial statements for periods ending on or after
December 15, 2021, by SSARS No. 25.]
.61 If, in addition to the representations required by paragraph .60, the
accountant determines that it is necessary to obtain one or more written rep-
resentations to support other review evidence relevant to the nancial state-
ments, the accountant should request such other written representations. (Ref:
par. .A98) [Paragraph renumbered by the issuance of SSARS No. 25, February
2020.]
Form of Written Representations
.62 The written representations should be in the form of a representation
letter addressed to the accountant. (Ref: par. .A99–.A100) [Paragraph renum-
bered by the issuance of SSARS No. 25, February 2020.]
Concerns About the Reliability of Written Representations and Requested
Written Representations Not Provided
.63 If, in relation to the written representations required by paragraphs
.60–.61
a. management does not provide the written representations, or
b. the accountant concludes that there is cause to doubt manage-
ment's integrity such that the written representations provided
are not reliable
©2021, AICPA AR-C §90.63
4596 Statements on Standards for Accounting and Review Services
the accountant should discuss the matter with management and those charged
with governance, as appropriate. If management does not provide the required
representations or the accountant continues to doubt management's integrity
such that the written representations provided may not be reliable, the accoun-
tant should withdraw from the engagement. [Paragraph renumbered by the
issuance of SSARS No. 25, February 2020.]
Forming the Accountant’s Conclusion on the
Financial Statements
Consideration of the Applicable Financial Reporting Framework
in Relation to the Financial Statements
.64 In forming the conclusion on the nancial statements, the accountant
should do the following:
a. Evaluate whether the nancial statements adequately refer to or
describe the applicable nancial reporting framework. (Ref: par.
.A101–.A102)
b. Consider whether, in the context of the requirements of the appli-
cable nancial reporting framework and the results of procedures
performed,
i. the terminology used in the nancial statements, includ-
ing the title of each nancial statement, is appropriate;
ii. the nancial statements adequately disclose the signi-
cant accounting policies selected and applied;
iii. the accounting policies selected and applied are consistent
with the applicable nancial reporting framework and are
appropriate;
iv. accounting estimates made by management appear rea-
sonable;
v. the information presented in the nancial statements ap-
pears relevant, reliable, comparable, and understandable;
and
vi. the nancial statements provide adequate disclosures to
enable the intended users to understand the effects of
material transactions and events on the information con-
veyed in the nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.65 The accountant should consider the impact of the following:
a. Uncorrected misstatements identied during the review, and in
the previous year's review of the entity's nancial statements, on
the nancial statements as a whole
b. Qualitative aspects of the entity's accounting practices, including
indicators of possible bias in management's judgments (Ref: par.
.A103–.A104)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.66 The accountant's consideration should also include the following:
a. The overall presentation, structure, and content of the nancial
statements
AR-C §90.64 ©2021, AICPA
Review of Financial Statements 4597
b. Whether the nancial statements represent the underlying trans-
actions and events in a manner that achieves fair presentation
(Ref: par. .A105)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Form of the Conclusion
Unmodified Conclusion
.67 The accountant should express an unmodied conclusion in the ac-
countant's review report on the nancial statements as a whole when the
accountant has obtained limited assurance to be able to conclude that noth-
ing has come to the accountant's attention that causes the accountant to be-
lieve that the nancial statements are not prepared, in all material respects,
in accordance with the applicable nancial reporting framework. [Paragraph
added, effective for reviews of nancial statements for periods ending on or after
December 15, 2021, by SSARS No. 25.]
.68 When the accountant expresses an unmodied conclusion, the accoun-
tant should, unless required by law or regulation, use the following language:
Based on my (our) review, I am (we are) not aware of any material modications
that should be made to the accompanying nancial statements for them to be
in accordance with [the applicable nancial reporting framework].
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Modified Conclusion
.69 The accountant should express a modied conclusion in the accoun-
tant's review report on the nancial statements as a whole when the accoun-
tant determines, based on the procedures performed and the review evidence
obtained, that the nancial statements are materially misstated. [Paragraph
added, effective for reviews of nancial statements for periods ending on or af-
ter December 15, 2021, by SSARS No. 25.]
.70 When the accountant modies the conclusion expressed on the nan-
cial statements, the accountant should do the following:
a. Use the heading "Qualied Conclusion" or "Adverse Conclusion,"
as appropriate, for the conclusion paragraph in the accountant's
review report.
b. Provide a description of the matter giving rise to the modication,
under an appropriate heading (for example, "Basis for Qualied
Conclusion," or "Basis for Adverse Conclusion," as appropriate),
in a separate paragraph in the accountant's review report imme-
diately before the conclusion paragraph (referred to as the basis
for conclusion paragraph).
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Financial Statements Are Materially Misstated
.71 If the accountant, having obtained sufcient appropriate review evi-
dence, determines, or is otherwise aware, that the nancial statements are ma-
terially misstated, the accountant should express one of the following: (Ref: par.
.A106)
©2021, AICPA AR-C §90.71
4598 Statements on Standards for Accounting and Review Services
a. A qualied conclusion, when the accountant concludes that the
effects of the matter or matters giving rise to the modication are
material but not pervasive to the nancial statements
b. An adverse conclusion, when the effects of the matter or matters
giving rise to the modication are both material and pervasive to
the nancial statements
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.72 When the accountant expresses a qualied conclusion on the nancial
statements because of a material misstatement, the accountant should, unless
otherwise required by law or regulation, use the following language:
Based on my (our) review, except for the effects of the matter(s) described in the
Basis for Qualied Conclusion paragraph, I am (we are) not aware of any ma-
terial modications that should be made to the accompanying nancial state-
ments in order for them to be in accordance with [the applicable nancial re-
porting framework].
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.73 When the accountant expresses an adverse conclusion on the nancial
statements, the accountant should, unless otherwise required by law or regu-
lation, use the following language:
Based on my (our) review, due to the signicance of the matter(s) described in
the Basis for Adverse Conclusion paragraph, the nancial statements are not
in accordance with [the applicable nancial reporting framework].
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.74 In the basis for conclusion paragraph, in relation to material misstate-
ments that give rise to either a qualied conclusion or an adverse conclusion,
the accountant should do the following:
a. Describe and quantify the nancial effects of the misstatement if
the material misstatement relates to specic amounts in the -
nancial statements (including quantitative disclosures) and the
effects of the departure on the nancial statements have been de-
termined by management or are known to the accountant as a
result of the accountant's procedures. If the effects of the depar-
ture have not been determined by management or are not known
to the accountant as a result of the accountant's procedures, the
accountant is not required to determine the effects of the depar-
ture; however, in such circumstances, the accountant should state
in the report that such determination has not been made by man-
agement.
b. Explain how disclosures are misstated if the material misstate-
ment relates to narrative disclosures.
c. Describe the nature of omitted information if the material mis-
statement relates to the nondisclosure of information required to
be disclosed. The accountant should include the omitted disclo-
sures when practicable to do so.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
AR-C §90.72 ©2021, AICPA
Review of Financial Statements 4599
Reporting on the Financial Statements
.75 The accountant's review report should be in writing. (Ref: par. .A107–
.A109) [Paragraph renumbered by the issuance of SSARS No. 25, February
2020.]
Accountant’s Review Report
.76 The written review report should include the following: (Ref: par.
.A123)
a. A title that includes the word independent to clearly indicate that
it is the report of an independent accountant for a review engage-
ment. (Ref: par. .A110)
b. An addressee, based on the circumstances of the engagement.
(Ref: par. .A111)
c. An introductory paragraph that (Ref: par. .A112–.A114)
i. identies the entity whose nancial statements have been
reviewed,
ii. states that the nancial statements identied in the report
were reviewed,
iii. identies the nancial statements,
iv. species the date or period covered by each nancial state-
ment,
v. includes a statement that a review includes primarily ap-
plying analytical procedures to management's (owner's) -
nancial data and making inquiries of company manage-
ment (owners), and
vi. includes a statement that a review is substantially less in
scope than an audit, the objective of which is the expres-
sion of an opinion regarding the nancial statements as a
whole, and that, accordingly, the accountant does not ex-
press such an opinion.
d. A section with the heading "Management's Responsibility for the
Financial Statements" that includes an explanation that manage-
ment is responsible for the preparation and fair presentation of
the nancial statements in accordance with the applicable nan-
cial reporting framework; this responsibility includes the design,
implementation, and maintenance of internal control relevant to
the preparation and fair presentation of nancial statements that
are free from material misstatement whether due to fraud or er-
ror. (Ref: par. .A115)
e. A section with the heading "Accountant's Responsibility" that in-
cludes the following statements:
i. The accountant's responsibility is to conduct the review en-
gagement in accordance with SSARSs promulgated by the
Accounting and Review Services Committee of the AICPA.
The accountant's review report should also explain that
those standards require that the accountant perform the
procedures to obtain limited assurance as a basis for re-
porting whether the accountant is aware of any material
modications that should be made to the nancial state-
ments for them to be in accordance with the applicable -
nancial reporting framework. (Ref: par. .A116–.A118)
©2021, AICPA AR-C §90.76
4600 Statements on Standards for Accounting and Review Services
ii. The accountant believes that the results of the accoun-
tant's procedures provide a reasonable basis for the ac-
countant's conclusion.
iii. The accountant is required to be independent of the entity
and to meet the accountant's other ethical responsibilities,
in accordance with the relevant ethical requirements re-
lating to the review.
f. A concluding section with an appropriate heading that includes
the accountant's conclusion on the nancial statements in accor-
dance with paragraphs .67–.74, as appropriate, and that identi-
es the country of origin of the nancial reporting framework, if
applicable
g. When the accountant's conclusion on the nancial statements is
modied,
i. a paragraph, under the appropriate heading, that contains
the accountant's modied conclusion in accordance with
paragraphs .69–.74, as appropriate, and
ii. a paragraph, under an appropriate heading, that provides
a description of the matter or matters giving rise to the
modication (Ref: par. .A119)
h. The signature of the accountant or the accountant's rm.
i. The city and state where the accountant practices. (Ref: par.
.A120)
j. The date of the review report, which should be dated no earlier
than the date on which the accountant has obtained sufcient
appropriate review evidence as the basis for the accountant's con-
clusion on the nancial statements, including being satised that
i. all the statements that the nancial statements comprise,
including the related notes, have been prepared and
ii. management has asserted that it has taken responsibility
for those nancial statements. (Ref: par. .A121–.A122)
[As amended, effective October 2016, by SSARS No. 23. As amended, effective
May 2018, by SSARS No. 24. Paragraph renumbered and amended, effective
for reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
Accountant’s Review Report on Financial Statements Prepared
in Accordance With a Special Purpose Framework
.77 The accountant should modify the review report when the accountant
becomes aware that the nancial statements do not include
a. a description of the special purpose framework. (Ref: par. .A126)
b. a summary of signicant accounting policies.
c. an adequate description about how the special purpose frame-
work differs from GAAP. The effects of these differences need not
be quantied. (Ref: par. .A127)
d. informative disclosures similar to those required by GAAP when
the nancial statements contain items that are the same as, or
AR-C §90.77 ©2021, AICPA
Review of Financial Statements 4601
similar to, those in nancial statements prepared in accordance
with GAAP. (Ref: par. .A128)
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
.78 In the case of nancial statements prepared in accordance with the
provisions of a contract, the accountant should evaluate whether the nancial
statements adequately describe any signicant interpretations of the contract
on which the nancial statements are based and modify the review report if
the nancial statements do not adequately describe any signicant interpreta-
tions of the contract on which the nancial statements are based. [Paragraph
renumbered and amended, effective for reviews of nancial statements for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
.79 In the case of an accountant's review report on special purpose nan-
cial statements, if management has a choice of nancial reporting frameworks
in the preparation of the special purpose nancial statements, the explanation
of management's responsibility for the nancial statements should also make
reference to its responsibility for determining that the applicable nancial re-
porting framework is acceptable in the circumstances. [Paragraph renumbered
and amended, effective for reviews of nancial statements for periods ending
on or after December 15, 2021, by SSARS No. 25.]
.80 The accountant's review report on nancial statements prepared in
accordance with a special purpose framework should include an emphasis-of-
matter paragraph, under an appropriate heading, that (Ref: par. .A130–.A131)
a. indicates that the nancial statements are prepared in accor-
dance with the applicable special purpose framework,
b. refers to the note to the nancial statements that describes the
framework, and
c. states that the special purpose framework is a basis of accounting
other than GAAP.
For special purpose nancial statements prepared in accordance with a con-
tractual basis of accounting, the emphasis-of-matter paragraph should also
state that, as a result, the nancial statements may not be suitable for another
purpose. [Paragraph renumbered and amended, effective for reviews of nan-
cial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.81 If the special purpose nancial statements are prepared in accordance
with the contractual basis of accounting, the accountant's review report should
include, in accordance with paragraph .104, an other-matter paragraph, un-
der an appropriate heading, that, in accordance with paragraphs .106–.109,
restricts the use of the accountant's review report (Ref: par. .A132) [Paragraph
renumbered and amended, effective for reviews of nancial statements for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
Comparative Financial Statements
.82 Comparative nancial statements may be required by the applicable
nancial reporting framework, or management may elect to provide such in-
formation. When comparative nancial statements are presented, the accoun-
tant's report should refer to each period for which nancial statements are
presented. (Ref: par. .A133–.A134) [Paragraph renumbered by the issuance of
SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.82
4602 Statements on Standards for Accounting and Review Services
Updating the Report
.83 When reporting on all periods presented, a continuing accountant
should update the report on one or more prior periods presented on a compara-
tive basis with those of the current period. The accountant's report on compar-
ative nancial statements should not be dated earlier than the date that the
accountant completed procedures sufcient to obtain limited assurance as a ba-
sis for reporting whether the accountant is aware of any material modications
that should be made to the nancial statements for them to be in accordance
with the applicable nancial reporting framework with respect to the current
period. (Ref: par. .A135) [Paragraph renumbered by the issuance of SSARS No.
25, February 2020.]
.84 When issuing an updated report, the continuing accountant should
consider information that the accountant has become aware of during the re-
view of the current period nancial statements. [Paragraph renumbered by the
issuance of SSARS No. 25, February 2020.]
.85 If, during the current engagement, circumstances or events come to
the accountant's attention that may affect the prior-period nancial statements
presented, the accountant should consider the effects on the review report.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Changed Reference to a Departure From the Applicable
Financial Reporting Framework
.86 When the accountant's report on the nancial statements of the prior
period contains a changed reference to a departure from the applicable nancial
reporting framework, the accountant's review report should include an other-
matter paragraph indicating (Ref: par. .A136)
a. the date of the accountant's previous review report.
b. the circumstances or events that caused the reference to be
changed.
c. when applicable, that the nancial statements of the prior period
have been changed.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
Reporting When One Period Is Audited
.87 When the prior period nancial statements were audited and the au-
ditor's report on the prior period nancial statements is not reissued, the re-
view report on the current period nancial statements should include an other-
matter paragraph indicating
a. that the nancial statements of the prior period were previously
audited;
b. the date of the auditor's report on the prior period nancial state-
ments;
c. the type of opinion issued on the prior period nancial statements;
d. if the opinion was modied, the substantive reasons for the mod-
ication; and
e. that no auditing procedures were performed after the date of the
previous report.
[Paragraph renumbered by the issuance of SSARS No. 25, February 2020.]
[.88] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
AR-C §90.83 ©2021, AICPA
Review of Financial Statements 4603
Emphasis-of-Matter and Other-Matter Paragraphs in the
Accountant’s Review Report
Emphasis-of-Matter Paragraphs in the Accountant’s Review Report
.89 If the accountant considers it necessary to draw users' attention to a
matter appropriately presented or disclosed in the nancial statements that,
in the accountant's professional judgment, is of such importance that it is fun-
damental to users' understanding of the nancial statements, the accountant
should include an emphasis-of-matter paragraph in the accountant's review re-
port, provided that the accountant has obtained sufcient appropriate review
evidence to conclude that the accountant is not aware of any material modica-
tions that should be made to the nancial statements with respect to such mat-
ter. Such a paragraph should refer only to information presented or disclosed in
the nancial statements. (Ref: par. .A141–.A143) [Paragraph renumbered and
amended, effective for reviews of nancial statements for periods ending on or
after December 15, 2021, by SSARS No. 25.]
.90 When the accountant includes an emphasis-of-matter paragraph in the
accountant's review report, the accountant should do the following:
a. Include the paragraph within a separate section of the accoun-
tant's report with the heading "Emphasis of a Matter" or other
appropriate heading. (Ref: par. .A144–.A145)
b. Include in the paragraph a clear reference to the matter being
emphasized and to where relevant disclosures that fully describe
the matter can be found in the nancial statements. The para-
graph should refer only to information presented or disclosed in
the nancial statements.
c. Indicate that the accountant's conclusion is not modied with re-
spect to the matter emphasized. (Ref: par. .A146)
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
Other-Matter Paragraphs in the Accountant’s Review Report
.91 If the accountant considers it necessary to communicate a matter other
than those that are presented or disclosed in the nancial statements that, in
the accountant's professional judgment, is relevant to the users' understand-
ing of the review, the accountant's responsibilities, or the accountant's review
report, the accountant should include an other-matter paragraph in the ac-
countant's review report. [Paragraph renumbered and amended, effective for
reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
.92 When the accountant includes an other-matter paragraph in the ac-
countant's review report, the accountant should include the paragraph within
a separate section with the heading "Other Matter" or other appropriate head-
ing. (Ref: par. .A141, .A144, and .A147–.A149) [Paragraph added, effective for
reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
Communication With Management
.93 If the accountant expects to include an emphasis-of-matter or other-
matter paragraph in the accountant's review report, the accountant should
communicate with management regarding this expectation and the proposed
©2021, AICPA AR-C §90.93
4604 Statements on Standards for Accounting and Review Services
wording of this paragraph. (Ref: par. .A150–.A151) [Paragraph renumbered by
the issuance of SSARS No. 25, February 2020.]
Correction of a Material Misstatement in Previously Issued
Financial Statements
.94 The accountant should include an emphasis-of-matter paragraph in
the accountant's review report when there are adjustments to correct a ma-
terial misstatement in previously issued nancial statements. The accountant
should include this type of emphasis-of-matter paragraph in the accountant's
review report when the related nancial statements are restated to correct the
prior material misstatement. The paragraph need not be repeated in subse-
quent periods. (Ref: par. .A152–.A154) [Paragraph added, effective for reviews
of nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
.95 The emphasis-of-matter paragraph should include
a. a statement that the previously issued nancial statements have
been restated for the correction of a material misstatement in the
respective period and
b. a reference to the entity's disclosure of the correction of the ma-
terial misstatement. (Ref: par. .A155)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.96 If the nancial statement disclosures relating to the restatement to
correct a material misstatement in previously issued nancial statements are
not adequate, the accountant should address the inadequacy of disclosure as
described in paragraphs .69–.72. [Paragraph added, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Other Reporting Responsibilities
.97 An accountant may be requested to address other reporting responsi-
bilities in the accountant's review report on the nancial statements that are
in addition to the accountant's responsibilities in accordance with this section
to report on the nancial statements. In such situations, those other reporting
responsibilities should be addressed by the accountant in a separate section
in the accountant's review report, under the heading "Report on Other Legal
and Regulatory Requirements," or otherwise, as appropriate to the content of
the section, following the section of the report titled "Report on the Financial
Statements." (Ref: par. .A156) [Paragraph added, effective for reviews of nan-
cial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
[.98–.102] [Paragraphs renumbered and deleted by the issuance of SSARS
No. 25, February 2020.]
Alert That Restricts the Use of the Accountant’s Review Report
.103 An accountant's review report should include an alert, in a separate
paragraph, that restricts its use when the subject matter of the accountant's
review report is based on (Ref: par. .A163–.A165)
a. measurement or disclosure criteria that are determined by the ac-
countant to be suitable only for a limited number of users who can
be presumed to have an adequate understanding of the criteria or
AR-C §90.94 ©2021, AICPA
Review of Financial Statements 4605
b. measurement or disclosure criteria that are available only to the
specied parties.
[Paragraph renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.104 The alert that restricts the use of the accountant's review report re-
quired by paragraph .103 should
a. state that the accountant's review report is intended solely for the
information and use of the specied parties.
b. identify the specied parties for whom use is intended.
c. state that the accountant's review report is not intended to be, and
should not be, used by anyone other than the specied parties.
(Ref: par. .A166)
[Paragraph renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Adding Other Specified Parties
.105 When, in accordance with paragraph .103, the accountant includes an
alert that restricts the use of the accountant's review report to certain specied
parties and the accountant is requested to add other parties as specied parties,
the accountant should determine whether to agree to add the other parties as
specied parties. (Ref: par. .A167) [Paragraph renumbered by the issuance of
SSARS No. 25, February 2020.]
.106 If the other parties are added after the release of the accountant's
review report, the accountant should either:
a. Amend the accountant's review report to add the other parties
and, in such circumstances, not change the original date of the
accountant's review report.
b. Provide a written acknowledgment to management and the other
parties that such parties have been added as specied parties and
state in the acknowledgment that no procedures were performed
subsequent to the original date of the accountant's review report.
[Paragraph renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
The Accountant’s Consideration of an Entity’s Ability to Continue
as a Going Concern
[.107–.108] [Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
Implications for the Accountant’s Review Report When Substantial Doubt
Exists About the Entity’s Ability to Continue as a Going Concern
.109 If, after considering conditions or events and management's plans,
the accountant concludes that substantial doubt about the entity's ability to
continue as a going concern for a reasonable period of time remains, the ac-
countant should include a separate section in the accountant's review report
with the heading "Substantial Doubt About the Entity's Ability to Continue as
a Going Concern" that does the following: (Ref: par. .A175–.A182)
a. Draws attention to the note in the nancial statements that dis-
closes
©2021, AICPA AR-C §90.109
4606 Statements on Standards for Accounting and Review Services
i. the conditions or events identied and management's
plans that deal with these conditions or events and
ii. that these conditions or events indicate that substantial
doubt exists about the entity's ability to continue as a going
concern for a reasonable period of time
b. States that the accountant's conclusion is not modied with re-
spect to the matter
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph
subsequently renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.110 The description in the "Going Concern" section about the entity's
ability to continue as a going concern for a reasonable period of time should
use terms consistent with those included in the applicable nancial reporting
framework. The accountant should not use conditional language concerning the
existence of substantial doubt about the entity's ability to continue as a going
concern for a reasonable period of time. (Ref: par. .A181) [Paragraph renum-
bered and amended, effective for reviews of nancial statements for periods
ending on or after June 15, 2019, by SSARS No. 24. Paragraph subsequently
renumbered and amended, effective for reviews of nancial statements for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
.111 If adequate disclosure about an entity's ability to continue as a going
concern for a reasonable period of time is not made in the nancial statements,
the accountant should do the following:
a. Express a qualied or adverse conclusion, as appropriate, in ac-
cordance with paragraphs .71–.74
b. In the "Basis for Qualied (Adverse) Conclusion" section of the
accountant's review report, state that
i. substantial doubt exists about the entity's ability to con-
tinue as a going concern and that the nancial statements
do not adequately disclose this matter or
ii. substantial doubt about the entity's ability to continue as a
going concern has been alleviated by management's plans
but the nancial statements do not adequately disclose
this matter.
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph
subsequently renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
Management Unwilling to Perform or Extend Its Evaluation
.112 If management is unwilling to perform or extend its evaluation to
meet the period of time required by the applicable nancial reporting frame-
work when requested to do so by the accountant, the accountant should consider
the implications for the accountant's review report. (Ref: par. .A123) [Paragraph
added, effective for reviews of nancial statements for periods ending on or af-
ter December 15, 2021, by SSARS No. 25.]
[.113–.121] [Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
AR-C §90.110 ©2021, AICPA
Review of Financial Statements 4607
Reference to the Work of Other Accountants in an Accountant’s
Review Report
.122 If other accountants audited or reviewed the nancial statements of
signicant components, such as consolidated and unconsolidated subsidiaries
and investees, and the accountant of the reporting entity decides not to as-
sume responsibility for the audit or review performed by the other accountants,
the accountant of the reporting entity should make reference to the review or
audit of such other accountants in the accountant's review report. In that in-
stance, the accountant should clearly indicate in the accountant's review report
that the accountant used the work of other accountants and should include
the magnitude of the portion of the nancial statements audited or reviewed
by the other accountants. (Ref: par. .A191–.A193) [Paragraph renumbered and
amended, effective for reviews of nancial statements for periods ending on or
after June 15, 2019, by SSARS No. 24. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.123 Reference to the audit or review of other accountants in the accoun-
tant's review report on the reporting entity should not be made if the other
accountants issued an auditor's or an accountant's review report that includes
an alert that restricts the use of such report. [Paragraph added, effective for
reviews of nancial statements for periods ending on or after June 15, 2019,
by SSARS No. 24. Paragraph renumbered by the issuance of SSARS No. 25,
February 2020.]
Determining Whether the Other Accountants Are Familiar with SSARSs or
Auditing Standards Generally Accepted in the United States of America,
as Applicable
.124 Regardless of whether the accountant of the reporting entity decides
to make reference to the review or audit of other accountants, the accountant
of the reporting entity should communicate with the other accountants and
determine the following:
a. The other accountants are aware that the nancial statements
of the component that the other accountants have audited or re-
viewed are to be included in the nancial statements on which
the accountant of the reporting entity will report and that the
other accountants' report thereon will be relied upon and, where
applicable, referred to by the accountant of the reporting entity.
b. The other accountants are familiar with the applicable nancial
reporting framework and with SSARSs or auditing standards
generally accepted in the United States of America, as applica-
ble, and will conduct the review or audit in accordance therewith.
(Ref: par. .A194)
c. The other accountants understand the ethical requirements that
are relevant to the engagement and, in particular, are indepen-
dent. (Ref: par. .A195)
d. A review will be made of matters affecting elimination of inter-
company transactions and accounts and, if appropriate in the
circumstances, the uniformity of accounting practices among the
components included in the nancial statements.
[Paragraph renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.124
4608 Statements on Standards for Accounting and Review Services
Determining Whether to Make Reference When the Financial Reporting
Framework Is Not the Same
.125 If the component's nancial statements are prepared using a different
nancial reporting framework from that used for the nancial statements of
the reporting entity, reference to the review or audit of the other accountants
in the review report of the accountant of the reporting entity should not be
made unless the following apply:
a. The accountant has determined that the measurement, recog-
nition, presentation, and disclosure criteria that are applicable
to all material items in the component's nancial statements in
accordance with the nancial reporting framework used by the
component are similar to the criteria that are applicable to all
material items in the reporting entity's nancial statements in
accordance with the nancial reporting framework used by the
reporting entity.
b. The accountant of the reporting entity has obtained sufcient ap-
propriate review evidence for purposes of evaluating the appro-
priateness of the adjustments to convert the component's nan-
cial statements to the nancial reporting framework used by the
reporting entity without the need to assume responsibility for,
and thus be involved in, the work of the other accountants. (Ref:
par. .A196)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after June 15, 2019, by SSARS No. 24. Paragraph renumbered by the
issuance of SSARS No. 25, February 2020.]
Supplementary Information That Accompanies
Reviewed Financial Statements and the Accountant’s
Review Report Thereon
.126 When supplementary information accompanies reviewed nancial
statements and the accountant's review report thereon, the accountant should
clearly indicate the degree of responsibility, if any, the accountant is taking with
respect to such information in either
a. an other-matter paragraph in the accountant's review report on
the nancial statements or
b. a separate report on the supplementary information
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.127 When the accountant has subjected the supplementary information
to the review procedures applied in the accountant's review of the basic nan-
cial statements, the other-matter paragraph in the accountant's review report
on the nancial statements or the separate report on the supplementary infor-
mation should state that (Ref: par. .A198 and .A200)
a. the supplementary information is presented for purposes of ad-
ditional analysis and is not a required part of the basic nancial
statements;
b. the supplementary information is the responsibility of manage-
ment and was derived from, and relates directly to, the under-
lying accounting and other records used to prepare the nancial
statements;
AR-C §90.125 ©2021, AICPA
Review of Financial Statements 4609
c. the supplementary information has been subjected to the review
procedures applied in the accountant's review of the basic nan-
cial statements and whether the accountant is aware of any ma-
terial modications that should be made to the supplementary
information; and
d. the accountant has not audited the supplementary information
and does not express an opinion on such information.
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
.128 When the accountant has not subjected the supplementary informa-
tion to the review procedures applied in the accountant's review of the basic
nancial statements, the other-matter paragraph in the accountant's review
report on the nancial statements or the separate report on the supplemen-
tary information should state that (Ref: par. .A199–.A200)
a. the supplementary information is presented for purposes of ad-
ditional analysis and is not a required part of the basic nancial
statements;
b. the supplementary information is the responsibility of manage-
ment; and
c. the accountant has not audited or reviewed the supplementary
information and, accordingly, does not express an opinion, a con-
clusion, nor provide any assurance on such information.
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
Required Supplementary Information
.129 Concerning the requirement in paragraph .126, with respect to re-
quired supplementary information, the accountant should include an other-
matter paragraph in the accountant's review report on the nancial statements.
The other-matter paragraph should include language to explain the following
circumstances, as applicable: (Ref: par. .A201)
a. The required supplementary information is included, and the ac-
countant performed a compilation engagement on the required
supplementary information.
b. The required supplementary information is included, and the ac-
countant reviewed the required supplementary information.
c. The required supplementary information is included, and the ac-
countant did not perform a compilation, review, or audit on the
required supplementary information.
d. The required supplementary information is omitted.
e. Some required supplementary information is missing, and some
is presented in accordance with the prescribed guidelines (Ref:
par. .A202)
f. The accountant has identied departures from the prescribed
guidelines.
g. The accountant has unresolved doubts about whether the re-
quired supplementary information is presented in accordance
with prescribed guidelines.
©2021, AICPA AR-C §90.129
4610 Statements on Standards for Accounting and Review Services
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
.130 If the entity has presented all or some of the required supplementary
information and the accountant did not perform a compilation or review on the
required supplementary information, the other-matter paragraph referred to
in paragraph .126 should include the following elements: (Ref: par. .A203)
a. A statement that [identify the applicable nancial reporting
framework (for example, accounting principles generally accepted
in the United States of America)]requirethatthe[identify the re-
quired supplementary information] be presented to supplement
the basic nancial statements
b. A statement that such information, although not a part of the ba-
sic nancial statements, is required by [identify designated ac-
counting standards-setter], who considers it to be an essential
part of nancial reporting for placing the basic nancial state-
ments in an appropriate operational, economic, or historical con-
text
c. A statement that the accountant did not perform a compilation,
review, or audit on the required supplementary information and
does not express an opinion or provide any assurance on the in-
formation
d. If some of the required supplementary information is omitted
i. a statement that management has omitted [description
of the missing required supplementary information]that
[identify the applicable nancial reporting framework (for
example, accounting principles generally accepted in the
United States of America)] require to be presented to sup-
plement the basic nancial statements
ii. a statement that such missing information, although not a
part of the basic nancial statements, is required by [iden-
tify designated accounting standards-setter], who consid-
ers it to be an essential part of nancial reporting for plac-
ing the basic nancial statements in an appropriate oper-
ational, economic, or historical context
e. If the measurement or presentation of the required supplemen-
tary information departs materially from the prescribed guide-
lines, a statement that material departures from prescribed
guidelines exist [describe the material departures from the appli-
cable nancial reporting framework]
f. If the accountant has unresolved doubts about whether the re-
quired supplementary information is measured or presented in
accordance with prescribed guidelines, a statement that the ac-
countant has doubts about whether material modications should
be made to the required supplementary information for it to be
presented in accordance with guidelines established by [identify
designated accounting standards-setter]
[As amended, effective October 2016, by SSARS No. 23. Paragraph renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
.131 If all the required supplementary information is omitted, the other-
matter paragraph should include the following elements:
AR-C §90.130 ©2021, AICPA
Review of Financial Statements 4611
a. A statement that management has omitted [description of the
missing required supplementary information]that[identify the
applicable nancial reporting framework (for example, account-
ing principles generally accepted in the United States of America)]
require to be presented to supplement the basic nancial state-
ments
b. A statement that such missing information, although not a part
of the basic nancial statements, is required by [identify desig-
nated accounting standards-setter], who considers it to be an es-
sential part of nancial reporting for placing the basic nancial
statements in an appropriate operational, economic, or historical
context
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Change in Engagement From Audit to Review
.132 If the accountant, who was engaged to perform an audit engagement
in accordance with generally accepted auditing standards, has been requested
to change the engagement to a review engagement, the accountant should con-
sider the following before deciding whether to agree to the change: (Ref: par.
.A204–.A205)
a. The reason given for the request, particularly the implications
of a restriction on the scope of the audit engagement, whether
imposed by management or by circumstances (Ref: par. .A206)
b. The additional audit effort required to complete the audit engage-
ment
c. The estimated additional cost to complete the audit engagement
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.133 In all circumstances, if the audit procedures are substantially com-
plete or the cost to complete such procedures is relatively insignicant, the
accountant should consider the propriety of accepting a change in the engage-
ment. [Paragraph renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.134 If the accountant concludes, based upon the accountant's professional
judgment, that reasonable justication exists to change the engagement, and if
the accountant complies with the standards applicable to a review engagement,
the accountant should issue an appropriate review report. [Paragraph renum-
bered by the issuance of SSARS No. 24, May 2018. Paragraph subsequently
renumbered by the issuance of SSARS No. 25, February 2020.]
.135 The report should not include reference to
a. the original engagement,
b. any audit procedures that may have been performed, or
c. scope limitations that resulted in the changed engagement.
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.136 When the accountant has been engaged to audit an entity's nan-
cial statements and management refuses to allow the accountant to correspond
with the entity's legal counsel, the accountant, except in rare circumstances, is
©2021, AICPA AR-C §90.136
4612 Statements on Standards for Accounting and Review Services
precluded from accepting an engagement to review those nancial statements.
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Review Documentation
.137 The preparation of documentation for the review provides evidence
that the review was performed in accordance with SSARSs and a sufcient
and appropriate record of the basis for the accountant's report. The accountant
should prepare review documentation in a timely manner that is sufcient to
enable an experienced accountant, having no previous connection to the review,
to understand the following: (Ref: par. .A207–.A211)
a. The nature, timing, and extent of the review procedures per-
formed to comply with SSARSs
b. The review evidence obtained from the review procedures per-
formed and the accountant's conclusions formed on the basis of
that review evidence
c. Signicant matters arising during the review, the accountant's
conclusions reached thereon, and signicant professional judg-
ments made in reaching those conclusions
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.138 In addition to the requirements in paragraph .137, the review docu-
mentation should include the following:
a. The engagement letter or other suitable form of written documen-
tation with management, as described in paragraphs .16–.17 (Ref:
par. .A25 and .A27)
b. Communications with management regarding the accountant's
expectation to include an emphasis-of-matter or other-matter
paragraph in the accountant's review report as required by para-
graph .93
c. Communications with management, those charged with gover-
nance, and others as relevant to the performance of the review
of signicant matters arising during the engagement, including
the nature of those matters
d. Communications with other accountants that have audited or re-
viewed the nancial statements of signicant components as re-
quired by paragraph .122
e. If, in the course of the engagement, the accountant identied
information that is inconsistent with the accountant's ndings
regarding signicant matters affecting the nancial statements,
how the inconsistency was addressed
f. The representation letter
g. A copy of the reviewed nancial statements and the accountant's
review report thereon
[Paragraph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
.139 In documenting the nature, timing, and extent of procedures per-
formed as required in this section, the accountant should record the following:
AR-C §90.137 ©2021, AICPA
Review of Financial Statements 4613
a. Who performed the work and the date such work was completed
b. Who reviewed the work performed for the purpose of quality con-
trol for the engagement and the date and extent of the review
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Application and Other Explanatory Material
Introduction
.A1 If the accountant is engaged to perform a review of historical nancial
information other than nancial statements, references in this section to nan-
cial statements are to be taken as a reference to such other historical nancial
information. [Paragraph added, effective October 2016, by SSARS No. 23.]
.A2 Examples of other historical nancial information that an accountant
may be engaged to review include, but are not limited to, the following:
•
Specied elements, accounts, or items of a nancial statement,
such as schedules of rentals, royalties, prot participation, or pro-
vision for income taxes
•
Supplementary information
•
Required supplementary information
•
Financial information contained in a tax return
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016.]
.A3 The accountant may review a single nancial statement, such as a bal-
ance sheet, and not other related nancial statements, such as the statements
of income, retained earnings, and cash ows, if the scope of the accountant's
inquiry and analytical procedures have not been restricted. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016.]
Objectives (Ref: par. .07)
.A4 A review differs signicantly from an audit of nancial statements in
which the auditor obtains reasonable assurance, which is a high, but not abso-
lute, level of assurance, that the nancial statements are free of material mis-
statement. A review does not contemplate obtaining an understanding of the
entity's internal control; assessing fraud risk; testing accounting records by ob-
taining sufcient appropriate audit evidence through inspection, observation,
conrmation, or the examination of source documents; or other procedures ordi-
narily performed in an audit. Accordingly, in a review, the accountant does not
obtain assurance that he or she will become aware of all signicant matters
that would be disclosed in an audit. Therefore, a review is designed to obtain
only limited assurance as a basis for reporting whether the accountant is aware
of any material modications that should be made to the nancial statements
in order for the statements to be in accordance with the applicable nancial
reporting framework. [Paragraph renumbered by the issuance of SSARS No.
23, October 2016.]
[.A5–.A9] [Paragraphs deleted by the issuance of SSARS No. 25, February
2020.]
©2021, AICPA AR-C §90[.A5–.A9]
4614 Statements on Standards for Accounting and Review Services
Definitions (Ref: par. .08)
.A10 Sufcient appropriate review evidence, consisting primarily of the
results of the accountant's analytical procedures and inquiries, is required to
obtain limited assurance to support the accountant's conclusion. Review evi-
dence is cumulative in nature and primarily obtained from the procedures per-
formed during the course of the review. The combination of the nature, timing,
and extent of evidence-gathering procedures is limited compared to an audit
engagement. [Paragraph added, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A11 Most nancial reporting frameworks requiring an explicit manage-
ment evaluation of the entity's ability to continue as a going concern specify the
period of time to be evaluated. For example, the nancial reporting frameworks
of the following standard-setting bodies specify such period of time as follows:
a. FASB. Within one year after the date that the nancial state-
ments are issued (or within one year after the date that the -
nancial statements are available to be issued, when applicable).
1
b. GASB. 12 months beyond the date of the nancial statements.
GASB further requires that, if a governmental entity currently
knows information that may raise substantial doubt shortly
thereafter (for example, within an additional three months), such
information should also be considered.
2
c. International Accounting Standards Board. At least, but not lim-
ited to, one year from the end of the reporting period.
3
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after June 15, 2019, by SSARS No. 24. Paragraph renumbered by the
issuance of SSARS No. 25, February 2020.]
[.A12] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
.A13 Supplementary information includes additional details or explana-
tions of items in or related to the basic nancial statements, consolidating infor-
mation, historical summaries of items extracted from the basic nancial state-
ments, statistical data, and other material, some of which may be from sources
outside the accounting system or outside the entity. [Paragraph added, effective
October 2016, by SSARS No. 23. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A14 Supplementary information may be prepared in accordance with an
applicable nancial reporting framework, by regulatory or contractual require-
ments, in accordance with management's criteria, or in accordance with other
requirements. [Paragraph added, effective October 2016, by SSARS No. 23.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
1
"Pending Content" in FASB Accounting Standards Codication (ASC) 205-40-50-1. [Footnote
added, effective for reviews of nancial statements for periods ending on or after June 15, 2019, by
SSARS No. 24.]
2
Paragraph 16 of GASB Statement No. 56, Codication of Accounting and Financial Reporting
Guidance Contained in the AICPA Statements on Auditing Standards. [Footnote added, effective for
reviews of nancial statements for periods ending on or after June 15, 2019, by SSARS No. 24.]
3
Paragraph 26 of International Accounting Standard 1, Presentation of Financial Statements.
[Footnote added, effective for reviews of nancial statements for periods ending on or after June 15,
2019, by SSARS No. 24.]
AR-C §90.A10 ©2021, AICPA
Review of Financial Statements 4615
Independence (Ref: par. .10)
.A15 The AICPA Code of Professional Conduct provides guidance with
respect to independence. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A16 Nothing prohibits an accountant who is unable to complete a review
engagement due to a determination that the accountant's independence is im-
paired from performing a compilation engagement on those nancial state-
ments. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
Professional Skepticism (Ref: par. .11)
.A17 Professional skepticism includes being alert to the following, for ex-
ample:
•
Review evidence that contradicts other review evidence obtained
•
Information that brings into question the reliability of responses
to inquiries and other information or records to be used as review
evidence
•
Circumstances that suggest the need for review procedures in ad-
dition to those required by this section
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A18 Maintaining professional skepticism throughout the review is neces-
sary if the accountant is, for example, to reduce the risks of
•
overlooking unusual circumstances.
•
overgeneralizing when drawing conclusions from review observa-
tions.
•
using inappropriate assumptions in determining the nature, tim-
ing, and extent of the review procedures and evaluating the re-
sults thereof.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A19 Professional skepticism is necessary to the critical assessment of re-
view evidence. This includes questioning contradictory review evidence and the
reliability of responses to inquiries and other information obtained from man-
agement and those charged with governance. It also includes consideration of
the sufciency and appropriateness of review evidence obtained in light of the
circumstances. [Paragraph added, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A20 The accountant may accept records and documents as genuine unless
the accountant has reason to believe the contrary. [Paragraph added, effective
for reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
.A21 The accountant neither assumes that management is dishonest nor
assumes unquestioned honesty. The accountant cannot be expected to disregard
past experience of the honesty and integrity of management and those charged
©2021, AICPA AR-C §90.A21
4616 Statements on Standards for Accounting and Review Services
with governance. Nevertheless, a belief that management and those charged
with governance are honest and have integrity does not relieve the accoun-
tant of the need to maintain professional skepticism or allow the accountant to
be satised with less than persuasive review evidence when obtaining limited
assurance. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
Acceptance and Continuance of Client Relationships and Review
Engagements (Ref: par. .13)
.A22 A review in accordance with SSARSs is conducted on the premise
that management has acknowledged and understands that it has the responsi-
bility set out in paragraph .26b of section 60. The preparation of nancial state-
ments, in whole or in part, is a nonattest service subject to the provisions of the
"Nonattest Services" interpretation (ET sec. 1.295) of the "Independence Rule"
of the AICPA Code of Professional Conduct. To avoid misunderstanding, agree-
ment is reached with management that it acknowledges and understands that
it has such responsibilities as part of agreeing and documenting the terms of
the review engagement as required by paragraphs .16–.17. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A23 Documents containing nancial statements that may include an in-
dication that such nancial statements have been reviewed by the entity's
accountant includes documents submitted to bonding companies. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Agreement on Engagement Terms (Ref: par. .16–.17 and .135)
.A24 Both management and the accountant have an interest in document-
ing the agreed-upon terms of the review engagement before the commencement
of the review engagement to help avoid misunderstandings with respect to the
review engagement. For example, it reduces the risk that management may in-
appropriately rely on or expect the accountant to protect management against
certain risks or perform certain functions, including those that are manage-
ment's responsibility. [Paragraph renumbered by the issuance of SSARS No. 23,
October 2016. Paragraph subsequently renumbered by the issuance of SSARS
No. 24, May 2018. Paragraph subsequently renumbered by the issuance of
SSARS No. 25, February 2020.]
.A25 The roles of management and those charged with governance in
agreeing upon the terms of the review engagement for the entity depend on
the governance structure of the entity and relevant law or regulation. Depend-
ing on the entity's structure, the agreement may be with management, those
charged with governance, or both. When the agreement on the terms of engage-
ment is only with those charged with governance, nonetheless, in accordance
with paragraph .26b of section 60, the accountant is required to obtain man-
agement's agreement that it acknowledges and understands its responsibili-
ties. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
AR-C §90.A22 ©2021, AICPA
Review of Financial Statements 4617
.A26 When a third party has contracted for a review of the entity's nan-
cial statements, agreeing the terms of the review with management of the en-
tity is necessary in order to establish that the preconditions for a review are
present. [Paragraph renumbered by the issuance of SSARS No. 23, October
2016. Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018. Paragraph subsequently renumbered by the issuance of SSARS No.
25, February 2020.]
.A27 The understanding with management regarding the services to be
performed for review engagements is required by paragraph .16 to be in a doc-
umented form, and, accordingly, an oral understanding is insufcient. An en-
gagement letter is the most common and usually the most convenient method
for documenting the understanding with management regarding the services to
be performed for review engagements. [Paragraph renumbered and amended,
effective October 2016, by SSARS No. 23. Paragraph subsequently renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
.A28 Although the accountant may prepare the nancial statements, in
whole or in part, the nancial statements are representations of management,
and the fairness of their presentation in accordance with the applicable nan-
cial reporting framework is management's responsibility. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A29 Illustrations of engagement letters for a review of nancial state-
ments are presented in exhibit A, "Illustrative Engagement Letters." [Para-
graph renumbered by the issuance of SSARS No. 23, October 2016. Paragraph
subsequently renumbered by the issuance of SSARS No. 24, May 2018. Para-
graph subsequently renumbered by the issuance of SSARS No. 25, February
2020.]
Communication With Management and Those Charged With
Governance (Ref: par. .18)
.A30 In a review engagement, the accountant's communications with man-
agement and those charged with governance take the form of
a. inquiries the accountant makes in the course of performing the
procedures for the review and
b. other communications, in the context of having effective two-way
communication to understand matters arising and to develop a
constructive working relationship for the engagement.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A31 The appropriate timing for communications will vary with the cir-
cumstances of the engagement. Relevant factors include the signicance and
nature of the matter and any action expected to be taken by management or
those charged with governance. For example, it may be appropriate to commu-
nicate a signicant difculty encountered during the review as soon as practi-
cable if management or those charged with governance are able to assist the
accountant to overcome the difculty. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
©2021, AICPA AR-C §90.A31
4618 Statements on Standards for Accounting and Review Services
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A32 Law or regulation may restrict the accountant's communication of
certain matters with those charged with governance. For example, law or reg-
ulation may specically prohibit a communication, or other action, that might
prejudice an investigation by an appropriate authority into an actual, or sus-
pected, illegal act. In some circumstances, potential conicts between the ac-
countant's obligations of condentiality and obligations to communicate may
be complex. In such cases, the accountant may consider obtaining legal advice.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Communicating Matters Concerning the Review
.A33 Matters to be communicated to management or those charged with
governance, as appropriate, in accordance with this section may include the
following:
•
The accountant's responsibilities in the review engagement, as in-
cluded in the engagement letter or other suitable form of written
agreement.
•
Signicant ndings from the review, for example
— the accountant's views about signicant qualitative as-
pects of the entity's accounting practices, including ac-
counting policies, accounting estimates, and nancial
statement disclosures.
— signicant ndings from the performance of procedures,
including situations when the accountant considered per-
formance of additional procedures necessary in accordance
with this section. The accountant may need to conrm
that those charged with governance have the same under-
standing of the facts and circumstances relevant to specic
transactions or events.
— Matters arising that may lead to modication of the ac-
countant's review report.
— Signicant difculties, if any, encountered during the re-
view, for example, unavailability of expected information,
unexpected inability to obtain evidence that the accoun-
tant considers necessary for the review, or restrictions im-
posed on the accountant by management. In some cir-
cumstances, such difculties may lead to the accountant's
withdrawal from the engagement.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A34 In some entities, different persons are responsible for the manage-
ment and governance of an entity. In these circumstances, management may
have the responsibility to communicate matters of governance interest to those
charged with governance. Communication by management with those charged
with governance of matters that the accountant is required to communicate
does not relieve the accountant of the responsibility to also communicate with
AR-C §90.A32 ©2021, AICPA
Review of Financial Statements 4619
those charged with governance. However, communication of these matters by
management may affect the form or timing of the accountant's communication
with those charged with governance. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Communication With Third Parties
.A35 The accountant may be required by law or regulation to, for example
•
notify a regulatory or enforcement body of certain matters com-
municated with those charged with governance.
•
submit copies of certain reports prepared for those charged with
governance to relevant regulatory or funding bodies or, in some
cases, make such reports publicly available.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A36 Unless required by law or regulation to provide a third party with a
copy of the accountant's written communications with those charged with gov-
ernance, the accountant may need the prior consent of management or those
charged with governance before doing so. [Paragraph renumbered by the is-
suance of SSARS No. 23, October 2016. Paragraph subsequently renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
Performing the Engagement
Materiality in a Review of Financial Statements (Ref: par. .19)
.A37 The accountant's consideration of materiality is made in the context
of the applicable nancial reporting framework. Financial reporting frame-
works often discuss the concept of materiality in the context of the preparation
and presentation of nancial statements. Although nancial reporting frame-
works may discuss materiality in different terms, they generally explain that
•
misstatements, including omissions, are considered to be material
if there is a substantial likelihood that, individually or in the ag-
gregate, they would inuence the judgment made by a reasonable
user based on the nancial statements.
•
judgments about materiality are made in light of surrounding cir-
cumstances and affected by the size or nature of a misstatement
or a combination of both.
•
judgments about materiality involve both qualitative and quanti-
tative considerations.
•
judgments about matters that are material to users of the nan-
cial statements are based on a consideration of the common nan-
cial information needs of users as a group. The possible effect of
misstatements on specic individual users, whose needs may vary
widely, is not considered.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
©2021, AICPA AR-C §90.A37
4620 Statements on Standards for Accounting and Review Services
.A38 If the applicable nancial reporting framework does not include a
discussion of the concept of materiality, the characteristics referred to in para-
graph .A37 provide the accountant with such a frame of reference. [Paragraph
added, effective for reviews of nancial statements for periods ending on or af-
ter December 15, 2021, by SSARS No. 25.]
.A39 The accountant's determination of materiality is a matter of profes-
sional judgment and is affected by the accountant's perception of the nancial
information needs of users of the nancial statements. For purposes of deter-
mining materiality, the accountant may assume that reasonable users
•
have a reasonable knowledge of business and economic activities
and accounting and a willingness to study the information in the
nancial statements with reasonable diligence;
•
understand that nancial statements are prepared, presented,
and reviewed to levels of materiality;
•
recognize the uncertainties inherent in the measurement of
amounts based on the use of estimates, judgment, and the con-
sideration of future events; and
•
make reasonable judgments based on the information in the -
nancial statements.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A40 The accountant's judgment about what is material in relation to the
nancial statements as a whole is the same regardless of the level of assurance
obtained by the accountant as a basis for expressing a conclusion on the nan-
cial statements. [Paragraph added, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A41 The accountant's determination of materiality for the nancial state-
ments as a whole may need to be revised during the engagement as a result of
the following:
•
A change in the circumstances that occurred during the review
(for example, a decision to dispose of a major part of the entity's
business)
•
New information, or a change in the accountant's understanding
of the entity and its environment as a result of performing review
procedures (for example, if during the review it appears that ac-
tual nancial results are likely to be substantially different from
anticipated period-end nancial results that were used initially to
consider materiality for the nancial statements as a whole)
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Understanding of the Industry (Ref: par. .21)
.A42 The requirement that the accountant possess a level of knowledge
of the industry in which the entity operates does not prevent the accountant
from accepting a review engagement for an entity in an industry with which
the accountant has no previous experience. It does, however, place upon the
accountant a responsibility to obtain the required level of knowledge. The
accountant may do so, for example, by consulting AICPA guides, industry
publications, nancial statements of other entities in the industry, textbooks
and periodicals, appropriate continuing professional education, or individuals
AR-C §90.A38 ©2021, AICPA
Review of Financial Statements 4621
knowledgeable about the industry. [Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Knowledge of the Entity (Ref: par. .22)
.A43 The accountant may obtain knowledge of the entity through inquiry
of the entity's personnel, the review of documents prepared by the entity, or
experience with the entity or the entity's industry. Such knowledge includes
the following:
•
An understanding of the entity's business
•
An understanding of the accounting principles and practices used
by the entity in measuring, recognizing, recording, and disclosing
all signicant accounts and disclosures in the nancial statements
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A44 The accountant's understanding of the entity's business encompasses
a general understanding of the entity's organization; its operating characteris-
tics; and the nature of its assets, liabilities, revenues, and expenses. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Designing and Per forming Review Procedures
(Ref: par. .24–.25)
.A45 Review evidence obtained through the performance of analytical pro-
cedures and inquiry will ordinarily provide the accountant with a reasonable
basis for obtaining limited assurance. However, in addition to analytical pro-
cedures and inquiries, in certain circumstances and based on the accountant's
professional judgment, the accountant may perform procedures ordinarily per-
formed in an audit. In such instances, the engagement remains a review, and
the accountant is not required to perform an audit of the nancial statements.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A46 The results of the accountant's analytical procedures and inquiries
may modify the accountant's risk awareness. For example, the response to an
inquiry that a related party transaction is not disclosed may revise the ac-
countant's awareness of risk relative to related party transactions. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.A47 Both quantitative and qualitative factors are considered when deter-
mining which items are material to the nancial statements, including disclo-
sures, and which areas include increased risk of material misstatement. For
example, disclosure of the implementation status of a new accounting stan-
dard may not include quantitatively material disclosures but may be qualita-
tively material such that the accountant would perform inquiry procedures to
©2021, AICPA AR-C §90.A47
4622 Statements on Standards for Accounting and Review Services
validate the disclosures presented. [Paragraph added, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Analytical Procedures (Ref: par. .26–.27)
.A48 Examples of analytical procedures that an accountant may consider
performing when conducting a review of nancial statements are contained
in appendix A, "Analytical Procedures the Accountant May Consider Perform-
ing When Conducting a Review of Financial Statements." [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A49 Analytical procedures include the consideration of comparisons of the
entity's nancial information with, for example:
•
Comparable information for prior periods
•
Anticipated results of the entity, such as budgets or forecasts, or
expectations of the accountant, such as an estimation of depreci-
ation
•
Similar industry information, such as a comparison of the entity's
ratio of sales to accounts receivable and gross margin percentages
with industry averages or other entities of comparable size in the
same industry
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A50 Analytical procedures also include consideration of relationships, for
example:
•
Among elements of nancial information, such as gross margin
percentages, that would be expected to conform to a predictable
pattern based on recent history of the entity and industry
•
Between nancial information and relevant nonnancial informa-
tion, such as payroll costs to number of employees
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A51 When considering plausible relationships, the accountant may wish
to consider information developed and used by the entity (for example, analy-
ses prepared for management or those charged with governance). [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.A52 Expectations developed by the accountant in performing analytical
procedures in connection with a review of nancial statements may be less
precise than those developed in an audit. Also, in a review, the accountant
is not required to corroborate management's responses with other evidence.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
AR-C §90.A48 ©2021, AICPA
Review of Financial Statements 4623
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A53 To compare disaggregated revenue data, the accountant may com-
pare, for example, revenue reported by month and product line or operating
segment during the current period with that of comparable prior periods. [Para-
graph renumbered by the issuance of SSARS No. 23, October 2016. Paragraph
subsequently renumbered by the issuance of SSARS No. 24, May 2018. Para-
graph subsequently renumbered by the issuance of SSARS No. 25, February
2020.]
.A54 Various methods may be used to perform analytical procedures.
These methods range from performing simple comparisons to performing com-
plex analyses. Analytical procedures may be performed at the nancial state-
ment level or at the detailed account level. The nature, timing, and extent of an-
alytical procedures are a matter of professional judgment. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
Investigating Results of Analytical Procedures (Ref: par. .28b)
.A55 Although the accountant is not required to corroborate manage-
ment's responses with other evidence, the need to perform other review pro-
cedures may arise when, for example, management is unable to provide an ex-
planation, or the explanation is not considered adequate. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
Inquiries of Members of Management Who Have Responsibility
for Financial and Accounting Matters (Ref: par. .29)
.A56 In addition to members of management who have responsibility for
nancial and accounting matters, the accountant may determine to direct in-
quiries to others within the entity and those charged with governance, if ap-
propriate. [Paragraph renumbered by the issuance of SSARS No. 23, October
2016. Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018. Paragraph subsequently renumbered by the issuance of SSARS No.
25, February 2020.]
.A57 Additional examples of unusual or complex transactions, events, or
matters about which the accountant may inquire of management are as follows:
•
Correction of an error
•
Business combinations
•
New or complex revenue recognition methods
•
Impairment of assets
•
Disposal of a segment of a business
•
Use of derivative instruments and hedging activities
•
Sales and transfers that may call into question the classication
of investments in securities, including management's intent and
ability with respect to the remaining securities classied as held
to maturity
•
Adoption of new stock compensation plans or changes to existing
plans
©2021, AICPA AR-C §90.A57
4624 Statements on Standards for Accounting and Review Services
•
Restructuring charges taken in the current and prior periods
•
Signicant, unusual, or infrequently occurring transactions
•
Changes in litigation or contingencies
•
Application of new accounting principles
•
Changes in accounting principles or the methods of applying them
•
Trends and developments affecting accounting estimates, such as
allowances for bad debts and excess or obsolete inventories, pro-
visions for warranties and employee benets, and realization of
unearned income and deferred charges
•
Compliance with debt covenants
•
Material off-balance-sheet transactions, variable interest entities,
and other equity investments
•
Unique terms for debt or capital stock that could affect classica-
tion
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.A58 Management may obtain knowledge of fraud or suspected fraud af-
fecting the entity involving management or others when the fraud could have a
material effect on the nancial statements through, among other things, com-
munications received from employees, former employees, or others. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph subse-
quently renumbered by the issuance of SSARS No. 24, May 2018.]
.A59 The accountant may obtain and read minutes from meetings of stock-
holders, the board of directors, committees of the board of directors, or compa-
rable meetings that may affect the nancial statements as an effective and
efcient procedure to meet the requirement in paragraph .29m to inquire of
members of management who have responsibility for nancial and accounting
matters concerning the nancial statements about actions taken at such meet-
ings. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
Procedures to Address Specific Circumstances
Related Parties
Understanding the Nature of Signicant Transactions Outside the Normal
Course of Business (Ref: par. .33a)
.A60 Inquiring into the nature of the signicant transactions outside the
entity's normal course of business involves obtaining an understanding of the
business rationale of the transactions and the terms and conditions under
which these have been entered into. [Paragraph added, effective for reviews
of nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
AR-C §90.A58 ©2021, AICPA
Review of Financial Statements 4625
Fraud and Noncompliance With Laws or Regulations (Ref: par. .34)
.A61 The communication of matters involving identied or suspected non-
compliance may describe the act of identied or suspected noncompliance, the
circumstances of its occurrence, and the effect on the nancial statements.
The accountant may reach agreement in advance with management and those
charged with governance, if applicable, on the nature and amount of matters
that would be considered not material and, thus, need not be communicated.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A62 The accountant's professional duty to maintain the condentiality
of client information may preclude reporting identied or suspected noncom-
pliance with laws and regulations to a party outside the entity. However, the
accountant's legal responsibilities vary by jurisdiction, and in certain circum-
stances, the duty of condentiality may be overridden by statute, the law, or
courts of law. In the following circumstances, a duty to notify parties outside
the entity may exist:
•
In response to a court order
•
In compliance with requirements for the reviews of entities that
receive nancial assistance from a government agency
Because potential conicts with the accountant's ethical and legal obligations
regarding condentiality may be complex, the accountant may consult with le-
gal counsel before discussing noncompliance with parties outside the entity.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A63 The accountant may consider whether withdrawal from the engage-
ment is necessary when
•
management or those charged with governance do not take the
remedial action that the accountant considers necessary in the
circumstances or
•
matters regarding fraud or noncompliance with laws or regula-
tions involve an owner of the business.
When deciding whether withdrawal from the engagement is necessary, the ac-
countant may consider seeking legal advice. [Paragraph added, effective for re-
views of nancial statements for periods ending on or after December 15, 2021,
by SSARS No. 25.]
Going Concern (Ref: par. .37–.38)
.A64 The nature and extent of the accountant's review procedures are mat-
ters of the accountant's professional judgment. For example, when a history of
protable operations and ready access to nancing exists, inquiry alone might
be sufcient to review the entity's ability to continue as a going concern for
a reasonable period of time. [Paragraph added, effective for reviews of nan-
cial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.A65 Certain nancial reporting frameworks require management to eval-
uate the entity's ability to continue as a going concern for a reasonable period
of time in preparing nancial statements. For example, FASB Accounting Stan-
dards Codication¨ (ASC) requires management to evaluate whether there are
conditions and events, considered in the aggregate, that raise substantial doubt
about an entity's ability to continue as a going concern. Under FASB ASC, the
evaluation period is within one year after the date that the nancial statements
©2021, AICPA AR-C §90.A65
4626 Statements on Standards for Accounting and Review Services
are issued (or within one year after the date that the nancial statements are
available to be issued, when applicable). [Paragraph added, effective for reviews
of nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
.A66 A review of nancial statements is not designed to identify conditions
or events that raise substantial doubt about the entity's ability to continue as
a going concern for a reasonable period of time. However, conditions or events
that raise substantial doubt about an entity's ability to continue as a going
concern for a reasonable period of time may have existed at the date of the
prior period nancial statements or may be identied as a result of inquiries
of management or in the course of performing other review procedures. The
signicance of such conditions and events will depend on the circumstances,
and some may have signicance only when viewed in conjunction with others.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A67 The following are examples of conditions or events that raise sub-
stantial doubt about the entity's ability to continue as a going concern for a
reasonable period of time:
•
Negative trends. For example, recurring operating losses, working
capital deciencies, negative cash ows from operating activities,
and other adverse key nancial ratios
•
Other indications of possible nancial difculties. For example, de-
faults on loans or similar agreements, arrearages in dividends, de-
nial of usual trade credit from suppliers, a need to restructure debt
to avoid default, noncompliance with statutory capital require-
ments, and a need to seek new sources or methods of nancing
or to dispose of substantial assets
•
Internal matters. For example, work stoppages or other labor dif-
culties, substantial dependence on the success of a particular
project, uneconomic long-term commitments, and a need to sig-
nicantly revise operations
•
External matters. For example, legal proceedings, legislation, or
similar matters that might jeopardize an entity's ability to oper-
ate; loss of a key franchise, license, or patent; loss of a principal
customer or supplier; and an uninsured or underinsured catastro-
phe such as a hurricane, tornado, earthquake, or ood
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A68 The signicance of such conditions or events that raise substantial
doubt about the entity's ability to continue as a going concern for a reasonable
period of time can often be mitigated by other factors. The following list includes
examples of plans that management may implement to mitigate conditions or
events that raise substantial doubt about an entity's ability to continue as a go-
ing concern for a reasonable period of time. The examples are not all-inclusive.
Following each example is a list of the types of information that management
should consider at the date that the nancial statements are issued in evalu-
ating the feasibility of the plans to determine whether it is probable
4
that the
4
The FASB ASC Master Glossary denes probable as "the future event or events are likely to
occur." [Footnote renumbered by the issuance of SSARS No. 24, May 2018.]
AR-C §90.A66 ©2021, AICPA
Review of Financial Statements 4627
plan will be effectively implemented within one year after the date that the
nancial statements are issued.
5
a. Plans to dispose of an asset or business
i. Restrictions on disposal of an asset or business, such as
covenants that limit those transactions in loans or similar
agreements, or encumbrances against the asset or busi-
ness
ii. Marketability of the asset or business that management
plans to sell
iii. Possible direct or indirect effects of disposal of the asset or
business
b. Plans to borrow money or restructure debt
i. Availability and terms of new debt nancing or availability
and terms of existing debt renancing, such as term debt,
lines of credit, or arrangements for factoring receivables or
sale-leaseback of assets
ii. Existing or committed arrangements to restructure or sub-
ordinate debt or to guarantee loans to the entity
iii. Possible effects on management's borrowing plans of exist-
ing restrictions on additional borrowing or the sufciency
of available collateral
c. Plans to reduce or delay expenditures
i. Feasibility of plans to reduce overhead or administrative
expenditures,to postpone maintenance or research and de-
velopment projects, or to lease rather than purchase assets
ii. Possible direct or indirect effects on the entity and its cash
ows of reduced or delayed expenditures
d. Plans to increase ownership equity
i. Feasibility of plans to increase ownership equity, including
existing or committed arrangements to raise additional
capital
ii. Existing or committed arrangements to reduce current
dividend requirements or to accelerate cash infusions from
afliates or other investors
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A69 In considering the adequacy of disclosure, some of the information
that may be disclosed, depending on the requirements of the nancial reporting
framework, includes the following:
•
Principal conditions and events that raise substantial doubt about
the entity's ability to continue as a going concern for a reasonable
period of time
•
The possible effects of such conditions and events
•
Management's evaluation of the signicance of those conditions
and events in relation to the entity's ability to meet its obligations
and any mitigating factors
5
"Pending Content" in FASB ASC 205-40-55-3. [Footnote renumbered by the issuance of SSARS
No. 24, May 2018.]
©2021, AICPA AR-C §90.A69
4628 Statements on Standards for Accounting and Review Services
•
Possible discontinuance of operations
•
Management's plans (including relevant prospective nancial in-
formation) that are intended to mitigate the conditions or events
that raise substantial doubt about the entity's ability to continue
as a going concern for a reasonable period of time
•
Information about the recoverability or classication of recorded
asset amounts or the amounts or classication of liabilities
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Reconciling the Financial Statements to the Underlying
Accounting Records (Ref: par. .41)
.A70 To obtain evidence that the nancial statements agree or reconcile
with the accounting records, the accountant may compare the nancial state-
ments to
•
the accounting records, such as the general ledger;
•
a consolidating schedule derived from the accounting records; or
•
other supporting data in the entity's records.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Additional Procedures When the Accountant Becomes Aware
That the Financial Statements May Be Materially Misstated
(Ref: par. .42)
.A71 Additional procedures are required in accordance with this section if
the accountant becomes aware of a matter that causes the accountant to believe
the nancial statements may be materially misstated. [Paragraph added, effec-
tive for reviews of nancial statements for periods ending on or after December
15, 2021, by SSARS No. 25.]
.A72 The accountant's response in undertaking additional procedures
with respect to an item the accountant has cause to believe may be materi-
ally misstated in the nancial statements will vary, depending on the circum-
stances, and is a matter for the accountant's professional judgment. [Paragraph
added, effective for reviews of nancial statements for periods ending on or af-
ter December 15, 2021, by SSARS No. 25.]
.A73 The accountant's judgment about the nature, timing, and extent of
additional procedures that are needed to obtain review evidence to either con-
clude that a material misstatement is not likely, or determine that a material
misstatement exists, is guided by the following:
•
Information obtained from the accountant's evaluation of the re-
sults of the procedures already performed
•
The accountant's updated understanding of the entity and its en-
vironment obtained throughout the course of the engagement
•
The accountant's view on the persuasiveness of review evidence
needed to address the matter that causes the accountant to believe
that the nancial statements may be materially misstated
AR-C §90.A70 ©2021, AICPA
Review of Financial Statements 4629
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A74 Additional procedures focus on obtaining sufcient appropriate re-
view evidence to enable the accountant to form a conclusion on matters that
the accountant believes may cause the nancial statements to be materially
misstated. Such procedures may consist of the following:
•
Additional inquiry or analytical procedures, for example, being
performed in greater detail or focused on the affected items (that
is, amounts or disclosures concerning the affected accounts or
transactions as reected in the nancial statements)
•
Other types of procedures, for example, a substantive test of de-
tails or external conrmations
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A75 The following example illustrates the accountant's evaluation of the
need to perform additional procedures and the accountant's response when the
accountant believes additional procedures are necessary:
In the course of performing the inquiry and analytical procedures for the re-
view, the accountant's analysis of accounts receivable shows a material amount
of past due accounts receivable for which there is no allowance for bad or doubt-
ful accounts. This causes the accountant to believe that the accounts receivable
balance in the nancial statements may be materially misstated. The accoun-
tant then inquires of management whether there are uncollectible accounts
receivable that would need to be shown as being impaired. Depending on man-
agement's response, the accountant's evaluation of the response may do the
following:
a. Enable the accountant to conclude that the accounts receivable
balance is not likely to be materially misstated. In that case, no
further procedures are required.
b. Enable the accountant to determine that the matter causes the
nancial statements to be materially misstated. No further pro-
cedures are required, and the accountant would form the con-
clusion that the nancial statements as a whole are materially
misstated.
c. Lead the accountant to continue to believe that the accounts re-
ceivable balance is likely to be materially misstated, while not
providing sufcient appropriate review evidence for the accoun-
tant to determine that it is, in fact, misstated. In that case, the
accountant is required to perform additional procedures, for ex-
ample, requesting from management an analysis of amounts re-
ceived for those accounts after the balance sheet date to identify
uncollectible accounts receivable. The evaluation of the results of
the additional procedures may enable the accountant to get to (a)
or (b) preceding. If not, the accountant is required to do one of the
following:
i. Continue performing additional procedures until the ac-
countant reaches either (a)or(b) preceding
ii. If the accountant is not able to either conclude that the
matter is not likely to cause the nancial statements
as a whole to be materially misstated or to determine
that the matter does cause the nancial statements as
a whole to be materially misstated, then, in accordance
with paragraph .48, withdraw from the engagement
©2021, AICPA AR-C §90.A75
4630 Statements on Standards for Accounting and Review Services
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Evaluating Review Evidence Obtained From the Procedures
Performed (Ref: par. .47)
[.A76–.A77] [Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
.A78 In some circumstances, the accountant may not have obtained the
evidence that the accountant had expected to obtain through the design of pri-
marily inquiry and analytical procedures and procedures addressing specic
circumstances. In these circumstances, the accountant considers that the re-
view evidence obtained from the procedures performed is not sufcient and
appropriate to be able to form a conclusion on the nancial statements. The
accountant may
•
extend the work performed or
•
perform other procedures judged by the accountant to be neces-
sary in the circumstances.
When neither of these is practicable in the circumstances, the accountant will
not be able to obtain sufcient appropriate review evidence to be able to form
a conclusion and is required by this section to determine the effect on the ac-
countant's ability to complete the engagement. This situation may arise even
though the accountant has not become aware of a matter or matters that cause
the accountant to believe the nancial statements may be materially misstated.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Subsequent Events and Subsequently Discovered Facts
Subsequent Events (Ref: par. .49)
.A79 Evidence or information that subsequent events that require adjust-
ment of, or disclosure in, the nancial statements may come to the accountant's
attention in the following ways:
•
During the performance of review procedures
•
Subsequent to the date of the accountant's review report but prior
to the release of the report
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Subsequently Discovered Facts That Become Known to the Accountant After
the Report Release Date (Ref: par. .54–.57)
.A80 New information may come to the accountant's attention that, had
such information been known to the accountant at the date of the accountant's
review report, may have caused the accountant to revise the accountant's re-
view report. When such information becomes known to the accountant after
the report release date, the requirements in paragraphs .54–.57 apply, even if
AR-C §90[.A76–.A77] ©2021, AICPA
Review of Financial Statements 4631
the accountant has withdrawn or been discharged. [Paragraph added, effective
for reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
.A81 Because of the variety of conditions that might be encountered, the
specic procedures or actions to be taken in a particular case may vary some-
what in light of the circumstances. For example, when determining whether the
nancial statements need revision, as required by paragraph .54b, the accoun-
tant may consider, in addition to the requirements of the applicable nancial
reporting framework, whether the accountant believes persons are currently
using,or are likely to use, the nancial statements and who would attach impor-
tance to the subsequently discovered facts. Consideration may be given, among
other things, to the issuance of reviewed or audited nancial statements for a
subsequent period, the time elapsed since the nancial statements were issued,
the date of the accountant's review report released, and any legal implications.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A82 The steps taken by management to ensure that anyone in receipt of
the reviewed nancial statements is informed of the situation, including that
the reviewed nancial statements are not to be used, depend on the circum-
stances. Management's steps may include the following:
•
Notify anyone who is known to be using, or who is likely to use, the
nancial statements and the accountant's review report that they
are not to be used and that revised nancial statements, together
with a new accountant's review report, will be issued. This may be
necessary when the issuance of revised nancial statements and
a new accountant's review report is not imminent.
•
Issue, as soon as practicable, revised nancial statements with
appropriate disclosure of the matter.
•
Issue the subsequent period's nancial statements with appropri-
ate disclosure of the matter. This may be appropriate when is-
suance of the subsequent period's reviewed or audited nancial
statements is imminent.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A83 If management made the reviewed nancial statements available to
third parties despite the accountant's notication not to do so, or if the accoun-
tant believes that management or those charged with governance have failed
to take the necessary steps to prevent use of the accountant's review report on
the previously issued reviewed nancial statements despite the accountant's
prior notication that the accountant will take action to seek to prevent such
use, the accountant's course of action depends on the accountant's legal and
ethical rights and obligations. Consequently, the accountant may consider it
appropriate to seek legal advice. [Paragraph added, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.A84 The actions that the accountant may take to seek to prevent use of
the accountant's review report may depend on the degree of certainty of the ac-
countant's knowledge that persons or entities exist who are currently using, or
who will use, the reviewed nancial statements, and who would attach impor-
tance to the information, and on the accountant's ability as a practical matter
©2021, AICPA AR-C §90.A84
4632 Statements on Standards for Accounting and Review Services
to communicate with them. In addition to seeking legal advice, the accountant
may consider taking the following steps to the extent applicable:
•
Notify management and those charged with governance that the
accountant's review report is not to be used.
•
Notify regulatory agencies having jurisdiction over the entity that
the accountant's review report is not to be used, including a re-
quest that the agency take whatever steps it may deem appropri-
ate to accomplish the necessary disclosure.
•
Notify anyone known to the accountant to be using the nancial
statements that the accountant's review report is not to be used. In
some instances, it will not be practicable for the accountant to give
appropriate individual notication to stockholders or investors at
large whose identities are unknown to the accountant; notica-
tion to a regulatory agency having jurisdiction over the entity will
usually be the only practical means for the accountant to provide
appropriate disclosure, together with a request that the agency
take whatever steps it may deem appropriate to accomplish the
necessary disclosure.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A85 Depending on the circumstances, if the accountant is able to deter-
mine that the nancial statements need revision, the accountant's notication
to anyone in receipt of the reviewed nancial statements may, if permitted by
law, regulation, and relevant ethical requirements,
•
include a description of the nature of the matter and of its effect
on the nancial statements, avoiding comments concerning the
conduct or motives of any person.
•
describe the effect that the matter would have had on the accoun-
tant's review report if it had been known to the accountant at the
date of the report and had not been reected in the nancial state-
ments.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A86 If the accountant is not able to determine whether the nancial state-
ments need revision, the notication to anyone in receipt of the reviewed nan-
cial statements may indicate that information became known to the accountant
and that, if the information is true, the accountant believes that the accoun-
tant's review report is not to be used. The specic matter may not be permitted
by law, regulation, and ethical requirements to be detailed in the notication.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Written Representations
Written Representations as Review Evidence (Ref: par. .58)
.A87 Written representations are an important source of review evidence.
If management modies or does not provide the requested written representa-
tions, it may alert the accountant to the possibility that one or more signicant
issues may exist. Further, a request for written, rather than oral, representa-
tions, in many cases, may prompt management to consider such matters more
rigorously, thereby enhancing the quality of the representations. [Paragraph
AR-C §90.A85 ©2021, AICPA
Review of Financial Statements 4633
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Management From Whom Written Representations Are Requested
(Ref: par. .59)
.A88 Written representations are requested from those with overall re-
sponsibility for nancial and operating matters whom the accountant believes
are responsible for, and knowledgeable about, directly or through others in the
organization, the matters covered by the representations, including the prepa-
ration and fair presentation of the nancial statements. Those individuals may
vary depending on the governance structure of the entity; however, manage-
ment (rather than those charged with governance) is often the responsible
party. Written representations may, therefore, be requested from the entity's
CEO and CFO or other equivalent persons in entities that do not use such ti-
tles. However, in some circumstances, other parties, such as those charged with
governance, also are responsible for the preparation and fair presentation of
the nancial statements. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A89 Due to its responsibility for the preparation and fair presentation of
the nancial statements and its responsibility for the conduct of the entity's
business, management would be expected to have sufcient knowledge of the
process followed by the entity in preparing the nancial statements on which
to base the written representations. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A90 In some cases, management may include in the written representa-
tions qualifying language to the effect that representations are made to the
best of its knowledge and belief. It is reasonable for the accountant to accept
such wording if, in the accountant's judgment, the representations are being
made by those with appropriate responsibilities and knowledge of the mat-
ters included in the representations. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Specific Written Representations (Ref: par. .60–.61)
.A91 Review evidence obtained during the review that management has
acknowledged the responsibilities referred to in paragraph .60a–b is not suf-
cient without obtaining representation from management that it believes that
it has fullled those responsibilities. This is because the accountant is not able
to judge solely on other review evidence whether management has prepared
and fairly presented the nancial statements and provided information to the
accountant on the basis of the agreed acknowledgment and understanding of its
responsibilities. [Paragraph renumbered by the issuance of SSARS No. 23, Oc-
tober 2016. Paragraph subsequently renumbered by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
.A92 The written representations relating to fraud required by paragraph
.60g–h are important for the accountant to obtain, regardless of the size of
the entity, because of the nature of fraud and the difculties encountered by
©2021, AICPA AR-C §90.A92
4634 Statements on Standards for Accounting and Review Services
accountants in detecting material misstatements in the nancial statements
resulting from fraud. [Paragraph renumbered by the issuance of SSARS No. 23,
October 2016. Paragraph subsequently renumbered by the issuance of SSARS
No. 24, May 2018. Paragraph subsequently renumbered by the issuance of
SSARS No. 25, February 2020.]
.A93 Because the preparation of nancial statements requires manage-
ment to adjust the nancial statements to correct material misstatements, the
accountant is required to request that management provide a written represen-
tation about uncorrected misstatements. In some circumstances, management
may not believe that certain uncorrected misstatements are misstatements.
For that reason, management may want to add to their written representation
words such as "We do not agree that items... and... constitute misstatements
because [description of reasons]." [Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A94 Circumstances in which it may be appropriate to obtain written rep-
resentations about related parties from those charged with governance in ad-
dition to management include the following:
•
When they have approved specic related party transactions that
— materially affect the nancial statements or
— involve management
•
When they have made specic oral representations to the accoun-
tant on details of certain related party transactions
•
When they have nancial or other interests in the related parties
or the related party transactions
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A95 Because written representations are necessary review evidence, the
accountant has not obtained limited assurance as a basis for reporting whether
the accountant is aware of any material modications that should be made
to the nancial statements in order for the statements to be in accordance with
the applicable nancial reporting framework and the accountant's review re-
port cannot be dated before the date of the written representations. Further-
more, because the accountant is concerned with events occurring up to the date
of the accountant's review report that may require adjustment to, or disclosure
in, the nancial statements, the written representations are dated as of the
date of the accountant's review report on the nancial statements. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.A96 The written representations cover all periods referred to in the ac-
countant's review report because management needs to reafrm that the writ-
ten representations it previously made with respect to the prior periods remain
appropriate. The accountant and management may agree to a form of writ-
ten representation that updates written representations relating to the prior
periods by addressing whether there are any changes to such written repre-
sentations and, if so, what they are. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
AR-C §90.A93 ©2021, AICPA
Review of Financial Statements 4635
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A97 Situations may arise in which current management was not present
during all periods referred to in the accountant's review report. Such persons
may assert that they are not in a position to provide some or all of the writ-
ten representations because they were not in place during the period. This
fact, however, does not diminish such persons' responsibilities for the nan-
cial statements as a whole. Accordingly, the requirement for the accountant to
request from them written representations that cover the whole of the rele-
vant period(s) still applies. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A98 The accountant may request additional representations regarding
matters specic to the entity's business or industry. In addition, the accountant
is not precluded from obtaining representations regarding services performed
in addition to the review engagement. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Form of Written Representations (Ref: par. .62)
.A99 Occasionally, circumstances may prevent management from signing
the representation letter and returning it to the accountant on the date of the
accountant's review report. In those circumstances, the accountant may accept
management's oral conrmation, on or before the date of the accountant's re-
view report, that management has reviewed the nal representation letter and
will sign the representation letter without exception as of the date of the ac-
countant's review report. Possession of the signed management representation
letter prior to releasing the accountant's review report is necessary because
paragraph .62 requires that the representations be in the form of a written
letter from management. Furthermore, when there are delays in releasing the
report, a fact may become known to the accountant that, had it been known
to the accountant at the date of the accountant's review report, might affect
the accountant's review report and result in the need for updated representa-
tions. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
.A100 Exhibit B, "Illustrative Representation Letter," provides an illustra-
tive example of a representation letter. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Forming the Accountant’s Conclusion on the
Financial Statements
Consideration of the Applicable Financial Reporting Framework
in Relation to the Financial Statements (Ref: par. .64–.66)
.A101 The description of the applicable nancial reporting framework in
the nancial statements is important because it advises users of the nancial
©2021, AICPA AR-C §90.A101
4636 Statements on Standards for Accounting and Review Services
statements of the framework on which the nancial statements are based. If
the nancial statements are special purpose nancial statements, they may be
prepared under a special purpose nancial reporting framework that is avail-
able only to the engaging party and the accountant. Description of the special
purpose nancial reporting framework used is important because the special
purpose nancial statements may not be appropriate for any use other than
the intended use identied. [Paragraph added, effective for engagements per-
formed in accordance with SSARSs for periods ending on or after December 15,
2021, by SSARS No. 25.]
.A102 A description of the applicable nancial reporting framework that
contains imprecise qualifying or limiting language (for example, "the nancial
statements are in substantial compliance with accounting principles generally
accepted in the United States") is not an adequate description of that frame-
work because it may mislead users of the nancial statements. [Paragraph
added, effective for engagements performed in accordance with SSARSs for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
.A103 In considering the qualitative aspects of the entity's accounting
practices, the accountant may become aware of possible bias in management's
judgments. The accountant may conclude that the cumulative effect of a lack
of neutrality, together with the effect of apparent uncorrected misstatements,
causes the nancial statements as a whole to be materially misstated. Indi-
cators of a lack of neutrality that may affect the accountant's evaluation of
whether the nancial statements as a whole may be materially misstated in-
clude the following:
•
The selective correction of apparent misstatements brought to
management's attention during the review (for example, correct-
ing misstatements with the effect of increasing reported earnings
but not correcting misstatements that have the effect of decreas-
ing reported earnings)
•
Possible management bias in the making of accounting estimates
[Paragraph added, effective for engagements performed in accordance with
SSARSs for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A104 Indicators of possible management bias do not necessarily mean
there are misstatements for purposes of drawing conclusions on the reason-
ableness of individual accounting estimates. They may, however, affect the ac-
countant's consideration of whether the nancial statements as a whole may be
materially misstated. [Paragraph added, effective for engagements performed
in accordance with SSARSs for periods ending on or after December 15, 2021,
by SSARS No. 25.]
Evaluation of Whether the Financial Statements Achieve Fair Presentation
(Ref: par. .66b)
.A105 The accountant's professional judgment concerning the fairness of
the presentation of the nancial statements is applied within the context of the
nancial reporting framework. Without that framework, the accountant would
have no consistent standard for evaluating the presentation of nancial posi-
tion, results of operations, and cash ows in nancial statements. [Paragraph
added, effective for engagements performed in accordance with SSARSs for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
Financial Statements Are Materially Misstated (Ref: par. .71)
.A106 Unless prohibited by law or regulation, the accountant may deter-
mine it appropriate to withdraw from the engagement when the accountant
AR-C §90.A102 ©2021, AICPA
Review of Financial Statements 4637
has determined, based on the procedures performed and the review evidence
obtained, that the nancial statements are materially misstated. [Paragraph
added, effective for engagements performed in accordance with SSARSs for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
Reporting on the Financial Statements (Ref: par. .75)
.A107 A written report encompasses reports issued in hard copy format
and those using an electronic medium. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A108 Financial statements that the accountant has reviewed may become
unattached from the accountant's review report. To minimize the possibility
that a user of the reviewed nancial statements may infer, through the accoun-
tant's association with the reviewed nancial statements, an unintended level
of reliance on the reviewed nancial statements, the accountant may consider
including a reference on each page of the reviewed nancial statements to the
accountant's review report. An example of a reference to the accountant's re-
view report included on each page of the reviewed nancial statements is "See
independent accountant's review report." [Paragraph renumbered by the is-
suance of SSARS No. 23, October 2016. Paragraph subsequently renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
.A109 When the accountant is unable to perform the inquiry, analytical
procedures, and other review procedures the accountant considers necessary
to obtain limited assurance as a basis for reporting whether the accountant
is aware of any material modications that should be made to the nancial
statements in order for the statements to be in accordance with the applicable
nancial reporting framework, or management does not provide the accoun-
tant with a representation letter, the review will be incomplete. A review that
is incomplete does not provide an adequate basis for issuing a review report.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Accountant’s Review Report (Ref: par. .76)
Title
.A110 An appropriate title would be "Independent Accountant's Review
Report." [Paragraph renumbered by the issuance of SSARS No. 23, October
2016. Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018. Paragraph subsequently renumbered by the issuance of SSARS No.
25, February 2020.]
Addressee
.A111 The accountant's review report is normally addressed to those for
whom the report is prepared. The report may be addressed to the entity whose
nancial statements are being reviewed or to those charged with governance.
A report on nancial statements of an unincorporated entity may be addressed
as circumstances dictate (for example, to the partners, general partner, or pro-
prietor). Occasionally, an accountant may be retained to review the nancial
statements of an entity that is not a client; in such a case, the report may be
addressed to the entity and not to those charged with governance of the entity
©2021, AICPA AR-C §90.A111
4638 Statements on Standards for Accounting and Review Services
whose nancial statements are being reviewed. [Paragraph renumbered by the
issuance of SSARS No. 23, October 2016. Paragraph subsequently renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
Introductory Paragraph
.A112 The introductory paragraph states, for example, that the accoun-
tant has "reviewed the accompanying nancial statements of ABC Company,
which comprise the balance sheet as of December 31, 20X1, and the related
statements of income, changes in stockholders' equity and cash ows for the
year then ended, and the related notes to the nancial statements." If the -
nancial statements include a separate statement of changes in stockholders'
equity accounts or a separate statement of comprehensive income, paragraph
.76c(iii) requires such statements to be identied in the introductory paragraph
of the report as a statement to which the nancial statements are comprised.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A113 When the accountant is aware that the reviewed nancial state-
ments will be included in a document that contains other information, such as
an annual report, the accountant may consider, if the form of presentation al-
lows, identifying the page numbers on which the reviewed nancial statements
are presented. This helps users identify the nancial statements to which the
accountant's review report relates. [Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A114 The identication of the title for each statement that the nan-
cial statements comprise may be achieved by referencing the table of contents.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph renumbered by the issuance of SSARS No. 24, May 2018. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 25, February 2020.]
Management's Responsibility
.A115 Management, and when appropriate, those charged with gover-
nance, accept responsibility for the preparation of the nancial statements in
accordance with the applicable nancial reporting framework, including their
fair presentation. Management also accepts responsibility for the design, im-
plementation, and maintenance of internal control relevant to the preparation
and fair presentation of nancial statements that are free from material mis-
statement, whether due to fraud or error. The description of management's re-
sponsibilities in the accountant's review report includes reference to both re-
sponsibilities because it helps explain to users the premise on which a review
is conducted. [Paragraph renumbered by the issuance of SSARS No. 23, Octo-
ber 2016. Paragraph subsequently renumbered by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
Accountant's Responsibility
.A116 The accountant's review report states that the accountant's respon-
sibility is to conduct the review engagement in accordance with SSARSs pro-
mulgated by the Accounting and Review Services Committee of the AICPA in
order to contrast it to management's responsibility for the nancial statements.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
AR-C §90.A112 ©2021, AICPA
Review of Financial Statements 4639
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A117 The reference to the standards used conveys to users of the accoun-
tant's review report that the review engagement has been conducted in accor-
dance with established standards. [Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A118 The accountant is not permitted to represent compliance with
SSARSs in the accountant's review report unless the accountant has complied
with the relevant requirements within the body of SSARSs. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
Basis for Modication Paragraph When the Conclusion Is Modied
.A119 An adverse conclusion relating to a specic matter described in the
basis for modication paragraph does not justify the omission of a description
of other identied matters that would have otherwise required a modication
of the accountant's conclusion. In instances in which other identied matters
would have otherwise required a modication of the accountant's conclusion,
the disclosure of such other matters of which the accountant is aware may be
relevant to users of the nancial statements. [Paragraph added, effective for
reviews of nancial statements for periods ending on or after December 15,
2021, by SSARS No. 25.]
Accountant's Address
.A120 The city and state where the accountant practices may be indi-
cated on letterhead that contains the issuing ofce's city and state. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Date of the Accountant's Review Report
.A121 The date of the accountant's review report informs users of the ac-
countant's review report that the accountant has considered the effect of events
and transactions of which the accountant became aware and that occurred up
to that date. The accountant's responsibility for events and transactions after
the date of the accountant's review report is addressed in paragraphs .49–.57.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A122 Because the accountant's conclusion is provided on the nancial
statements, and the nancial statements are the responsibility of management,
the accountant is not in a position to conclude that the accountant has obtained
limited assurance as a basis for reporting whether the accountant is aware of
any material modications that should be made to the nancial statements for
them to be in accordance with the applicable nancial reporting framework
until evidence is obtained that all the statements that the nancial statements
comprise, including the related notes, have been prepared, and management
has accepted responsibility for them. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.A122
4640 Statements on Standards for Accounting and Review Services
.A123 Exhibit C, "Illustrations of Accountant's Review Reports on Finan-
cial Statements," contains illustrations of accountant's review reports on nan-
cial statements incorporating the elements required by paragraph .76. [Para-
graph renumbered by the issuance of SSARS No. 23, October 2016. Paragraph
subsequently renumbered by the issuance of SSARS No. 24, May 2018. Para-
graph subsequently renumbered by the issuance of SSARS No. 25, February
2020.]
Accountant’s Review Report on Financial Statements
Prepared in Accordance With a Special Purpose
Framework (Ref: par. .13, .77, and .80–.81)
.A124 There may be circumstances in which a regulatory or contractual
basis of accounting is based on a general purpose framework established by a
designated accounting standard setter, such as GAAP, or by law or regulation
but does not comply with all the requirements of that framework. An example is
a contract that requires nancial statements to be prepared in accordance with
most, but not all, of GAAP. If the nancial statements purport to be prepared in
accordance with a general purpose framework and such nancial statements
are materially misstated due to a departure from that framework, paragraphs
.71–.72 apply. [Paragraph added, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A125 When it is acceptable in the circumstances of the engagement to re-
port, in accordance with this section, on special purpose nancial statements
that purport to be prepared in accordance with a regulatory or contractual basis
of accounting that is based on a general purpose framework, it is inappropriate
for the description of the applicable nancial reporting framework in the spe-
cial purpose nancial statements to imply that the special purpose framework
includes all the requirements of, or is the same as, the nancial reporting frame-
work on which the special purpose framework is based. In the example of the
contract in paragraph .A124, the description of the applicable nancial report-
ing framework may refer to the nancial reporting provisions of the contract.
The requirements in paragraphs .80–.81 are designed to avoid misunderstand-
ings about compliance with the general purpose framework. [Paragraph added,
effective for reviews of nancial statements for periods ending on or after De-
cember 15, 2021, by SSARS No. 25.]
.A126 The description of the special purpose framework may be included
in the nancial statement titles, in the notes to the nancial statements, or oth-
erwise on the face of the nancial statements. Although terms such as balance
sheet, statement of nancial position, statement of income, statement of opera-
tions,andstatement of cash ows or similar unmodied titles, are generally
understood to be applicable only to nancial statements that are intended to
present nancial position, results of operations, or cash ows in accordance with
GAAP, such titles, with appropriate modication, may be used in connection
with nancial statements prepared in accordance with a special purpose frame-
work. Suitable nancial statement titles for nancial statements prepared in
accordance with a special purpose framework include, but are not limited to
•
a modied cash basis nancial statement that might be titled
— "Income Statement—Modied Cash Basis," or
— "Statement of Cash Receipts and Disbursements."
AR-C §90.A123 ©2021, AICPA
Review of Financial Statements 4641
•
nancial statements prepared in accordance with the tax basis of
accounting that might be titled
— "Balance Sheet—Tax Basis,"
— "Statement of Assets, Liabilities, and Equity—Tax Basis,"
— "Statement of Operations—Tax Basis," or
— "Statement of Revenue and Expenses—Tax Basis."
•
a nancial statement prepared in accordance with a regulatory
basis of accounting that might be titled "Statement of Income—
Regulatory Basis."
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A127 The description of how the special purpose framework differs from
GAAP ordinarily includes only the material differences between GAAP and the
special purpose framework. For example, if several items are accounted for dif-
ferently in accordance with the special purpose framework than they would be
in accordance with GAAP, but only the differences in how depreciation is cal-
culated are material, a brief description of the depreciation differences is all
that would be necessary, and the remaining differences need not be described.
The differences need not be quantied. [Paragraph subsequently renumbered
by the issuance of SSARS No. 23, October 2016. Paragraph renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A128 Financial statements prepared when applying a special purpose
framework are not considered appropriate in form unless the nancial state-
ments include informative disclosures similar to those required by GAAP if the
nancial statements contain items that are the same as, or similar to, those in
nancial statements prepared in accordance with GAAP. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
[.A129] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
.A130 Special purpose nancial statements may be used for purposes
other than those for which they were intended. To avoid misunderstandings,
paragraph .80 requires the accountant to include an emphasis-of-matter para-
graph in the accountant's review report that alerts users of the accountant's
review report that the nancial statements are prepared in accordance with
a special purpose framework and that the basis of accounting is a basis of ac-
counting other than GAAP. [Paragraph added, effective for reviews of nan-
cial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
.A131 Financial statements prepared in accordance with a special purpose
framework may be the only nancial statements an entity prepares. Such spe-
cial purpose nancial statements may be used by users other than those for
whom the nancial reporting framework is designed. Despite the broad dis-
tribution of the nancial statements, the nancial statements are still consid-
ered to be special purpose nancial statements for purposes of SSARSs. The re-
quirement in paragraph .80 is designed to avoid misunderstandings about the
©2021, AICPA AR-C §90.A131
4642 Statements on Standards for Accounting and Review Services
framework used to prepare the nancial statements. [Paragraph added, effec-
tive for reviews of nancial statements for periods ending on or after December
15, 2021, by SSARS No. 25.]
.A132 If the special purpose nancial statements are prepared in accor-
dance with a contractual basis of accounting, paragraph .81 requires the ac-
countant to include an other-matter paragraph in the accountant's review re-
port, under an appropriate heading, that restricts the use of the accountant's
review report to specied parties pursuant to paragraphs .103–.104. In the case
of special purpose nancial statements prepared in accordance with a basis of
accounting other than a contractual basis, the accountant may consider it nec-
essary in the circumstances of the engagement to include an alert that restricts
the use of the accountant's review report but is not required to do so. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered and amended, effective for reviews of nancial state-
ments for periods ending on or after December 15, 2021, by SSARS No. 25.]
Comparative Financial Statements (Ref: par. .82)
.A133 The level of information included for the prior periods in compara-
tive nancial statements is comparable with that of nancial statements of the
current period. [Paragraph renumbered by the issuance of SSARS No. 23, Octo-
ber 2016. Paragraph subsequently renumbered by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
.A134 If one rm of accountants merges with another rm, and the new
rm becomes the accountant of a client of one of the two former rms, the new
rm may accept responsibility and issue a review report on the nancial state-
ments for the prior period(s) as well as for those of the current period. The new
rm may indicate in the accountant's review report or as part of the signature
that a merger took place and may name the rm with whom it was merged.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Updating the Report (Ref: par. .83)
.A135 An updated report is issued in conjunction with the continuing
accountant's report on the current period nancial statements. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
Changed Reference to a Departure From the Applicable Financial Reporting
Framework (Ref: par. .86)
.A136 A changed reference includes the removal of a prior reference or the
inclusion of a new reference. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
[.A137–.A140] [Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
AR-C §90.A132 ©2021, AICPA
Review of Financial Statements 4643
Emphasis-of-Matter and Other-Matter Paragraphs in the
Accountant’s Review Report (Ref: par. .89 and .91)
.A141 The accountant is required to include an emphasis-of-matter or
other-matter paragraph in the accountant's review report relating to the fol-
lowing matters:
•
In accordance with paragraph .55c with respect to reporting when
management revises nancial statements for a subsequently dis-
covered fact that became known to the accountant after the report
release date and the accountant's review report on the revised -
nancial statements differs from the accountant's review report on
the original nancial statements
•
In accordance with paragraphs .80–.81 with respect to nancial
statements prepared in accordance with a special purpose frame-
work
•
In accordance with paragraph .86 with respect to a changed refer-
ence to a departure from the applicable nancial reporting frame-
work when reporting on comparative nancial statements
•
In accordance with paragraph .87 with respect to reporting on
comparative nancial statements when the prior period is audited
•
In accordance with paragraph .109 when, after considering condi-
tions or events and management's plans, the accountant concludes
that substantial doubt about the entity's ability to continue as a
going concern for a reasonable period of time remains
•
In accordance with paragraph .123 with respect to supplementary
information that accompanies reviewed nancial statements and
the accountant's review report thereon
•
In accordance with paragraph .124 with respect to required sup-
plementary information
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Emphasis-of-Matter Paragraphs in the Accountant’s Review Report
(Ref: par. .89–.90)
.A142 In addition to the required emphasis-of-matter paragraphs listed
in paragraph .A141, the following are examples of circumstances when the
accountant may consider it necessary to include an emphasis-of-matter para-
graph:
•
An uncertainty relating to the future outcome of unusually impor-
tant litigation or regulatory action
•
A major catastrophe that has had, or continues to have, a signi-
cant effect on the entity's nancial position
•
Signicant transactions with related parties
•
Unusually important subsequent events
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of
©2021, AICPA AR-C §90.A142
4644 Statements on Standards for Accounting and Review Services
nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
.A143 Paragraph .89 requires that an emphasis-of-matter paragraph re-
fer only to matters appropriately presented or disclosed in the nancial state-
ments. To include information in an emphasis-of-matter paragraph about a
matter beyond what is presented or disclosed in the nancial statements may
raise questions about the appropriateness of such presentation or disclosure.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A144 Another heading may be considered appropriate if it adequately de-
scribes the nature of the matter being disclosed or communicated. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.A145 The accountant may add further context to the heading "Emphasis
of Matter" (for example, "Emphasis of Matter — Subsequent Event") to fur-
ther describe the nature of the matter addressed by the emphasis-of-matter
paragraph. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
.A146 The inclusion of an emphasis-of-matter paragraph in the accoun-
tant's review report does not affect the accountant's conclusion. An emphasis-
of-matter paragraph is not a substitute for the following:
•
A modied conclusion in accordance with paragraphs .69–.74
when required by the circumstances of a specic review engage-
ment
•
Disclosures in the nancial statements that the applicable nan-
cial reporting framework requires management to make
•
Reporting in accordance with paragraphs .109–.112 when, af-
ter considering identied conditions or events and management's
plans, the accountant concludes that substantial doubt about the
entity's ability to continue as a going concern for a reasonable pe-
riod of time remains, in which case the accountant is required to
include a separate section in the accountant's report
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
Other-Matter Paragraphs in the Accountant’s Review Report (Ref: par. .91)
.A147 If not properly presented or disclosed in the nancial statements, a
matter cannot be included in an emphasis-of-matter paragraph. However, if the
matter is relevant to users' understanding of the review, the accountant's re-
sponsibilities, or the accountant's review report, the matter can be disclosed in
an other-matter paragraph. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A148 An entity may prepare one set of nancial statements in accor-
dance with a general purpose framework (for example, accounting principles
AR-C §90.A143 ©2021, AICPA
Review of Financial Statements 4645
generally accepted in the United States of America) and another set of nan-
cial statements in accordance with another general purpose framework (for
example, International Financial Reporting Standards promulgated by the In-
ternational Accounting Standards Board) and may engage the accountant to
review both sets of nancial statements. If the accountant has determined that
the frameworks are acceptable in the respective circumstances, the accountant
may include an other-matter paragraph in the accountant's review report re-
ferring to the fact that another set of nancial statements has been prepared
by the same entity in accordance with another general purpose framework and
that the accountant has issued a review report on those nancial statements.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A149 The content of an other-matter paragraph reects clearly that such
other matter is not required to be presented and disclosed in the nancial state-
ments. An other-matter paragraph does not include information that the ac-
countant is prohibited from providing by law, regulation, or other professional
standards (for example, ethical standards relating to the condentiality of in-
formation). An other-matter paragraph does not include information that is re-
quired to be provided by management. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018.]
Communication With Management (Ref: par. .93)
.A150 The accountant's communication with management, as described in
paragraph .93, enables management to be made aware of the nature of any spe-
cic matters that the accountant intends to highlight in the accountant's review
report and provides them with an opportunity to obtain further clarication
from the accountant, when necessary. When the inclusion of an other-matter
paragraph on a particular matter in the accountant's review report recurs on
each successive engagement, the accountant may determine that it is unnec-
essary to repeat the communication on each engagement. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A151 In addition to management, the accountant may also consider it ap-
propriate to communicate with those charged with governance regarding the
expectation of including an other-matter paragraph in the accountant's review
report and the proposed wording of this paragraph. [Paragraph renumbered by
the issuance of SSARS No. 23, October 2016. Paragraph subsequently renum-
bered by the issuance of SSARS No. 24, May 2018. Paragraph subsequently
renumbered by the issuance of SSARS No. 25, February 2020.]
Correction of a Material Misstatement in Previously Issued
Financial Statements (Ref: par. .94–.95)
.A152 The requirement for the accountant to include an emphasis-of-
matter paragraph in the accountant's review report when there are ad-
justments to correct a material misstatement in previously issued nancial
statements applies when comparative or single-year nancial statements are
presented. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
©2021, AICPA AR-C §90.A152
4646 Statements on Standards for Accounting and Review Services
.A153 A change from an accounting principle that is not in accordance with
the applicable nancial reporting framework to one that is in accordance with
the applicable nancial reporting framework is a correction of a misstatement.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
.A154 Paragraphs .54–.55 address the accountant's responsibilities when
adjustments have been made to correct a material misstatement in previously
issued nancial statements. [Paragraph added, effective for reviews of nancial
statements for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A155 The following is an example of an emphasis-of-matter paragraph
when there has been a correction of a material misstatement in previously is-
sued nancial statements:
Emphasis of Matter
As discussed in Note X to the nancial statements, the 20X2 nancial state-
ments have been restated to correct a misstatement. Our conclusion is not mod-
ied with respect to this matter.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after December 15, 2021, by SSARS No. 25.]
Other Reporting Responsibilities (Ref: par. .97)
.A156 These other reporting responsibilities are addressed in a separate
section of the accountant's report, to clearly distinguish them from the accoun-
tant's responsibility in accordance with this section to report on the nancial
statements. Where relevant, this section may contain subheadings that de-
scribe the content of the other reporting responsibilities paragraph or para-
graphs. [Paragraph added, effective for reviews of nancial statements for pe-
riods ending on or after December 15, 2021, by SSARS No. 25.]
[.A157–.A162]
[6]
[Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
Alert That Restricts the Use of the Accountant’s Review Report
(Ref: par. .103)
.A163 The need for an alert that restricts the use of the accountant's re-
view report arises from the potential for the accountant's review report to be
misunderstood if taken out of the context in which the accountant's review re-
port is intended to be used. [Paragraph renumbered by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A164 Accountant's review reports on nancial statements prepared in ac-
cordance with a general purpose framework ordinarily do not include an alert
that restricts their use. A general purpose framework is a nancial reporting
framework designed to meet the common nancial information needs of a wide
range of users. However, nothing in SSARSs precludes an accountant from in-
cluding an alert in any accountant's review report. For example, nancial state-
ments prepared specically for use in an acquisition may be prepared in accor-
dance with a general purpose framework because the parties involved in the
[6]
[Footnote renumbered and deleted by the issuance of SSARS No. 25, February 2020.]
AR-C §90.A153 ©2021, AICPA
Review of Financial Statements 4647
transaction have agreed that such general purpose nancial statements are ap-
propriate for their purposes. Nevertheless, when the terms of the engagement
to review those nancial statements require the accountant to supply the ac-
countant's review report only to specied parties, the accountant may consider
it necessary in the circumstances to include an other-matter paragraph in the
accountant's review report that restricts the use of the accountant's review re-
port. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
Distribution of the Accountant’s Review Report (Ref: par. .103)
.A165 An accountant is not responsible for controlling, and cannot control,
distribution of the accountant's review report after its release. The alert that
restricts the use of the accountant's review report is designed to avoid misun-
derstandings related to the use of the accountant's review report, particularly
if the accountant's review report is taken out of the context in which the ac-
countant's review report is intended to be used. An accountant may consider
informing the entity or other specied parties that the accountant's review re-
port is not intended for distribution to parties other than those specied in
the accountant's review report. The accountant may, in connection with estab-
lishing the terms of the engagement, reach an understanding with the entity
that the intended use of the accountant's review report will be restricted and
may obtain the entity's agreement that the entity and specied parties will not
distribute such accountant's review report to parties other than those identi-
ed therein. [Paragraph renumbered by the issuance of SSARS No. 23, October
2016. Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018. Paragraph subsequently renumbered by the issuance of SSARS No.
25, February 2020.]
Illustrative Alert Language (Ref: par. .104)
.A166 The alert that restricts the use of the accountant's review report
may list the specied parties or refer to the specied parties listed elsewhere in
the accountant's review report. The following illustrates language that includes
the elements required by paragraph .104:
This report is intended solely for the information and use of [list or refer to the
specied parties] and is not intended to be, and should not be, used by anyone
other than these specied parties.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Adding Other Specified Parties (Ref: par. .105)
.A167 When the accountant is requested to add other parties as specied
parties,the accountant may agree to add other parties as specied parties based
on the accountant's consideration of factors such as the identity of the other par-
ties and the intended use of the accountant's review report. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.A167
4648 Statements on Standards for Accounting and Review Services
The Accountant’s Consideration of an Entity’s Ability to Continue
as a Going Concern
[.A168–.A173]
7–8
[Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
Implications for the Accountant’s Review Report When Substantial Doubt
Exists About the Entity’s Ability to Continue as a Going Concern
(Ref: .109–.110 and .112)
[.A174] [Paragraph renumbered and deleted by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
.A175 The identication of substantial doubt is a matter that is important
to users' understanding of the nancial statements. The use of a separate sec-
tion with a heading that includes reference to the fact that substantial doubt
exists about the entity's ability to continue as going concern alerts users to this
circumstance. [Paragraph added, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A176 The following are illustrations of the statements that are required to
be included in the accountant's review report on the nancial statements. The
following illustrations provide examples in which FASB ASC is the applicable
nancial reporting framework. If an applicable nancial reporting framework
other than FASB ASC is used, the wording in the illustrations may need to be
adapted to reect the application of the other nancial reporting framework in
the circumstances.
Illustration 1 — An Accountant’s Review Report Containing an Unmod-
ied Conclusion and Including a Going Concern Section When Man-
agement Is Required Under the Applicable Financial Reporting Frame-
work to Include a Statement in the Notes to the Financial Statements
That Conditions or Events Have Been Identied and Substantial Doubt
Exists and Disclosure in The Financial Statements Is Adequate
Substantial Doubt About the Company's Ability to Continue as a Going Concern
The accompanying nancial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note X to the nan-
cial statements, the Company has suffered recurring losses from operations,
has a net capital deciency, and has stated that substantial doubt exists about
the Company's ability to continue as a going concern. Management's evaluation
of the events and conditions and management's plans regarding these matters
are also described in Note X. The nancial statements do not include any adjust-
ments that might result from the outcome of this uncertainty. Our conclusion
is not modied with respect to this matter.
Illustration 2 — An Accountant’s Review Report Containing an Unmod-
ied Opinion Conclusion and Including an Emphasis-of-Matter Para-
graph Because Substantial Doubt Has Been Alleviated
Emphasis of Matter
As discussed in Note X to the nancial statements, the Company has suffered
recurring losses from operations and has a net capital deciency. Management's
evaluation of the events and conditions and management's plans to mitigate
these matters are also described in Note X. Our conclusion is not modied with
respect to this matter.
7–8
[Footnote renumbered and deleted by the issuance of SSARS No. 25, February 2020.]
AR-C §90[.A168–.A173] ©2021, AICPA
Review of Financial Statements 4649
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph renumbered and amended, effective for reviews of nancial statements
for periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph subse-
quently renumbered and amended, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
[.A177] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
.A178 When FASB ASC or the GASB statements are the applicable nan-
cial reporting framework used in the preparation of the nancial statements,
the accountant's conclusion about the entity's ability to continue as a going
concern is expressed through the use of the phrase "substantial doubt about
its (the entity's) ability to continue as a going concern." In other nancial re-
porting frameworks, a similar term or phrase may be appropriate depending on
the requirements of the applicable nancial reporting framework. If the appli-
cable nancial reporting framework does not include comparable terms, then
wording that includes the terms substantial doubt and going concern may be
appropriate. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after December 15, 2021, by SSARS No. 25.]
.A179 If conditions or events, considered in the aggregate, have been iden-
tied that raise substantial doubt about the entity's ability to continue as a
going concern for a reasonable period of time but, based on the review evidence
obtained, the accountant concludes that substantial doubt has been alleviated
by management's plans and adequate disclosure has been made in the nancial
statements, the accountant may include an emphasis-of-matter paragraph in
accordance with paragraphs .89–.90, making reference to management's dis-
closures related to the conditions and events and management's plans related
to those conditions or events. In this circumstance, the use of an emphasis-of-
matter paragraph is to draw users' attention to the disclosures of the condi-
tions and events and management's plans. It is distinguished from the situa-
tion in which the accountant concludes, after considering identied conditions
or events and management's plans, that substantial doubt about the entity's
ability to continue as a going concern remains, in which case the accountant is
required by paragraph .109 to include a separate "Going Concern" section in
the accountant's review report.
[Paragraph added, effective for reviews of nancial statements for periods end-
ing on or after June 15, 2019, by SSARS No. 24. Paragraph renumbered and
amended, effective for reviews of nancial statements for periods ending on or
after December 15, 2021, by SSARS No. 25.]
.A180 As indicated in paragraph .71, in circumstances in which conditions
and events have been identied and the accountant concludes that, based on the
review evidence obtained, the disclosures are materially misstated, the accoun-
tant is required to modify the accountant's review report. [Paragraph added,
effective for reviews of nancial statements for periods ending on or after De-
cember 15, 2021, by SSARS No. 25.]
.A181 Examples of conditional language that are inappropriate to use in
the "Going Concern" section include the following:
•
If the Company continues to suffer recurring losses from opera-
tions and continues to have a net capital deciency, there may be
substantial doubt about its ability to continue as a going concern.
•
The Company has been unable to renegotiate its expiring credit
agreements. Unless the entity is able to obtain nancial support,
there is substantial doubt about its ability to continue as a going
concern.
©2021, AICPA AR-C §90.A181
4650 Statements on Standards for Accounting and Review Services
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph renumbered and amended, effective for reviews of nancial statements
for periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph subse-
quently renumbered and amended, effective for reviews of nancial statements
for periods ending on or after December 15, 2021, by SSARS No. 25.]
.A182 In certain circumstances, the accountant may believe it necessary to
request that management perform or extend its evaluation to meet the period
of time required by the applicable nancial reporting framework. If manage-
ment is unwilling to do so, a qualied or adverse conclusion in the accountant's
review report may be appropriate. For example, management may be unwilling
to extend its evaluation because it believes it has satised the requirements to
conclude whether substantial doubt exists about the entity's ability to continue
as a going concern for a reasonable period of time when the applicable nancial
reporting framework requires management to make this evaluation. If, in the
accountant's judgment, management's conclusion is not adequately supported,
the accountant may conclude that a qualied or adverse conclusion for a de-
parture from the applicable nancial reporting framework is appropriate in
the circumstances. Paragraphs .69–.74 provide guidance related to the modi-
cation of the accountant's conclusion. [Paragraph added, effective for reviews
of nancial statements for periods ending on or after December 15, 2021, by
SSARS No. 25.]
[.A183–.A190] [Paragraphs renumbered and deleted by the issuance of
SSARS No. 25, February 2020.]
Reference to the Work of Other Accountants in an Accountant’s
Review Report (Ref: par. .122)
.A191 The accountant of the reporting entity may make reference to any or
all other accountants who audited or reviewed signicant components. For ex-
ample, if a signicant component is audited or reviewed by an other accountant
and a second signicant component is audited or reviewed by a different other
accountant, the accountant of the reporting entity may decide to make refer-
ence to one of the other accountants, both of the other accountants, or neither.
The decision is solely at the discretion and judgment of the accountant of the
reporting entity. [Paragraph renumbered by the issuance of SSARS No. 23, Oc-
tober 2016. Paragraph subsequently renumbered by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
.A192 The disclosure of the magnitude of the portion of the nancial state-
ments audited or reviewed by other accountants may be achieved by stating the
dollar amounts or percentages of total assets, total revenues, other appropriate
criteria, or a combination of these, whichever most clearly describes the portion
of the nancial statements audited or reviewed by other accountants. When two
or more other accountants participate in the audit or review, the dollar amounts
or the percentages covered by the other accountants may be stated in the aggre-
gate. [Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
.A193 Exhibit C contains an example of appropriate reporting in the ac-
countant's review report when reference is made to the audit or review of sig-
nicant components, such as consolidated and unconsolidated subsidiaries and
AR-C §90.A182 ©2021, AICPA
Review of Financial Statements 4651
investees, by other accountants.
9
[Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
Determining Whether the Other Accountants Are Familiar with SSARSs or
Auditing Standards Generally Accepted in the United States of America, as
Applicable (Ref: par. .124b)
.A194 An other accountant's review report stating that the review was con-
ducted in accordance with SSARSs or an auditor's report stating that the au-
dit was conducted in accordance with generally accepted auditing standards
(GAAS) is sufcient to make the determination required by paragraph .124b.
When the other accountant has performed a review of the component nan-
cial statements in accordance with standards other than SSARSs or an audit
of the component nancial statements in accordance with auditing standards
other than GAAS, the accountant of the reporting entity may evaluate, exercis-
ing professional judgment, whether the engagement performed by the other
accountant meets the relevant requirements of SSARSs or GAAS, as appli-
cable. For the purposes of complying with paragraph .124b, relevant require-
ments of SSARSs or GAAS are those that pertain to planning and perform-
ing the engagement on the component nancial statements and do not include
those related to the form of the accountant's review or the auditor's report.
Reviews performed in accordance with International Standard on Review En-
gagements 2400 (Revised), Engagements to Review Historical Financial State-
ments, and audits performed in accordance with International Standards on
Auditing (ISAs), both of which are promulgated by the International Audit-
ing and Assurance Standards Board (IAASB), are likely to meet the relevant
requirements of SSARSs and GAAS, respectively. The other accountants may
perform additional procedures in order to meet the relevant requirements of
SSARSs or GAAS. The accountant of the reporting entity, having determined
that all relevant requirements of SSARSs or GAAS have been met by the other
accountant, may decide to make reference to the review or audit of that other
accountant in the accountant's review report on the reporting entity's nancial
statements. [Paragraph added, effective for reviews of nancial statements for
periods ending on or after June 15, 2019, by SSARS No. 24. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A195 When the other accountants are not subject to the AICPA Code of
Professional Conduct, compliance by the other accountants with the ethics and
independence requirements set forth in the International Ethics Standards
Board's Code of Ethics for Professional Accountants is sufcient to fulll the
other accountants' ethical responsibilities. [Paragraph added, effective for re-
views of nancial statements for periods ending on or after June 15, 2019, by
SSARS No. 24. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
Determining Whether to Make Reference When the Financial Reporting
Framework Is Not the Same (Ref: par. .125b)
.A196 The greater the number of differences or the greater the sig-
nicance of the differences between the criteria used for measurement,
9
Illustration 6, "An Accountant's Review Report on Comparative Consolidated Financial State-
ments in Which the Accountant Makes Reference to the Work of Other Accountants Who Were En-
gaged to Review the Financial Statements of a Signicant Component," of exhibit C. [Footnote renum-
bered by the issuance of SSARS No. 24, May 2018. Footnote subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.A196
4652 Statements on Standards for Accounting and Review Services
recognition, presentation, and disclosure of all material items in the compo-
nent's nancial statements in accordance with the nancial reporting frame-
work used by the component and the nancial reporting framework used by the
reporting entity, the less similar the nancial reporting frameworks. Financial
statements prepared and presented in accordance with International Financial
Reporting Standards (IFRS) and International Financial Reporting Standard
for Small- and Medium-Sized Entities, as issued by the International Account-
ing Standards Board, are generally viewed as similar to nancial statements
prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP). In most cases, special purpose frameworks
are not similar to GAAP. [Paragraph added, effective for reviews of nancial
statements for periods ending on or after June 15, 2019, by SSARS No. 24.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
Supplementary Information That Accompanies Reviewed
Financial Statements (Ref: par. .126–.128)
[.A197] [Paragraph renumbered and deleted by the issuance of SSARS
No. 23, October 2016. Paragraph subsequently renumbered by the issuance of
SSARS No. 24, May 2018. Paragraph subsequently renumbered by the issuance
of SSARS No. 25, February 2020.]
.A198 The following is an example of how an accountant may word an
other-matter paragraph addressing supplementary information when the sup-
plementary information has been subjected to the review procedures applied
in the accountant's review of the basic nancial statements:
Other Matter
The accompanying [identify the supplementary information] is presented for
purposes of additional analysis and is not a required part of the basic nancial
statements. Such information is the responsibility of management and was de-
rived from, and relates directly to, the underlying accounting and other records
used to prepare the nancial statements. The supplementary information has
been subjected to the review procedures applied in my (our) review of the ba-
sic nancial statements. I am (We are) not aware of any material modications
that should be made to the supplementary information. I (We) have not au-
dited the supplementary information and do not express an opinion on such
information.
[Paragraph renumbered and amended, effective October 2016, by SSARS No.
23. Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
.A199 The following is an example of how an accountant may word an
other-matter paragraph addressing supplementary information when the sup-
plementary information has not been subjected to the review procedures ap-
plied in the review of the basic nancial statements:
Other Matter
The accompanying [identify the supplementary information] is presented for
purposes of additional analysis and is not a required part of the basic nancial
statements. Such information is the responsibility of management. I (We) have
not audited or reviewed such information and I (we) do not express an opinion,
a conclusion, nor provide any assurance on it.
AR-C §90[.A197] ©2021, AICPA
Review of Financial Statements 4653
[Paragraph renumbered and amended, effective October 2016, by SSARS No.
23. Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
.A200 Supplementary information may become unattached from the ac-
countant's review report. To minimize the possibility that a user of the supple-
mentary information may infer, through the accountant's association with such
information, an unintended level of reliance on it, the accountant may consider
including a reference to the accountant's review report on each page of the sup-
plementary information. An example of a reference to the accountant's review
report included on each page of the supplementary information is "See inde-
pendent accountant's review report." [Paragraph renumbered and amended,
effective October 2016, by SSARS No. 23. Paragraph subsequently renumbered
by the issuance of SSARS No. 24, May 2018. Paragraph subsequently renum-
bered by the issuance of SSARS No. 25, February 2020.]
Required Supplementary Information (Ref: par. .129–.130)
.A201 Examples of required supplementary information that may accom-
pany reviewed nancial statements include the following:
•
With respect to common interest realty associations, estimates of
current or future costs of major repairs and replacements of com-
mon property that will be required in the future as required by
FASB Accounting Standards Codication 972-235-50-3
•
Management's discussion and analysis and budgetary comparison
statements as required by GASB Statement No. 34, Basic Finan-
cial Statements—and Management's Discussion and Analysis—
for State and Local Governments
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
.A202 Prescribed guidelines are the authoritative guidelines established
by the designated accounting standard-setter for the methods of measure-
ment and presentation of the required supplementary information. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
.A203 Because the required supplementary information accompanies the
basic nancial statements, the accountant's review report on the nancial
statements includes a discussion of the responsibility taken by the accountant
on that information. However, if the required supplementary information is
omitted by the entity, the accountant does not have a responsibility to present
that information. [Paragraph renumbered by the issuance of SSARS No. 23, Oc-
tober 2016. Paragraph subsequently renumbered by the issuance of SSARS No.
24, May 2018. Paragraph subsequently renumbered by the issuance of SSARS
No. 25, February 2020.]
Change in Engagement From Audit to Review (Ref: par. .132)
.A204 A request to change the engagement may result from a change in
circumstances affecting the entity's requirement for an audit engagement; a
misunderstanding regarding the nature of an audit or review engagement; or
©2021, AICPA AR-C §90.A204
4654 Statements on Standards for Accounting and Review Services
a restriction on the scope of the audit engagement, whether imposed by man-
agement or caused by circumstances. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A205 A change in circumstances that affects the entity's requirement for
an audit engagement or a misunderstanding concerning the nature of an audit
or review engagement would ordinarily be considered a reasonable basis for re-
questing a change in the engagement. [Paragraph renumbered by the issuance
of SSARS No. 23, October 2016. Paragraph subsequently renumbered by the
issuance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
.A206 The implications of a restriction on the scope of the audit engage-
ment include the possibility that information affected by the scope restriction
may be incorrect, incomplete, or otherwise unsatisfactory. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
Review Documentation (Ref: par. .137)
.A207 Review documentation may be recorded on paper or on electronic or
other media. [Paragraph renumbered by the issuance of SSARS No. 23, October
2016. Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018. Paragraph subsequently renumbered by the issuance of SSARS No.
25, February 2020.]
.A208 The accountant need not include in review documentation super-
seded drafts of working papers and nancial statements, notes that reect in-
complete or preliminary thinking, previous copies of documents corrected for
typographical or other errors, and duplicates of documents. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
.A209 The accountant is not precluded from supporting the review report
by other means in addition to the review documentation. Such other means
might include written documentation contained in other engagement les (for
example, compilation or nonattest services) or quality control les (for example,
consultation les) and, in limited situations, oral explanations. On their own,
oral explanations by the accountant do not represent adequate support for the
work the accountant performed or conclusions reached, but they may be used
to explain or clarify information contained in the review documentation. [Para-
graph renumbered by the issuance of SSARS No. 23, October 2016. Paragraph
subsequently renumbered by the issuance of SSARS No. 24, May 2018. Para-
graph subsequently renumbered by the issuance of SSARS No. 25, February
2020.]
.A210 In the case of a review in which the engagement partner performs
all the review work, the engagement partner is still required to comply with
the overriding requirement in paragraph .137 to prepare review documentation
that can be understood by an experienced accountant because the review doc-
umentation may be subject to review by external parties. [Paragraph renum-
bered by the issuance of SSARS No. 23, October 2016. Paragraph subsequently
renumbered by the issuance of SSARS No. 24, May 2018. Paragraph subse-
quently renumbered by the issuance of SSARS No. 25, February 2020.]
AR-C §90.A205 ©2021, AICPA
Review of Financial Statements 4655
.A211 Findings or issues that, in the accountant's professional judgment,
are signicant may include the results of review procedures that indicate that
the nancial statements could be materially misstated, including actions taken
to address such ndings and the basis for the nal conclusions. [Paragraph
renumbered by the issuance of SSARS No. 23, October 2016. Paragraph sub-
sequently renumbered by the issuance of SSARS No. 24, May 2018. Paragraph
subsequently renumbered by the issuance of SSARS No. 25, February 2020.]
©2021, AICPA AR-C §90.A211
4656 Statements on Standards for Accounting and Review Services
.A212
Appendix A — Analytical Procedures the Accountant
May Consider Performing When Conducting a Review
of Financial Statements (Ref: par. .A29)
Analytical procedures are designed to identify relationships and individual
items that appear to be unusual and that may reect a material misstatement
of the nancial statements. Examples of analytical procedures that an accoun-
tant may consider performing in a review of nancial statements include the
following:
•
Comparing current nancial statements with the nancial state-
ments of the prior period.
•
Comparing current nancial statements with anticipated results,
such as budgets or forecasts (for example, comparing tax bal-
ances and the relationship between the provision for income taxes
and pretax income in the current nancial statements with corre-
sponding information in [a] budgets, using expected rates, and [b]
nancial statements for prior periods). Caution is necessary when
comparing and evaluating current nancial statements with bud-
gets, forecasts, or other anticipated results because of the inherent
lack of precision in estimating the future and the susceptibility of
such information to manipulation and misstatement by manage-
ment to reect desired results.
•
Comparing current nancial statements with relevant nonnan-
cial information.
•
Comparing ratios and indicators for the current period with ex-
pectations based on prior periods (for example, performing gross
prot analysis by product line and operating segment using el-
ements of the current nancial statements and comparing the
results with corresponding information for prior periods). Exam-
ples of key ratios and indicators are the current ratio, receivable
turnover or days sales outstanding, inventory turnover, deprecia-
tion to average xed assets, debt to equity, gross prot percentage,
net income percentage, and plant operating rates.
•
Comparing ratios and indicators for the current period with those
of entities in the same industry.
•
Comparing relationships among elements in the current nan-
cial statements with corresponding relationships in the nancial
statements of prior periods (for example, expense by type as a per-
centage of sales, assets by type as a percentage of total assets, and
percentage of change in sales to percentage of change in receiv-
ables).
•
Comparing disaggregated data. The following are examples of how
data may be disaggregated:
— By period (for example, nancial statement items disag-
gregated into quarterly, monthly, or weekly amounts)
— By product line or operating segment
— By location (for example, subsidiary, division, or branch)
AR-C §90.A212 ©2021, AICPA
Review of Financial Statements 4657
Analytical procedures may include such statistical techniques as trend anal-
ysis or regression analysis and may be performed manually or with the use
of computer-assisted techniques. [Paragraph renumbered by the issuance of
SSARS No. 23, October 2016. Paragraph subsequently renumbered by the is-
suance of SSARS No. 24, May 2018. Paragraph subsequently renumbered by
the issuance of SSARS No. 25, February 2020.]
[.A213] [Paragraph renumbered and deleted by the issuance of SSARS No.
25, February 2020.]
©2021, AICPA AR-C §90[.A213]
4658 Statements on Standards for Accounting and Review Services
.A214
Exhibit A — Illustrative Engagement Letters
(Ref: par. .A29)
Illustration 1 — An Engagement Letter for a Review Engagement With Re-
spect to Financial Statements Prepared in Accordance With Accounting Prin-
ciples Generally Accepted in the United States of America
Illustration 2 — An Engagement Letter for a Review Engagement With Re-
spect to Financial Statements Prepared in Accordance With the Tax Basis of
Accounting
The illustrative engagement letters in this exhibit are intended as illustrations
that may be used in conjunction with the considerations outlined in Statements
on Standards for Accounting and Review Services. The engagement letter will
vary according to individual requirements and circumstances, and the illustra-
tions are drafted to refer to a review engagement for a single reporting period.
The accountant may seek legal advice about whether a proposed letter is suit-
able.
Illustration 1 — An Engagement Letter for a Review Engagement With Respect
to Financial Statements Prepared in Accordance With Accounting Principles
Generally Accepted in the United States of America
Circumstances include the following:
•
The accountant will prepare, as a nonattest service, the nancial
statements, including related notes, subject to the review engage-
ment.
•
The nancial statements will be prepared in accordance with ac-
counting principles generally accepted in the United States of
America.
To the appropriate representative of management of ABC Company:
1
You
2
have requested that we prepare the nancial statements of ABC Com-
pany, which comprise the balance sheet as of December 31, 20XX, and the re-
lated statements of income, changes in stockholders' equity, and cash ows for
the year then ended, and the related notes to the nancial statements and per-
form a review engagement with respect to those nancial statements.
3
We are
pleased to conrm our acceptance and understanding of this engagement by
means of this letter.
Our Responsibilities
The objective of our engagement is to
1
The addresses and references in the engagement letter would be those that are appropriate in
the circumstances of the review engagement, including the relevant jurisdiction. It is important to
refer to the appropriate persons. See paragraph .A25.
2
Throughout this engagement letter, references to you, we, us, management,andaccountant
would be used or amended as appropriate in the circumstances.
3
The accountant may include other nonattest services to be performed as part of the engagement,
such as income tax preparation and bookkeeping services.
AR-C §90.A214 ©2021, AICPA
Review of Financial Statements 4659
a. prepare nancial statements in accordance with accounting prin-
ciples generally accepted in the United States of America based
on information provided by you and
b. obtain limited assurance as a basis for reporting whether we are
aware of any material modications that should be made to the
nancial statements in order for the statements to be in accor-
dance with accounting principles generally accepted in the United
States of America.
We will conduct our engagement in accordance with Statements on Standards
for Accounting and Review Services (SSARSs) promulgated by the Accounting
and Review Services Committee of the AICPA and comply with the AICPA's
Code of Professional Conduct, including ethical principles of integrity, objectiv-
ity, professional competence, and due care.
A review engagement includes primarily applying analytical procedures to your
nancial data and making inquiries of company management. A review engage-
ment is substantially less in scope than an audit engagement, the objective of
which is the expression of an opinion regarding the nancial statements as a
whole. A review engagement does not contemplate obtaining an understanding
of the entity's internal control; assessing fraud risk; testing accounting records
by obtaining sufcient appropriate audit evidence through inspection, observa-
tion, conrmation, or the examination of source documents; or other procedures
ordinarily performed in an audit engagement. Accordingly, we will not express
an opinion regarding the nancial statements.
Our engagement cannot be relied upon to identify or disclose any nancial
statement misstatements, including those caused by error or fraud, or to iden-
tify or disclose any wrongdoing within the entity or noncompliance with laws
and regulations. However, we will inform the appropriate level of management
of any material errors and any evidence or information that comes to our atten-
tion during the performance of our review procedures that indicates fraud may
have occurred. In addition, we will report to you any evidence or information
that comes to our attention during the performance of our review procedures
regarding noncompliance with laws and regulations that may have occurred,
unless they are clearly inconsequential.
Your Responsibilities
The engagement to be performed is conducted on the basis that you acknowl-
edge and understand that our role is to prepare nancial statements in accor-
dance with accounting principles generally accepted in the United States of
America and to obtain limited assurance as a basis for reporting whether we
are aware of any material modications that should be made to the nancial
statements in order for the statements to be in accordance with accounting
principles generally accepted in the United States of America. You have the
following overall responsibilities that are fundamental to our undertaking the
engagement in accordance with SSARSs:
a. The selection of accounting principles generally accepted in the
United States of America as the nancial reporting framework to
be applied in the preparation of the nancial statements
b. The preparation and fair presentation of the nancial statements
in accordance with accounting principles generally accepted in
the United States of America and the inclusion of all informative
disclosures that are appropriate for accounting principles gener-
ally accepted in the United States of America
c. The design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of the nancial
©2021, AICPA AR-C §90.A214
4660 Statements on Standards for Accounting and Review Services
statements that are free from material misstatement, whether
due to fraud or error
d. The prevention and detection of fraud
e. To ensure that the entity complies with the laws and regulations
applicable to its activities
f. The accuracy and completeness of the records, documents, expla-
nations, and other information, including signicant judgments,
you provide to us for the engagement
g. To provide us with
i. access to all information of which you are aware is rele-
vant to the preparation and fair presentation of the nan-
cial statements, such as records, documentation, and other
matters
ii. additional information that we may request from you for
the purpose of the review engagement
iii. unrestricted access to persons within the entity of whom
we determine it necessary to make inquiries
h. To provide us, at the conclusion of the engagement, with a letter
that conrms certain representations made during the review
You are also responsible for all management decisions and responsibilities, and
for designating an individual with suitable skills, knowledge, and experience
to oversee our preparation of your nancial statements. You are responsible
for evaluating the adequacy and results of services performed and accepting
responsibility for such services.
Our Report
[Insert appropriate reference to the expected form and content of the accountant's
review report. Example follows.]
We will issue a written report upon completion of our review of ABC Company's
nancial statements. Our report will be addressed to the board of directors of
ABC Company. We cannot provide assurance that an unmodied accountant's
review report will be issued. Circumstances may arise in which it is neces-
sary for us to report known departures from accounting principles generally
accepted in the United States of America, add an emphasis-of-matter or other-
matter paragraph(s), or withdraw from the engagement. If, for any reason, we
are unable to complete the review of your nancial statements, we will not issue
a report on such statements as a result of this engagement.
You agree to include our accountant's review report in any document containing
nancial statements that indicates that such nancial statements have been
reviewed by us and, prior to inclusion of the report, to ask our permission to do
so.
Other Relevant Information
Our fees for these services. . .
[The accountant may include language, such as the following, regarding limita-
tion of or other arrangements regarding the liability of the accountant or the en-
tity, such as indemnication to the accountant for liability arising from knowing
misrepresentations to the accountant by management (regulators may restrict
or prohibit such liability limitation arrangements):
You agree to hold us harmless and to release, indemnify, and defend us from
any liability or costs, including attorney's fees, resulting from management's
knowing misrepresentations to us or resulting from any actions against us by
AR-C §90.A214 ©2021, AICPA
Review of Financial Statements 4661
third parties relying on the nancial statements described herein except for our
own intentional wrongdoing.]
Please sign and return the attached copy of this letter to indicate your acknowl-
edgement of, and agreement with, the arrangements for our engagement to pre-
pare the nancial statements described herein and to perform a review of those
same nancial statements and our respective responsibilities.
Sincerely yours,
[Signature of accountant or accountant's rm]
Acknowledged and agreed on behalf of ABC Company by:
[Signed]
[Name and Title]
[Date]
[Revised, February 2015, to include additional required engagement letter ele-
ments; Paragraph subsequently renumbered by the issuance of SSARS No. 24,
May 2018.]
Illustration 2 — An Engagement Letter for a Review Engagement With Respect
to Financial Statements Prepared in Accordance With the Tax Basis of
Accounting
Circumstances include the following:
•
The accountant will prepare, as a nonattest service, the nancial
statements, including related notes, subject to the review engage-
ment.
•
The nancial statements will be prepared in accordance with the
tax basis of accounting.
To the appropriate representative of management of ABC Company:
1
You
2
have requested that we prepare the nancial statements of ABC Com-
pany, which comprise the statement of assets, liabilities, and equity—tax basis
as of December 31, 20XX, and the related statements of operations and retained
earnings—tax basis, and cash ows—tax basis for the year then ended, and the
related notes to the nancial statements and to perform a review engagement
with respect to those nancial statements.
3
We are pleased to conrm our ac-
ceptance and our understanding of this engagement by means of this letter.
Our Responsibilities
The objective of our engagement is to
a. prepare nancial statements in accordance with the tax basis of
accounting based on information provided by you and
1
The addresses and references in the engagement letter would be those that are appropriate in
the circumstances of the review engagement, including the relevant jurisdiction. It is important to
refer to the appropriate persons. See paragraph .A25.
2
Throughout this engagement letter, references to you, we, us, management,andaccountant
would be used or amended as appropriate in the circumstances.
3
The accountant may include other nonattest services to be performed as part of the engagement,
such as income tax preparation and bookkeeping services.
©2021, AICPA AR-C §90.A214
4662 Statements on Standards for Accounting and Review Services
b. obtain limited assurance as a basis for reporting whether we are
aware of any material modications that should be made to the -
nancial statements in order for the statements to be in accordance
with the tax basis of accounting.
We will conduct our review engagement in accordance with Statements on
Standards for Accounting and Review Services (SSARSs) promulgated by the
Accounting and Review Services Committee of the AICPA and comply with the
AICPA's Code of Professional Conduct, including ethical principles of integrity,
objectivity, professional competence, and due care.
A review engagement includes primarily applying analytical procedures to your
nancial data and making inquiries of company management. A review engage-
ment is substantially less in scope than an audit engagement, the objective of
which is the expression of an opinion regarding the nancial statements as a
whole. A review engagement does not contemplate obtaining an understanding
of the entity's internal control; assessing fraud risk; testing accounting records
by obtaining sufcient appropriate audit evidence through inspection, observa-
tion, conrmation, or the examination of source documents; or other procedures
ordinarily performed in an audit engagement. Accordingly, we will not express
an opinion regarding the nancial statements.
Our engagement cannot be relied upon to identify or disclose any nancial
statement misstatements, including those caused by error or fraud, or to iden-
tify or disclose any wrongdoing within the entity or noncompliance with laws
and regulations. However, we will inform the appropriate level of management
of any material errors and any evidence or information that comes to our atten-
tion during the performance of our review procedures that indicates fraud may
have occurred. In addition, we will report to you any evidence or information
that comes to our attention during the performance of our review procedures
regarding noncompliance with laws and regulations that may have occurred,
unless they are clearly inconsequential.
Your Responsibilities
The engagement to be performed is conducted on the basis that you acknowl-
edge and understand that our role is to prepare nancial statements in accor-
dance with the tax basis of accounting and to obtain limited assurance as a
basis for reporting whether we are aware of any material modications that
should be made to the nancial statements in order for the statements to be
in accordance with the tax basis of accounting. You have the following overall
responsibilities that are fundamental to our undertaking the engagement in
accordance with SSARSs:
a. The selection of the tax basis of accounting as the nancial report-
ing framework to be applied in the preparation of the nancial
statements
b. The preparation and fair presentation of the nancial statements
in accordance with the tax basis of accounting and the inclusion of
all informative disclosures that are appropriate for the tax basis
of accounting. This includes
i. a description of the tax basis of accounting, including a
summary of signicant accounting policies, and how the
tax basis of accounting differs from accounting principles
generally accepted in the United States of America, the ef-
fects of which need not be qualied
ii. informative disclosures similar to those required by ac-
counting principles generally accepted in the United
States of America
AR-C §90.A214 ©2021, AICPA
Review of Financial Statements 4663
c. The design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of the nancial
statements that are free from material misstatement, whether
due to fraud or error
d. The prevention and detection of fraud
e. To ensure that the entity complies with the laws and regulations
applicable to its activities
f. The accuracy and completeness of the records, documents, expla-
nations, and other information, including signicant judgments,
you provide to us for the engagement
g. To provide us with
i. access to all information of which you are aware is rele-
vant to the preparation and fair presentation of the nan-
cial statements, such as records, documentation, and other
matters
ii. additional information that we may request from you for
the purpose of the review engagement
iii. unrestricted access to persons within the entity of whom
we determine it necessary to make inquiries
h. To provide us, at the conclusion of the engagement, with a letter
that conrms certain representations made during the review
You are also responsible for all management decisions and responsibilities and
for designating an individual with suitable skills, knowledge, and experience
to oversee our preparation of your nancial statements. You are responsible for
evaluating the adequacy and results of the services performed and accepting
responsibility for such services.
Our Report
[Insert appropriate reference to the expected form and content of the accountant's
review report. Example follows.]
We will issue a written report upon completion of our review of ABC Company's
nancial statements. Our report will be addressed to the board of directors of
ABC Company. We cannot provide assurance that an unmodied accountant's
review report will be issued. Circumstances may arise in which it is neces-
sary of us to report known departures from the tax basis of accounting, add
an emphasis-of-matter or other-matter paragraph(s), or withdraw from the en-
gagement. If, for any reason, we are unable to complete the review of your -
nancial statements, we will not issue a report on such statements as a result of
this engagement.
Our report will state that the nancial statements are prepared in accordance
with tax basis of accounting, which is a basis of accounting other than account-
ing principles generally accepted in the United States of America. Our conclu-
sion will not be modied with respect to this matter.
You agree to include our accountant's review report in any document containing
nancial statements that indicates that such nancial statements have been
reviewed by us and, prior to inclusion of the report, to ask our permission to do
so.
Other Relevant Information
Our fees for these services. . .
[The accountant may include language, such as the following, regarding limita-
tion of or other arrangements regarding the liability of the accountant or the en-
tity, such as indemnication to the accountant for liability arising from knowing
©2021, AICPA AR-C §90.A214
4664 Statements on Standards for Accounting and Review Services
misrepresentations to the accountant by management (regulators may restrict
or prohibit such liability limitation arrangements):
You agree to hold us harmless and to release, indemnify, and defend us from
any liability or costs, including attorney's fees, resulting from management's
knowing misrepresentations to us or resulting from any actions against us by
third parties relying on the nancial statements described herein except for our
own intentional wrongdoing.]
Please sign and return the attached copy of this letter to indicate your acknowl-
edgement of, and agreement with, the arrangements for our engagement to pre-
pare the nancial statements described herein and to perform a review with
respect to those same nancial statements and our respective responsibilities.
Sincerely yours,
[Signature of accountant or accountant's rm]
Acknowledged and agreed on behalf of ABC Company by:
[Signed]
[Name and Title]
[Date]
[Revised, February 2015, to include additional required engagement letter ele-
ments. Paragraph renumbered by the issuance of SSARS No. 23, October 2016.
Paragraph subsequently renumbered by the issuance of SSARS No. 24, May
2018. Paragraph subsequently renumbered by the issuance of SSARS No. 25,
February 2020.]
AR-C §90.A214 ©2021, AICPA
Review of Financial Statements 4665
.A215
Exhibit B — Illustrative Representation Letter
(Ref: par. .A97)
The following illustrative letter is intended as an illustration that may be used
to comply with the requirements of section 90. The representation letter will
vary according to individual requirements and circumstances.
It is assumed in this illustration that the applicable nancial reporting frame-
work is accounting principles generally accepted in the United States of Amer-
ica, that no conditions or events exist that might be indicative of the entity's
inability to continue as a going concern, and that no exceptions exist to the
requested written representations. If circumstances differ from these assump-
tions, the representations would need to be modied to reect the actual cir-
cumstances.
(Entity Letterhead)
(To Accountant)
(Date)
This representation letter is provided in connection with your review of the
nancial statements of ABC Company, which comprise the balance sheets as of
December 31, 20X2 and 20X1, and the related statements of income, changes
in stockholders' equity and cash ows for the years then ended, and the related
notes to the nancial statements, for the purpose of obtaining limited assurance
as a basis for reporting whether you are aware of any material modications
that should be made to the nancial statements in order for the statements to
be in accordance with accounting principles generally accepted in the United
States of America.
Certain representations in this letter are described as being limited to matters
that are material. Items are considered material, regardless of size, if they in-
volve an omission or misstatement of accounting information that, in the light
of surrounding circumstances, makes it probable that the judgment of a rea-
sonable person relying on the information would be changed or inuenced by
the omission or misstatement.
We represent that [to the best of our knowledge and belief, having made such
inquiries as we considered necessary for the purpose of appropriately informing
ourselves][as of (date of accountant's review report)]:
Financial Statements
•
We acknowledge our responsibility and have fullled our respon-
sibilities for the preparation and fair presentation of the nancial
statements in accordance with accounting principles generally ac-
cepted in the United States of America.
•
We acknowledge our responsibility and have fullled our respon-
sibilities for the design, implementation, and maintenance of in-
ternal control relevant to the preparation and fair presentation
of nancial statements that are free from material misstatement,
whether due to fraud or error.
•
We acknowledge our responsibility for the design, implementa-
tion, and maintenance of internal control to prevent and detect
fraud.
©2021, AICPA AR-C §90.A215
4666 Statements on Standards for Accounting and Review Services
•
Signicant assumptions used by us in making accounting esti-
mates, including those measured at fair value, are reasonable.
•
Related party relationships and transactions have been appropri-
ately accounted for and disclosed in accordance with the require-
ments of accounting principles generally accepted in the United
States of America.
•
Guarantees, whether written or oral, under which the company is
contingently liable have been properly accounted for and disclosed
in accordance with the requirements of accounting principles gen-
erally accepted in the United States of America.
•
Signicant estimates and material concentrations known to man-
agement that are required to be disclosed in accordance with
FASB Accounting Standards Codication (ASC) 275, Risks and
Uncertainties, have been properly accounted for and disclosed in
accordance with the requirements of accounting principles gener-
ally accepted in the United States of America. [Signicant esti-
mates are estimates at the balance sheet date that could change
materially within the next year. Concentrations refer to volumes of
business, revenues, available sources of supply, or markets or geo-
graphic areas for which events could occur that would signicantly
disrupt normal nances within the next year.]
•
All events occurring subsequent to the date of the nancial state-
ments and for which accounting principles generally accepted in
the United States of America requires adjustment or disclosure
have been properly accounted for.
•
The effects of uncorrected misstatements are immaterial, both in-
dividually and in the aggregate, to the nancial statements as a
whole.
•
The effects of all known actual or possible litigation and claims
have been accounted for and disclosed in accordance with account-
ing principles generally accepted in the United States of America.
[Any other matters that the accountant may consider appropriate.]
Information Provided
•
We have responded fully and truthfully to all inquiries made to us
by you during your review.
•
We have provided you with
— access to all information, of which we are aware, that is
relevant to the preparation and fair presentation of the
nancial statements, such as records, documentation, and
other matters;
— minutes of meetings of stockholders, directors, and com-
mittees of directors or summaries of actions of recent meet-
ings for which minutes have not yet been prepared;
— additional information that you have requested from us
for the purpose of the review; and
— unrestricted access to persons within the entity from
whom you determined it necessary to obtain review evi-
dence.
•
All transactions have been recorded in the accounting records and
are reected in the nancial statements.
AR-C §90.A215 ©2021, AICPA
Review of Financial Statements 4667
•
We have [no knowledge of any][disclosed to you all information
that we are aware of regarding] fraud or suspected fraud that af-
fects the entity and involves
— management,
— employees who have signicant roles in internal control,
or
— others when the fraud could have a material effect on the
nancial statements.
•
We have [no knowledge of any][disclosed to you all information
that we are aware of regarding]allegationsoffraud,orsuspected
fraud, affecting the entity's nancial statements as a whole com-
municated by employees, former employees, analysts, regulators,
or others.
•
We have no plans or intentions that may materially affect the car-
rying amounts or classication of assets and liabilities.
•
We have disclosed to you all known instances of noncompliance or
suspected noncompliance with laws or regulations whose effects
should be considered when preparing nancial statements.
•
We [have disclosed to you all known actual or possible][are not
aware of any pending or threatened] litigation and claims whose
effects should be considered when preparing the nancial state-
ments [and we have not consulted legal counsel concerning litiga-
tion or claims]
•
We have disclosed to you any other material liabilities or gain or
loss contingencies that are required to be accrued or disclosed by
FASB ASC 450, Contingencies.
•
We have disclosed to you the identity of the entity's related parties
and all the related party relationships and transactions of which
we are aware.
•
We have disclosed to you all information relevant to the use of the
going concern assumption in the nancial statements.
•
No material losses exist (such as from obsolete inventory or pur-
chase or sale commitments) that have not been properly accrued
or disclosed in the nancial statements.
•
The company has satisfactory title to all owned assets, and no
liens or encumbrances on such assets exist, nor has any asset been
pledged as collateral, except as disclosed to you and reported in the
nancial statements.
•
We have complied with all aspects of contractual agreements that
would have a material effect on the nancial statements in the
event of noncompliance.
•
We are in agreement with the adjusting journal entries that you
have recommended, and they have been posted to the company's
accounts (if applicable).
[Any other matters that the accountant may consider necessary.]
[Name of Chief Executive Ofcer and Title]
[Name of Chief Financial Ofcer and Title]
©2021, AICPA AR-C §90.A215
4668 Statements on Standards for Accounting and Review Services
Representation letters ordinarily are tailored to include additional appropriate
representations from management relating to matters specic to the entity's
business or industry.
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered by the issuance of SSARS No. 25, Febru-
ary 2020.]
AR-C §90.A215 ©2021, AICPA
Review of Financial Statements 4669
.A216
Exhibit C — Illustrations of Accountant’s Review Reports
on Financial Statements (Ref: par. .A123 and .A191)
The illustrative accountant's review reports in this exhibit are intended as il-
lustrations that may be used to comply with the requirements of section 90.
The accountant's review report will vary according to individual requirements
and circumstances.
Illustration 1 — An Accountant's Review Report on Comparative Financial
Statements Prepared in Accordance With Accounting Principles Generally
Accepted in the United States of America When a Review Has Been Performed
for Both Periods
Illustration 2 — An Accountant's Review Report on Single Year Financial
Statements Prepared in Accordance With Accounting Principles Generally
Accepted in the United States of America
Illustration 3 — An Accountant's Review Report on Single Year Financial
Statements Prepared in Accordance With the Tax Basis of Accounting
Illustration 4 — An Accountant's Review Report on Interim Financial State-
ments Prepared in Accordance With Accounting Principles Generally Ac-
cepted in the United States of America
Illustration 5 — An Accountant's Review Report on Comparative Financial
Statements Disclosing a Departure From Accounting Principles Generally
Accepted in the United States of America
Illustration 6 — An Accountant's Review Report on Comparative Consol-
idated Financial Statements in Which the Accountant Makes Reference to
the Work of Other Accountants Who Were Engaged to Review the Financial
Statements of a Signicant Component
Illustration 7 — An Accountant's Review Report on Single Year Financial
Statements Prepared in Accordance With Accounting Principles Generally
Accepted in the United States of America Containing an Adverse Conclusion
Due to a Misstatement of the Financial Statements That Is Both Material
and Pervasive to the Financial Statements
Illustration 1 — An Accountant’s Review Report on Comparative Financial
Statements Prepared in Accordance With Accounting Principles Generally
Accepted in the United States of America When a Review Has Been Performed
for Both Periods
Circumstances include the following:
•
Review of a complete set of comparative nancial statements.
•
The nancial statements are prepared in accordance with ac-
counting principles generally accepted in the United States of
America.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying nancial statements of XYZ Company,
which comprise the balance sheets as of December 31, 20X2 and 20X1, and the
©2021, AICPA AR-C §90.A216
4670 Statements on Standards for Accounting and Review Services
related statements of income, changes in stockholders' equity, and cash ows
for the years then ended, and the related notes to the nancial statements.
A review includes primarily applying analytical procedures to management's
(owners') nancial data and making inquiries of company management (own-
ers). A review is substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the nancial statements as a whole.
Accordingly, I (we) do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair presen-
tation of these nancial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the prepara-
tion and fair presentation of nancial statements that are free from material
misstatement whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagements in accordance
with Statements on Standards for Accounting and Review Services promul-
gated by the Accounting and Review Services Committee of the AICPA. Those
standards require me (us) to perform procedures to obtain limited assurance as
a basis for reporting whether I am (we are) aware of any material modications
that should be made to the nancial statements for them to be in accordance
with accounting principles generally accepted in the United States of America.
I (We) believe that the results of my (our) procedures provide a reasonable basis
for my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our reviews.
Accountant’s Conclusion
Based on my (our) reviews, I am (we are) not aware of any material modica-
tions that should be made to the accompanying nancial statements in order
for them to be in accordance with accounting principles generally accepted in
the United States of America.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
Illustration 2 — An Accountant’s Review Report on Single Year Financial
Statements Prepared in Accordance With Accounting Principles Generally
Accepted in the United States of America
Circumstances include the following:
•
Review of a complete set of nancial statements (single year).
•
The nancial statements are prepared in accordance with ac-
counting principles generally accepted in the United States of
America.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying nancial statements of XYZ Company,
which comprise the balance sheet as of December 31, 20XX, and the related
statements of income, changes in stockholders' equity, and cash ows for the
year then ended, and the related notes to the nancial statements. A review
AR-C §90.A216 ©2021, AICPA
Review of Financial Statements 4671
includes primarily applying analytical procedures to management's (owners')
nancial data and making inquiries of company management (owners). A re-
view is substantially less in scope than an audit, the objective of which is the
expression of an opinion regarding the nancial statements as a whole. Accord-
ingly, I (we) do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair presen-
tation of these nancial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the prepara-
tion and fair presentation of nancial statements that are free from material
misstatement whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagement in accordance with
Statements on Standards for Accounting and Review Services promulgated by
the Accounting and Review Services Committee of the AICPA. Those standards
require me (us) to perform procedures to obtain limited assurance as a basis
for reporting whether I am (we are) aware of any material modications that
should be made to the nancial statements for them to be in accordance with
accounting principles generally accepted in the United States of America. I (We)
believe that the results of my (our) procedures provide a reasonable basis for
my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our review.
Accountant’s Conclusion
Based on my (our) review, I am (we are) not aware of any material modica-
tions that should be made to the accompanying nancial statements in order
for them to be in accordance with accounting principles generally accepted in
the United States of America.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
Illustration 3 — An Accountant’s Review Report on Single Year Financial
Statements Prepared in Accordance With the Tax Basis of Accounting
Circumstances include the following:
•
Review of a complete set of nancial statements (single year).
•
The nancial statements are of a partnership and prepared in ac-
cordance with the basis of accounting the partnership uses for in-
come tax purposes (that is, a special purpose framework).
•
Management has a choice of nancial reporting frameworks.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying nancial statements of XYZ Partner-
ship, which comprise the statement of assets, liabilities, and partners' capital—
tax basis as of December 31, 20XX, and the related statements of revenue and
expenses—tax basis, and partners' capital—tax basis for the year then ended,
and the related notes to the nancial statements. A review includes primarily
applying analytical procedures to management's (partners') nancial data and
©2021, AICPA AR-C §90.A216
4672 Statements on Standards for Accounting and Review Services
making inquiries of partnership management (partners). A review is substan-
tially less in scope than an audit, the objective of which is the expression of an
opinion regarding the nancial statements as a whole. Accordingly, I (we) do
not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (Partners) is (are) responsible for the preparation and fair presen-
tation of these nancial statements in accordance with the basis of accounting
the partnership uses for income tax purposes; this includes determining that
the basis of accounting the partnership uses for income tax purposes is an ac-
ceptable basis for the preparation of nancial statements in the circumstances.
Management (Partners) is (are) also responsible for the design, implementa-
tion, and maintenance of internal control relevant to the preparation and fair
presentation of nancial statements that are free from material misstatement,
whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagement in accordance with
Statements on Standards for Accounting and Review Services promulgated by
the Accounting and Review Services Committee of the AICPA. Those standards
require me (us) to perform procedures to obtain limited assurance as a basis
for reporting whether I am (we are) aware of any material modications that
should be made to the nancial statements for them to be in accordance with
the basis of accounting the partnership uses for income tax purposes. I (We)
believe that the results of my (our) procedures provide a reasonable basis for
my (our) conclusion.
We are required to be independent of XYZ Partnership and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our review.
Accountant’s Conclusion
Based on my (our) review, I am (we are) not aware of any material modica-
tions that should be made to the accompanying nancial statements in order
for them to be in accordance with the basis of accounting the partnership uses
for income tax purposes.
Basis of Accounting
I (We) draw attention to Note X of the nancial statements, which describes the
basis of accounting. The nancial statements are prepared in accordance with
the basis of accounting the partnership uses for income tax purposes, which is a
basis of accounting other than accounting principles generally accepted in the
United States of America. Our conclusion is not modied with respect to this
matter.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
Illustration 4 — An Accountant’s Review Report on Interim Financial Statements
Prepared in Accordance With Accounting Principles Generally Accepted in the
United States of America
Circumstances include the following:
•
Review of a complete set of interim nancial statements for the pe-
riod ended September 30, 20XX, and for the three and nine months
then ended.
AR-C §90.A216 ©2021, AICPA
Review of Financial Statements 4673
•
The interim nancial statements are prepared in accordance with
accounting principles generally accepted in the United States of
America.
•
The accountant appropriately performs the engagement in accor-
dance with SSARSs (that is, AU-C section 930, Interim Financial
Information, is not applicable).
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying interim nancial statements of XYZ
Company, which comprise the balance sheet as of September 30, 20XX, and the
related statements of income, changes in stockholders' equity, and cash ows
for the three and nine months then ended, and the related notes to the interim
nancial statements. A review includes primarily applying analytical proce-
dures to management's (owners') nancial data and making inquiries of com-
pany management (owners). A review is substantially less in scope than an
audit, the objective of which is the expression of an opinion regarding the in-
terim nancial statements as a whole. Accordingly, I (we) do not express such
an opinion.
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair pre-
sentation of these interim nancial statements in accordance with accounting
principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of interim nancial statements that are
free from material misstatement whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagements in accordance
with Statements on Standards for Accounting and Review Services promul-
gated by the Accounting and Review Services Committee of the AICPA. Those
standards require me (us) to perform procedures to obtain limited assurance
as a basis for reporting whether I am (we are) aware of any material modi-
cations that should be made to the interim nancial statements for them to
be in accordance with accounting principles generally accepted in the United
States of America. I (We) believe that the results of my (our) procedures provide
a reasonable basis for my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our review.
Accountant’s Conclusion
Based on my (our) review, I am (we are) not aware of any material modications
that should be made to the accompanying interim nancial statements in order
for them to be in accordance with accounting principles generally accepted in
the United States of America.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
©2021, AICPA AR-C §90.A216
4674 Statements on Standards for Accounting and Review Services
Illustration 5 — An Accountant’s Review Report on Comparative Financial
Statements Disclosing a Departure From Accounting Principles Generally
Accepted in the United States of America
Circumstances include the following:
•
Review of a complete set of comparative nancial statements.
•
The nancial statements contain a departure from accounting
principles generally accepted in the United States of America.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying nancial statements of XYZ Company,
which comprise the balance sheets as of December 31, 20X2 and 20X1, and the
related statements of income, changes in stockholders' equity, and cash ows
for the years then ended, and the related notes to the nancial statements.
A review includes primarily applying analytical procedures to management's
(owners') nancial data and making inquiries of company management (own-
ers). A review is substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the nancial statements as a whole.
Accordingly, I (we) do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair presen-
tation of these nancial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the prepara-
tion and fair presentation of nancial statements that are free from material
misstatement whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagements in accordance
with Statements on Standards for Accounting and Review Services promul-
gated by the Accounting and Review Services Committee of the AICPA. Those
standards require me (us) to perform procedures to obtain limited assurance as
a basis for reporting whether I am (we are) aware of any material modications
that should be made to the nancial statements for them to be in accordance
with accounting principles generally accepted in the United States of America.
I (We) believe that the results of my (our) procedures provide a reasonable basis
for my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our reviews.
Basis for Qualied Conclusion
As disclosed in Note X to these nancial statements, accounting principles gen-
erally accepted in the United States of America require that inventory cost con-
sist of material, labor, and overhead. Management has informed me (us) that
the inventory of nished goods and work in process is stated in the accompa-
nying nancial statements at material and labor cost only, and that the effects
of this departure from accounting principles generally accepted in the United
States of America on nancial position, results of operations, and cash ows
have not been determined.
or
As disclosed in Note X to these nancial statements, the company has adopted
[description of newly adopted method], whereas it previously used [description
AR-C §90.A216 ©2021, AICPA
Review of Financial Statements 4675
of previous method]. Although the [description of newly adopted method]isin
accordance with accounting principles generally accepted in the United States
of America, the company does not appear to have reasonable justication for
making a change as required by FASB Accounting Standards Codication 250,
Accounting Changes and Error Corrections.
Qualied Conclusion
Based on my (our) reviews, except for the effect of the matter described in the
Basis for Qualied Conclusion paragraph, I am (we are) not aware of any ma-
terial modications that should be made to the accompanying nancial state-
ments in order for them to be in accordance with accounting principles gener-
ally accepted in the United States of America.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
Illustration 6 — An Accountant’s Review Report on Comparative Consolidated
Financial Statements in Which the Accountant Makes Reference to the Work of
Other Accountants Who Were Engaged to Review the Financial Statements of a
Significant Component
Circumstances include the following:
•
Review of a complete set of comparative consolidated nancial
statements.
•
The nancial statements of B Company, a wholly-owned sub-
sidiary, whose nancial statements reect total assets constitut-
ing 20 percent and 22 percent, respectively, of consolidated total
assets at December 31, 20X2 and 20X1, and total revenues con-
stituting 18 percent and 20 percent, respectively, of consolidated
total revenues for the years then ended, were reviewed by other
accountants, and the accountant has decided to make reference to
the work of other accountants in the accountant's review report.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying consolidated nancial statements of
XYZ Company and its subsidiaries, which comprise the consolidated balance
sheets as of December 31, 20X2 and 20X1, and the related consolidated state-
ments of income, changes in stockholders' equity, and cash ows for the years
then ended, and the related notes to the nancial statements. A review includes
primarily applying analytical procedures to management's (owners') nancial
data and making inquiries of company management (owners). A review is sub-
stantially less in scope than an audit, the objective of which is the expression
of an opinion regarding the nancial statements as a whole. Accordingly, I (we)
do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair presen-
tation of these consolidated nancial statements in accordance with accounting
principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of consolidated nancial statements that are
free from material misstatement whether due to fraud or error.
©2021, AICPA AR-C §90.A216
4676 Statements on Standards for Accounting and Review Services
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagements in accordance
with Statements on Standards for Accounting and Review Services (SSARSs)
promulgated by the Accounting and Review Services Committee of the AICPA.
We have not reviewed the nancial statements of B Company, a wholly-owned
subsidiary, whose nancial statements reect total assets constituting 20 per-
cent and 22 percent, respectively, of consolidated total assets at December 31,
20X2 and 20X1, and total revenues constituting 18 percent and 20 percent, re-
spectively, of consolidated total revenues for the years then ended. These state-
ments were reviewed by other accountants, whose report has been furnished to
me (us), and our conclusion, insofar as it relates to the amounts included for B
Company, is based solely on the report of the other accountants.
SSARSs require me (us) to perform procedures to obtain limited assurance as a
basis for reporting whether I am (we are) aware of any material modications
that should be made to the consolidated nancial statements for them to be in
accordance with accounting principles generally accepted in the United States
of America. I (We) believe that the results of my (our) procedures provide a
reasonable basis for my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our reviews.
Accountant’s Conclusion
Based on my (our) reviews, and the report of other accountants, I am (we are)
not aware of any material modications that should be made to the accompa-
nying consolidated nancial statements in order for them to be in accordance
with accounting principles generally accepted in the United States of America.
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
Illustration 7 — An Accountant's Review Report on Single Year Finan-
cial Statements Prepared in Accordance With Accounting Principles
Generally Accepted in the United States of America Containing an Ad-
verse Conclusion Due to a Misstatement of the Financial Statements
That Is Both Material and Pervasive to the Financial Statements
Circumstances include the following:
•
Review of a complete set of comparative nancial statements.
•
The nancial statements contain a departure from accounting
principles generally accepted in the United States of America that
is both material and pervasive to the nancial statements due to
nonconsolidation of a subsidiary.
Independent Accountant's Review Report
[Appropriate Addressee]
I (We) have reviewed the accompanying nancial statements of XYZ Company,
which comprise the balance sheet as of December 31, 20X1, and the related
statements of income, changes in stockholders' equity, and cash ows for the
year then ended, and the related notes to the nancial statements. A review
includes primarily applying analytical procedures to management's (owners')
nancial data and making inquiries of company management (owners). A re-
view is substantially less in scope than an audit, the objective of which is the
expression of an opinion regarding the nancial statements as a whole. Accord-
ingly, I (we) do not express such an opinion.
AR-C §90.A216 ©2021, AICPA
Review of Financial Statements 4677
Management’s Responsibility for the Financial Statements
Management (Owners) is (are) responsible for the preparation and fair presen-
tation of these nancial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the prepara-
tion and fair presentation of nancial statements that are free from material
misstatement whether due to fraud or error.
Accountant’s Responsibility
My (Our) responsibility is to conduct the review engagement in accordance with
Statements on Standards for Accounting and Review Services promulgated by
the Accounting and Review Services Committee of the AICPA. Those standards
require me (us) to perform procedures to obtain limited assurance as a basis
for reporting whether I am (we are) aware of any material modications that
should be made to the nancial statements for them to be in accordance with
accounting principles generally accepted in the United States of America. I (We)
believe that the results of my (our) procedures provide a reasonable basis for
my (our) conclusion.
We are required to be independent of XYZ Company and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements
related to our reviews.
Basis for Adverse Conclusion
As disclosed in Note X to these nancial statements, the Company has not con-
solidated the nancial statements of subsidiary ABC Company it acquired dur-
ing 20X1 because it has not yet been able to ascertain the fair values of certain
of the subsidiary's material assets and liabilities at the acquisition date. This
investment is therefore accounted for on a cost basis by the Company. Under
accounting principles generally accepted in the United States of America, the
subsidiary should have been consolidated because it is controlled by the Com-
pany. Had XYZ Company been consolidated, many elements in the accompa-
nying consolidated nancial statements would have been materially affected.
The effects on the consolidated nancial statements of the failure to consolidate
have not been determined.
Adverse Conclusion
Based on my (our) review, due to the signicance of the matter described in the
Basis for Adverse Conclusion paragraph, the nancial statements are not in
accordance with accounting principles generally accepted in the United States
of America. [Had we been engaged to perform an audit, other matters might
have come to our attention.]
[Signature of accounting rm or accountant, as appropriate]
[Accountant's city and state]
[Date of the accountant's review report]
[Paragraph renumbered by the issuance of SSARS No. 23, October 2016. Para-
graph subsequently renumbered by the issuance of SSARS No. 24, May 2018.
Paragraph subsequently renumbered and amended, effective for reviews of -
nancial statements for periods ending on or after December 15, 2021, by SSARS
No. 25.]
©2021, AICPA AR-C §90.A216
