Review of financial statements under ISRE 2400<\/h1>\n
The middle ground between a full audit and no external check at all. The practitioner performs inquiries and analytical procedures and concludes that nothing has come to their attention indicating material misstatement. For many donors, banks and shareholders that is enough, and a review costs noticeably less than an audit and is delivered faster.<\/p>\n
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<\/div>\nAn ISRE 2400 review is a limited assurance engagement. The practitioner does not gather evidence to the extent required in an audit, so the conclusion is expressed in the negative form: nothing has come to our attention that suggests material misstatement. It fits where the donor or bank does not specifically require an auditor’s opinion.<\/p>\n
How a review differs from an audit<\/h2>\n<\/div>\n\n\nAudit under ISA<\/div>\nReasonable assurance<\/b><\/p>\n
The auditor gathers evidence: inventory observation, third party confirmations, testing of transaction samples, assessment of internal control, and expresses an opinion on fair presentation.<\/p>\n<\/div>\n
\nReview under ISRE 2400<\/div>\nLimited assurance<\/b><\/p>\n
The practitioner makes inquiries of management and the accounting team and performs analytical procedures. External confirmations and sample testing are not mandatory. The conclusion is negative in form.<\/p>\n<\/div>\n
\nCompilation under ISRS 4410<\/div>\nNo assurance<\/b><\/p>\n
The practitioner prepares the statements from the client’s data without verifying them. Used where properly presented statements are needed rather than a check.<\/p>\n<\/div>\n<\/div>\n
The practical difference is how much the practitioner is obliged to do. An audit is a search for evidence; a review is a professional test of plausibility. That is where the difference in timeline and fee comes from.<\/p>\n<\/section>\n\n\nWho it suits<\/div>\nWhen a review is enough<\/h2>\n<\/div>\n\nA small grant where the donor does not require an audit<\/b><\/p>\nThe terms of reference say “review” or “limited assurance”. Commissioning a full audit then means overpaying and spending an extra month.<\/p>\n<\/div>\n
Interim reporting during the year<\/b><\/p>\nThe donor or the parent company asks for assurance on a half-year or quarter, while the annual statements still go through a full audit.<\/p>\n<\/div>\n
A bank or a lessor<\/b><\/p>\nThe lender wants an external check but does not insist on an auditor’s report. A review closes the question faster.<\/p>\n<\/div>\n
A shareholder or a board<\/b><\/p>\nAn independent look at the statements before approval, with no statutory requirement behind it. For non-profits this is the common case.<\/p>\n<\/div>\n<\/div>\n
When a review is not enough<\/b><\/p>\n
Reasonable assurance<\/b><\/p>\n
The auditor gathers evidence: inventory observation, third party confirmations, testing of transaction samples, assessment of internal control, and expresses an opinion on fair presentation.<\/p>\n<\/div>\n
Limited assurance<\/b><\/p>\n
The practitioner makes inquiries of management and the accounting team and performs analytical procedures. External confirmations and sample testing are not mandatory. The conclusion is negative in form.<\/p>\n<\/div>\n
No assurance<\/b><\/p>\n
The practitioner prepares the statements from the client’s data without verifying them. Used where properly presented statements are needed rather than a check.<\/p>\n<\/div>\n<\/div>\n
The practical difference is how much the practitioner is obliged to do. An audit is a search for evidence; a review is a professional test of plausibility. That is where the difference in timeline and fee comes from.<\/p>\n<\/section>\n The terms of reference say “review” or “limited assurance”. Commissioning a full audit then means overpaying and spending an extra month.<\/p>\n<\/div>\n The donor or the parent company asks for assurance on a half-year or quarter, while the annual statements still go through a full audit.<\/p>\n<\/div>\n The lender wants an external check but does not insist on an auditor’s report. A review closes the question faster.<\/p>\n<\/div>\n An independent look at the statements before approval, with no statutory requirement behind it. For non-profits this is the common case.<\/p>\n<\/div>\n<\/div>\nWhen a review is enough<\/h2>\n<\/div>\n