Audit Engagements
Independent financial statement audits support businesses and organizations that require an auditor’s report for lenders, shareholders, funders or other reporting purposes.
Audit planning begins with an understanding of the organization’s activities, accounting records and financial reporting requirements. This helps identify areas where significant errors or omissions could arise and the procedures appropriate to the circumstances.
Depending on the nature of the organization, audit procedures may include:
- Examining transactions and balances: Testing selected items against supporting evidence, such as invoices, agreements, bank records and confirmations from third parties.
- Assessing how transactions are reported: Evaluating the accounting treatment of revenue, expenses, assets and liabilities, including significant or unusual transactions.
- Considering estimates and disclosures: Assessing significant accounting estimates, the policies applied and the explanations included in the financial statements.
- Understanding relevant internal controls: Considering how financial information is recorded and checked, and communicating significant control deficiencies identified during the audit.
An initial discussion with management establishes the records needed and anticipated timing. Questions and proposed adjustments are addressed as the engagement progresses.
At completion, an independent auditor’s report sets out the audit opinion on the financial statements. An audit provides reasonable assurance—a high, but not absolute, level of assurance—about whether the statements as a whole are free from errors or omissions significant enough to affect readers’ decisions.
Review Engagements
Review engagements provide limited assurance on financial statements. A review may meet the reporting requirements of a lender, shareholder or other party where an audit is not required.
The engagement begins with an understanding of the organization’s activities, accounting practices and reporting requirements. Procedures focus primarily on discussions with management and analysis of the financial information, with additional work where matters require further investigation.
Review procedures may include:
- Understanding significant transactions: Asking about changes in business activities, financing arrangements, major purchases and other events that affect the financial statements.
- Analysing financial results: Comparing revenue, expenses, margins and account balances with previous periods and expectations based on an understanding of the business.
- Following up on unusual items: Investigating unexpected changes, inconsistencies or explanations that require further support.
- Considering accounting policies and disclosures: Assessing significant estimates, the accounting methods applied and the information included in the notes to the financial statements.
Ongoing discussions with management address questions and proposed adjustments affecting the reporting.
At completion, an independent practitioner’s review engagement report sets out a conclusion on the financial statements. A review provides limited assurance and involves less extensive procedures than an audit. The intended use of the statements is discussed at the outset to establish whether this level of reporting meets your needs.
Compilation Engagements
Compilation engagements provide professionally presented financial information for businesses that do not require an audit or review. The statements are prepared from accounting records and explanations supplied by management.
The intended use and recipients of the information are discussed before work begins. This helps establish whether a compilation is appropriate, particularly when the statements will be shared with a lender or another outside party.
The engagement may include:
- Understanding your accounting records: Discussing the business’s activities, how transactions are recorded and the information available for preparing the statements.
- Establishing the basis of accounting: Helping management identify an appropriate basis for presenting the information and describing that basis in a note to the statements.
- Organizing the financial information: Presenting assets, liabilities, income, expenses and equity in a structured set of financial statements.
- Addressing accounting questions: Discussing items that need clarification and assisting with accounting adjustments approved by management.
The completed financial information is accompanied by a compilation engagement report explaining the nature of the work.
A compilation does not provide assurance on the financial information or involve audit or review procedures to verify the records supplied. Management remains responsible for the accuracy and completeness of those records and the final financial information.
Interim Reporting & Other Accounting Services
Interim financial reporting provides information about income, expenses and financial position between year ends. It can support a performance review, a planned purchase or a request for information from a lender.
The work reflects your accounting records, the period being reported and the purpose of the reports. Agreeing on these requirements in advance helps ensure the information addresses the questions you need answered.
Depending on your needs, services may include:
- Preparing interim financial reports: Bringing together income, expenses, assets and liabilities for an agreed period, such as a month, quarter or year to date.
- Reconciling accounts: Working through differences between your accounting records and supporting information, including bank, credit card and loan statements.
- Addressing accounting adjustments: Helping account for outstanding invoices, unpaid expenses, asset purchases and other items that affect the reported results.
- Preparing for year end: Identifying missing information, resolving outstanding balances and organizing records needed for financial statements and tax preparation.
Explanations of significant movements and accounting adjustments help you understand the reports and identify matters requiring further attention.
The frequency and scope of the work are agreed according to your requirements. Reports intended for an outside party may require a compilation, review or audit engagement, depending on their purpose.