A limited review of financial statements is an audit restricted to an examination either for a limited period or of a limited part of the records. A review does not contemplate obtaining an understanding of the entity's internal control; assessing fraud risk; tests of accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, or the examination of source documents (for example, cancelled checks or bank images); and other procedures ordinarily performed in an audit. Accordingly, a review does not provide assurance that we will become aware of all significant matters that would be disclosed in an audit. Therefore, a review provides only limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles.
The definition of nonattest services is very inclusive. It includes, for example, preparation of the client's depreciation schedule and preparation of journal entries even if management has approved the journal entries. I have confirmed these examples directly with the AICPA ethics division. The definition of nonattest services includes preparation of tax returns.
A Missouri Engagement Letter for Review of Financial Statements by an Accounting Firm is a formal agreement between the accounting firm and the client, outlining the scope and terms of the review engagement. The purpose of this letter is to establish a clear understanding of the responsibilities of both parties involved in the review process of the client's financial statements. It ensures transparency, professionalism, and a mutually beneficial working relationship. The key elements included in a typical Missouri Engagement Letter for Review of Financial Statements are: 1. Introduction: The engagement letter begins with an introduction that identifies the accounting firm, the client, and the purpose of the engagement. This section also highlights the period under review and any relevant regulatory requirements. 2. Scope of Engagement: This section outlines the specific objectives of the review engagement and the extent to which the accounting firm will perform the review. It clarifies that a review is less in scope than an audit, and that the firm will provide limited assurance on the financial statements. 3. Management Responsibilities: The engagement letter clearly defines the responsibilities of the client's management, such as providing accurate and complete financial records, internal controls, and any additional information needed for the review. 4. Accounting Firm Responsibilities: This section highlights the responsibilities of the accounting firm, which typically include performing analytical procedures, making inquiries, and evaluating the overall presentation of the financial statements in accordance with the applicable accounting standards. 5. Communication and Reporting: The engagement letter details the form and timing of the accounting firm's report, including any limitations or restrictions on its distribution. It also addresses confidentiality and the appropriate use of the report. 6. Fee Arrangements: This section specifies the fee structure for the review engagement. It may be based on various factors such as the complexity of the financial statements, the client's industry, and the time and effort required by the accounting firm. 7. Terms and Termination: The engagement letter includes provisions regarding the termination of the engagement, the right to withdraw, and any related conditions or penalties. Types of Missouri Engagement Letters for Review of Financial Statements: 1. General Engagement Letter: This is the standard engagement letter used for most review engagements in Missouri. It covers the regular and routine reviews of financial statements for businesses in various industries. 2. Special Purpose Engagement Letter: This type of engagement letter is used when the review engagement is intended for a specific purpose or industry, such as nonprofit organizations, government entities, or specific regulatory compliance requirements. 3. Limited Scope Engagement Letter: In certain cases, the accounting firm may limit the scope of the review engagement due to specific constraints, such as time limitations or restricted access to certain financial records. A limited scope engagement letter is used to address these situations. Overall, the Missouri Engagement Letter for Review of Financial Statements serves as a crucial document that sets the foundation for a successful review engagement, establishes expectations and responsibilities, and ensures compliance with professional standards and regulations. It is an essential aspect of maintaining trust between the accounting firm and the client.
