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.
Mississippi Engagement Letter for Review of Financial Statements by Accounting Firm An engagement letter for the review of financial statements is a crucial document that outlines the scope, responsibilities, and expectations between a Mississippi-based accounting firm and their client. This formal agreement is designed to establish a clear understanding of the services to be provided and the terms of the review engagement. In Mississippi, there are various types of engagement letters for the review of financial statements offered by accounting firms. Some commonly used ones include: 1. General Review Engagement Letter: This type of engagement letter is suitable for businesses of all sizes and industries. It outlines the responsibilities of both the accounting firm and the client, including the procedures to be performed during the review, key deadlines, and the expected deliverables. 2. Industry-Specific Review Engagement Letter: Certain industries, such as healthcare, real estate, or manufacturing, may require specialized review procedures due to unique regulatory requirements or industry practices. In such cases, an industry-specific engagement letter is drafted to address these specific considerations. 3. Nonprofit Review Engagement Letter: Nonprofit organizations have distinct financial reporting requirements, which may differ from those applicable to for-profit entities. An engagement letter specifically tailored for nonprofits will address the applicable accounting standards, compliance obligations, and any additional procedures necessary to provide an accurate review of their financial statements. 4. Publicly-Traded Company Review Engagement Letter: Publicly-traded companies in Mississippi must comply with additional reporting requirements set by regulatory bodies such as the Securities and Exchange Commission (SEC). A review engagement letter for such companies will include specific language that satisfies these additional requirements. Key components to be included in a Mississippi engagement letter for the review of financial statements may consist of: a) Parties Involved: Clearly identify the accounting firm and the client, including their addresses and contact information. b) Objective of the Review: Clearly state that the engagement is for the purpose of reviewing the financial statements, highlighting the limitations of the review compared to an audit. c) Scope of the Review: Detail the specific procedures to be performed, ensuring compliance with relevant professional standards and regulations. d) Timing and Reporting: Specify the timeline for the review process and the expected delivery date of the final reviewed financial statements. e) Limitations of Liability: Address the extent of liability accepted by the accounting firm, providing information on any applicable indemnification clauses or limitations. f) Fee Structure: Outline the basis for determining the fee, including hourly rates, fixed fees, or a combination thereof. Highlight any additional charges that may be incurred during the review process. g) Termination Clause: Establish the grounds and procedure for termination of the engagement by either party. h) Signatures and Date: Require both parties to sign and date the engagement letter, indicating their agreement to the terms and conditions outlined. In conclusion, a Mississippi engagement letter for the review of financial statements by an accounting firm is a vital document that establishes the terms, responsibilities, and expectations of both the firm and the client. By utilizing specific engagement letters tailored to different circumstances or industries, accounting firms can ensure compliance with relevant regulations and provide the necessary level of review assurance for their clients' financial statements.
