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.
New York Engagement Letter for Review of Financial Statements by Accounting Firm is a crucial document that outlines the terms and conditions between an accounting firm and its client when conducting a review of financial statements. This letter serves as a legally binding agreement that sets expectations, responsibilities, and scope of the engagement. The core purpose of the engagement letter is to define the nature and extent of the review engagement, ensuring that both parties have a clear understanding of the objectives and procedures involved. It provides a framework for the accounting firm to perform an independent assessment of the client's financial statements in accordance with Generally Accepted Accounting Principles (GAAP) and applicable regulations in New York. Within New York, there may be variations in the types of engagement letters, tailored to specific circumstances or client requirements. Some common types include: 1. General New York Engagement Letters: These are standard engagement letters used for review engagements in various industries and sectors. They provide a framework for conducting a review of financial statements for any client in compliance with the relevant standards and regulations. 2. Industry-specific New York Engagement Letters: Certain industries, such as healthcare, real estate, or nonprofits, may require specific considerations or procedures due to their unique accounting practices. Industry-specific engagement letters cater to these specialized needs and ensure that the review is conducted in accordance with industry-specific standards and regulations. 3. Limited Scope New York Engagement Letters: In some cases, a client may request a review of only specific parts or sections of their financial statements. Limited scope engagement letters explicitly define the boundaries of the review and identify the areas excluded from the assessment. 4. Agreed-Upon Procedures (AUP) New York Engagement Letters: An agreed-upon procedures engagement involves performing specific procedures on financial information based on the client's needs or requests. This type of engagement letter outlines the specific procedures that the accounting firm will perform and the objectives they aim to achieve. The New York Engagement Letter for Review of Financial Statements typically covers several key components, including: 1. Parties Involved: Clearly identifies the accounting firm and the client, establishing their roles and responsibilities throughout the engagement. 2. Objective and Scope: Describes the purpose and objectives of the review engagement, outlining the extent of the review and the financial statements to be examined. 3. Assumptions and Limitations: States the assumptions made during the engagement, such as the client's responsibility for accuracy and completeness of records. It also highlights any limitations on the review process. 4. Financial Reporting Framework: Specifies the applicable financial reporting framework, such as GAAP or other specific standards mandated by regulatory bodies or industry requirements. 5. Timelines and Deadlines: Establishes the expected timeline for the review engagement, including key milestones, deliverables, and deadlines for both the accounting firm and the client. 6. Fees and Payment Terms: Clearly outlines the fee structure, including hourly rates, estimated costs, and payment terms. 7. Confidentiality and Non-Disclosure: Includes provisions to safeguard the confidentiality of client information and restrict the disclosure of sensitive financial data. 8. Terms of Termination: Defines the conditions under which either party may terminate the engagement, including any necessary notifications or obligations. It is important to note that the specifics of New York Engagement Letters may vary among accounting firms, clients, and industries. Consequently, it is crucial for both parties to review and agree upon the terms stated in the engagement letter before commencing the review of financial statements.
