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.
Puerto Rico Engagement Letter for Review of Financial Statements by Accounting Firm An engagement letter is a critical document that outlines the terms and conditions of the engagement between an accounting firm and their client for the review of financial statements. In Puerto Rico, various types of engagement letters can be tailored to meet specific requirements and circumstances. Below, we will explore the key components typically included in a Puerto Rico Engagement Letter for the Review of Financial Statements. 1. Introduction: The engagement letter begins with an introduction that identifies the accounting firm, the date of the engagement, and the contact information of both parties involved. It also states the purpose of the engagement, which is to review the client's financial statements and express limited assurance. 2. Scope of Services: This section details the scope of the engagement, specifying the financial statements to be reviewed (e.g., balance sheet, income statement, statement of cash flows) and the accounting standards to be applied (e.g., Generally Accepted Accounting Principles — GAAP). It also outlines the responsibilities of both the accounting firm and the client concerning the provision of necessary records and information. 3. Independence: To ensure objectivity and impartiality, the engagement letter explicitly states that the accounting firm will maintain independence throughout the review process. This is crucial to maintain the integrity and credibility of the financial statements. 4. Limitations of Review and Communication: The engagement letter outlines the parameters of a review engagement, emphasizing that it provides "limited assurance" rather than an "audit" level of assurance. It also clarifies that the review may not detect all errors or irregularities. Additionally, the letter specifies how the accounting firm will communicate the results of the review to the client and any necessary third parties. 5. Fees and Billing: This section details the fees for the review engagement and the billing method, such as hourly rates, fixed fees, or a combination of both. It also includes any additional costs or expenses that may be incurred during the engagement process. 6. Timelines and Deadlines: The engagement letter sets clear timelines for the completion of the review engagement, including deadlines for the submission of necessary documentation by the client and deliverables from the accounting firm. This ensures that the engagement progresses smoothly and in a timely manner. 7. Confidentiality: To protect the client's sensitive information, the engagement letter includes a confidentiality clause, stating that all information provided by the client will be treated as confidential and not disclosed to third parties without prior consent, except where required by law or professional standards. Different Types of Puerto Rico Engagement Letters for Review of Financial Statements by Accounting Firm: 1. Standard Review Engagement Letter: This is the most commonly used engagement letter for reviews of financial statements in Puerto Rico. It follows the general structure outlined above. 2. Public Company Review Engagement Letter: This type of engagement letter includes additional requirements and considerations specific to publicly traded companies in Puerto Rico. It may include references to regulations such as the Securities and Exchange Commission (SEC) rules and Puerto Rico Stock Exchange guidelines. 3. Nonprofit Organization Review Engagement Letter: For engagements involving nonprofit organizations, this engagement letter may include provisions related to specific reporting requirements and considerations unique to the nonprofit sector. It may also address compliance with relevant tax regulations for tax-exempt organizations. It is important to note that engagement letters may vary depending on the specific circumstances and requirements of the engagement. Therefore, it is recommended to consult with an accounting professional or legal advisor to tailor the engagement letter to the specific needs of your business or organization in Puerto Rico.Puerto Rico Engagement Letter for Review of Financial Statements by Accounting Firm An engagement letter is a critical document that outlines the terms and conditions of the engagement between an accounting firm and their client for the review of financial statements. In Puerto Rico, various types of engagement letters can be tailored to meet specific requirements and circumstances. Below, we will explore the key components typically included in a Puerto Rico Engagement Letter for the Review of Financial Statements. 1. Introduction: The engagement letter begins with an introduction that identifies the accounting firm, the date of the engagement, and the contact information of both parties involved. It also states the purpose of the engagement, which is to review the client's financial statements and express limited assurance. 2. Scope of Services: This section details the scope of the engagement, specifying the financial statements to be reviewed (e.g., balance sheet, income statement, statement of cash flows) and the accounting standards to be applied (e.g., Generally Accepted Accounting Principles — GAAP). It also outlines the responsibilities of both the accounting firm and the client concerning the provision of necessary records and information. 3. Independence: To ensure objectivity and impartiality, the engagement letter explicitly states that the accounting firm will maintain independence throughout the review process. This is crucial to maintain the integrity and credibility of the financial statements. 4. Limitations of Review and Communication: The engagement letter outlines the parameters of a review engagement, emphasizing that it provides "limited assurance" rather than an "audit" level of assurance. It also clarifies that the review may not detect all errors or irregularities. Additionally, the letter specifies how the accounting firm will communicate the results of the review to the client and any necessary third parties. 5. Fees and Billing: This section details the fees for the review engagement and the billing method, such as hourly rates, fixed fees, or a combination of both. It also includes any additional costs or expenses that may be incurred during the engagement process. 6. Timelines and Deadlines: The engagement letter sets clear timelines for the completion of the review engagement, including deadlines for the submission of necessary documentation by the client and deliverables from the accounting firm. This ensures that the engagement progresses smoothly and in a timely manner. 7. Confidentiality: To protect the client's sensitive information, the engagement letter includes a confidentiality clause, stating that all information provided by the client will be treated as confidential and not disclosed to third parties without prior consent, except where required by law or professional standards. Different Types of Puerto Rico Engagement Letters for Review of Financial Statements by Accounting Firm: 1. Standard Review Engagement Letter: This is the most commonly used engagement letter for reviews of financial statements in Puerto Rico. It follows the general structure outlined above. 2. Public Company Review Engagement Letter: This type of engagement letter includes additional requirements and considerations specific to publicly traded companies in Puerto Rico. It may include references to regulations such as the Securities and Exchange Commission (SEC) rules and Puerto Rico Stock Exchange guidelines. 3. Nonprofit Organization Review Engagement Letter: For engagements involving nonprofit organizations, this engagement letter may include provisions related to specific reporting requirements and considerations unique to the nonprofit sector. It may also address compliance with relevant tax regulations for tax-exempt organizations. It is important to note that engagement letters may vary depending on the specific circumstances and requirements of the engagement. Therefore, it is recommended to consult with an accounting professional or legal advisor to tailor the engagement letter to the specific needs of your business or organization in Puerto Rico.
