Chapter 10: Review of Financial Information (SRE 2400 & SRE 2410)
1. SRE 2400 (Revised) vs SRE 2410 Master Distinction
| Distinguishing Factor | SRE 2400 (Revised) | SRE 2410 |
|---|---|---|
| Subject Matter | Historical financial statements of an entity. | Interim financial information (quarterly / half-yearly). |
| Who Performs? | Practitioner who is not necessarily the statutory auditor. | Independent Auditor of the entity who also audits the annual FS. |
| Assurance Level | Limited Assurance (Negative form of conclusion). | Limited Assurance (Negative form of conclusion). |
| Understanding of Controls | Understanding entity & environment sufficient to identify areas where material misstatements are likely to arise. | Auditor already possesses updated understanding of internal controls from the annual audit process. |
2. Review Procedures & Depth of Examination
A review engagement consists primarily of making inquiries of management and analytical procedures. It does NOT require testing internal controls, physical verification of assets, or obtaining third-party confirmations (unless reason to believe info is false).
| Procedure Category | Specific Review Actions |
|---|---|
| Inquiries | • Inquire regarding accounting policies and consistency. • Inquire regarding major accounting estimates, provisions, and contingencies. • Inquire regarding significant journal entries and adjustments around period-end. • Inquire regarding events subsequent to review period. |
| Analytical Procedures | • Compare current period results with prior periods and budgets. • Ratio analysis (gross margin, inventory turnover, receivable days). • Investigate unusual fluctuations or inconsistencies. |
| Written Representations | Mandatory written representations from management acknowledging responsibility for FS, internal controls, and completeness of info. |
3. Review Conclusions Matrix
The practitioner forms a conclusion expressed in negative form:
| Situation | Type of Conclusion | Wording Formulation |
|---|---|---|
| Unmodified Conclusion | Clean Conclusion | "Nothing has come to our attention that causes us to believe that the accompanying financial statements do not give a true and fair view..." |
| Material Departure from AFRF | Qualified Conclusion | "Except for the effects of matter described... nothing has come to our attention..." |
| Pervasive Departure from AFRF | Adverse Conclusion | "The accompanying financial statements do not give a true and fair view in accordance with AFRF." |
| Pervasive Scope Limitation | Disclaimer of Conclusion | "We do not express a conclusion on the accompanying financial statements." |
4. SEBI LODR Regulation 33 Fast-Track Rules
• Quarterly Submission: Listed entities must submit quarterly standalone & consolidated financial results to stock exchanges within 45 days of the end of the quarter (along with Limited Review Report or Audit Report).
• Last Quarter Option: For the last quarter, submit audited annual results within 60 days of the end of the financial year.
• Statutory Requirement: Limited Review of listed entities must be conducted in accordance with SRE 2410 by an auditor holding a valid Peer Review certificate.