Salac, Ramon Kristian

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1. What are Review Engagements? Explain the following:

Review engagements pertain to the investigation which is limited to a smaller scope

in comparison with an audit, In turn, this process results in a negative assurance given
by the auditor. But what is a negative assurance? And what does it entail? Negative
assurance is a type of assurance given by an auditor which entails that he/she did not
find anything that may compromise the integrity of the reviewed financial statements in
terms of their compliance with the identified reporting framework (Cabrera and Cabrera,
2020). To simply put it, a review engagement gives assurance at the moderate level
entailing that there are no material misstatements unlike in an audit where it is usually
deeper and more detailed (p. 742)

1. Reviews of Historical Financial Information

In reviews of historical financial information, a conclusion is to be drawn by a

practitioner to provide the intended users with confidence regarding an entity’s prepared
financial statements and its compliance with a relevant framework, the level of
assurance that it provides is to be considered less than an audit. Practitioners gather
the basis for their conclusion by conducting analytical operations and primary inquiry
hand in hand. Auditors are also allowed to conduct whatever means they deem
necessary to come up with a conclusion when they find any anomalies or mistakes that
have led the financial statements to be misstated materially (PwC, n.d.).

2. Review of Interim Financial Information

Before we go through what is a review of interim financial information, let us first

define what is interim financial information. Interim financial information, as stated by
Bragg (2022), is closely monitored by investors as they are financial statements that
contain less than a year's worth of financial information. These are then utilized to
disseminate performance information of issuing entities before the normal reporting year
ends. Moving forward, a review of interim financial information has the same procedures
and premises as the review of historical financial information except for the review of
interim financial information validates and evaluates interim financial statements instead
of historical financial information. 

3. Examination of Prospective Financial Information

In a statement published on the BDO-Mozambique website (Examination of

Prospective Financial Information, n.d.), it is said that prospective financial information
are pieces of information relating to events and actions that are yet to occur or may
never occur. Hence, evidence gathered concerning this is speculative in nature and is
distinctively different from the usual information available in audits of historical and
interim financial information. In addition, the statement also elaborated that the objective
of the examination of financial information is to come up with an opinion as to whether
or not the pieces of prospective financial information were prepared properly. These
pieces of information are to be based on the stated assumptions which include a
Salac, Ramon Kristian
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XTAUDITP1 – Internal Auditing Principles
negative assurance statement or a reasonable basis for the preparation of the
prospective financial information.

2. What are Agreed-Upon Procedures? Explain its scope and objectives.

Agreed-Upon Procedures are services where auditors are to apply their expertise
and skills to create a straightforward financial report which contains condensed factual
findings that in no circumstance entail any assurance at all. The reason being is that the
intended users are the ones to conclude the findings that the practitioner provided. In
addition, these reports are to be restricted to prevent misinterpretation (Cabrera and
Cabrera, 2020) (p. 168-169).
 
3. What is a Compilation Engagement? Explain its scope and objectives.

Compilation Engagements on the other hand are fairly similar to Agreed-Upon

Procedures as they both leave the conclusion to the intended user. Their difference lies
in the process and output that they offer, Compilation Engagement consists of the
process similar to preparing general financial statements, but they are to be made more
concise and understandable so that the intended users have an easier time
comprehending the compiled financial instruments (Cabrera and Cabrera, 2020) (p.
168-169).
4. Differentiate the following:
1. Review Engagements from Agreed-Upon Procedures

Review engagements and Agreed-Upon Procedures are similar in nature as both

of their processes include validating and evaluating financial information, however,
Agreed-Upon Procedures do not offer any sort of assurance, unlike Review
engagements which, as mentioned earlier, usually give out negative assurances. 
2. Review Engagements from Compilation Engagements

Compilation Engagement’s nature focuses on the preparation of financial

instruments in a condensed and manageable manner, while Review Engagements are
the processes that validate financial instruments. Similar to the statement above,
Review Engagements offer negative assurances, while Compilation Engagements do
not. 
3. Agreed-upon Procedures from Compilation Engagements

Agreed-Upon Procedures is more on auditors reevaluating the financial instruments

and information given to them which they will be utilizing as they construct factual
findings about the given materials. Compilation Engagement on the other hand zeros in
on accountants producing more concise and understandable financial instruments than
general financial statements. Those are the key differences, and their key similarity is
that they both do not offer any form of assurance as they leave the conclusion up to the
intended users. 
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5. Why is a CPA / Accountant engaged to perform these services?

As we all know, laws are to be followed by everyone anywhere and failure to do so

would result in different penalties and sanctions. But not everyone is familiar or even
aware of most laws if not all, hence, experts are needed. Business, income, and taxes,
all of which are under the expertise of CPAs and accountants, therefore making them
qualified to cater services concerning these fields to businesses and individuals. Hiring
CPAs and accountants enable businesses and individuals to ensure their compliance
with the financial laws and standards of the nation, but that is only one of the many
aspects and advantages of hiring these experts. Being under the care of an accountant
also expands an entity or an individual’s financial opportunities and knowledge as the
accountant provides a professional perspective for his or her client, which then can
result in many improvements like more efficient and effective operations, maximum
utilization of tax deductions and credits, uncovering fraud and misstatements and many
more.
 
 
 
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References:

Bdo.co.mz. n.d. Examination of Prospective Financial Information. [online] Available at:

<https://www.bdo.co.mz/en-gb/services/audit-assurance/examination-of-
prospective-financial- information#:~:text=An%20examination%20of
%20prospective%20financial,basis %20for%20the%20preparation%20of>
[Accessed 25 July 2022].
 
Bragg, S., 2022. Interim financial statements definition — AccountingTools. [online]
AccountingTools. Available at: <https://www.accountingtools.com/articles/what-
are-interim-financial-statements.html> [Accessed 25 July 2022].
 
Cabrera, M. E. B. and Cabrera, G. A. B., 2020. Principles of Auditing and Assurance
Services. Sampaloc, Manila: GIC Enterprises & Co., Inc., pp.168-169.

Cabrera, M. E. B. and Cabrera, G. A. B., 2020. Principles of Auditing and Assurance

Services. Sampaloc, Manila: GIC Enterprises & Co., Inc., p.742.

PwC, n.d. The Engagement to Review Historical Financial Statements. [online]

pwc.com. Available at:
<https://viewpoint.pwc.com/dt/ca/en/iaasb/standards/iaasb_isres_INT/iaasb_isres
_INT/isre_2400_revised_en__1_INT/introduction__143_INT/the_engagement_to
_re_INT.html> [Accessed 25 July 2022].