Proposed statement on auditing standards : Interim financial information : (to supersede Statement on auditing standards no. 71, Interim financial information;Interim financial information : (to supersede Statement on auditing standards no. 71, Interim financial information
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This proposed Statement on Auditing Standards (SAS) establishes standards and provides guidance to an accountant performing a review of interim financial information of: 1. A public entity, or 2. A nonpublic entity that makes a filing with a regulatory agency in preparation for a public offering or listing, and has had or is currently having its latest annual financial statements audited. The term interim financial information means financial information or statements covering a period less than a full year or for a 12-month period ending on a date other than the entity's fiscal year end. The term accountant, as used in this SAS, refers to a CPA performing a review engagement. The standards and guidance for performing reviews of interim financial information currently reside in SAS No. 71, Interim Financial Information (AICPA, Professional Standards, vol. 1, AU sec. 722). The Auditing Standards Board (ASB) is revising SAS No. 71 to provide additional guidance on performing reviews of interim financial information and to incorporate the requirement of the Securities Exchange Commission (SEC) for timely filings of interim financial information. This proposed SAS also incorporates relevant recommendations of the Public Oversight Board's Panel on Audit Effectiveness in its August 31, 2000 document, Report and Recommendations, as well as recommendations of the AlCPA's Professional Issues Task Force in Practice Alert 2000-4, "Quarterly Review Procedures for Public Companies." This proposed SAS revises SAS No. 71 by: 1. Clarifying the applicability of generally accepted auditing standards to a review of interim financial information. Citing the SEC requirement that an entity engage an independent accountant to review the entity's interim financial information before the entity files its quarterly report on Form 10-Q or Form 10-QSB, and modifying the relevant guidance in the SAS to reflect this requirement. 2. Providing guidance to an accountant performing an initial review of interim financial information. A review engagement is deemed an initial review if the accountant has not audited the financial statements of the previous year end. Requiring an accountant to establish an understanding with his or her client regarding the services to be performed in an interim review engagement, and specifying the matters generally included in that understanding. 3. Requiring the accountant to perform certain additional specified procedures in an interim review engagement, including: a. Comparing disaggregated revenue data, for example, comparing revenue reported by month and by product line or business segment for the current interim period with that of comparable prior periods. b. Obtaining evidence that the interim financial information agrees or reconciles with the accounting records. c. Inquiring of members of management who have responsibility for financial and accounting matters about their knowledge of any fraud perpetrated on the entity, any alleged or suspected fraud, or any allegations of fraudulent financial reporting on the part of the entity received in communications from employees, former employees, short sellers, financial analysts, or others. 4. Providing an illustrative report for a review of comparative interim financial information. 5. Providing guidance on the accountant's consideration, in an interim review engagement, of matters related to an entity's ability to continue as a going concern, and presenting reporting options related to such matters. 6. Adding an appendix to the SAS that presents examples of analytical procedures the accountant may consider performing 7. Adding an appendix to the SAS that provides examples of unusual or complex situations an accountant would ordinarily consider inquiring about when conducting a review of interim financial information. 8. Adding an appendix to the SAS containing two illustrative representation letters for a review of interim financial information. The first letter is designed to be used independently of any other letter. The second letter is designed to be used in conjunction with the representation letter for the audit of the financial statements of the prior year end. This proposed SAS would supersede SAS No. 71.
Financial statements, Interim -- Standards -- United States
Accounting | Taxation
American Institute of Certified Public Accountants. Auditing Standards Board, "Proposed statement on auditing standards : Interim financial information : (to supersede Statement on auditing standards no. 71, Interim financial information;Interim financial information : (to supersede Statement on auditing standards no. 71, Interim financial information" (2002). Statements of Position. 294.