Audit Method: Interim Audit Procedures

Interim financial information or statement as defined in ISAs’ is “Financial information (which may be less than a complete set of financial statements) issued at interim dates (usually half-yearly or quarterly) in respect of a financial period”. IAS 34 Interim Financial Reporting outlines the recognition, measurement and disclosure requirements for interim reports.

The International Standards on Review Engagements (ISRES) 2400 and 2410 govern the interim review procedures. A review engagement is a limited assurance engagement that provides a moderate level of assurance that the information subject to review is free of material misstatement; this is expressed in the form of negative assurance. The difference between the report issued by auditor for a yearly audit and the report issued for quarterly or half yearly review is as follows.

Audit Report: The Auditor give an opinion as to whether the financial statements, taken as a whole, are fairly presented. This opinion is made after detailed tests are conducted of the accounting records. These tests include but are not limited to confirmation with outside parties, analytical procedures, inquiry of client personnel and a detailed study of the accounting records.

Review Engagement Report: In a review engagement for quarterly or half yearly period, the auditors’ express a limited assurance that they have not noted any items that would require adjustments that should be made to the statements in order for them to be in conformity with the accepted standards. The auditor must conduct a review and be satisfied as to the reasonableness of the statements through inquiry and analytical procedures.

In some circumstances, the auditor may determine that it is effective to perform substantive procedures at an interim date, and to compare and reconcile information concerning the balance at the period end with the comparable information at the interim date to:

(a) Identify amounts that appear unusual;

(b) Investigate any such amounts; and

(c) Perform substantive analytical procedures or tests of details to test the intervening period.

Practice

The Auditor while conducting a review engagement should still practice professional skepticism and should follow the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.