[Music] hello hi guys this is C balakrishna from lecture pedia in how are you hope you people are doing well even I am fantastic in the today's class we'll be revising Sr 2400 that is standard on review engagements basically here in this review engagement series we'll be having two standards one is SRE 2400 and Sr 201410 we'll be uh I'll be explaining you what is difference between Sr 2004 and 410 when you should apply 400 uh that is Sr 2400 and when you should apply Sr 201410 first of all we'll understand what is meant by a review what is difference between audit and a review and who will conduct audit who will conduct review see in case of audit you will provide reasonable Assurance right whereas in case of review you will provide only limited Assurance now the question that arises is what is the difference between reasonable assurance and limited Assurance basically in case of reasonable Assurance the type of opinion that you do it will be positively worded whereas in case of limited Assurance the type of conclusion that you give it will be negatively worded how see in case of audit audit of financial statements what will be the wording of your opinion it will be financial statements as a whole or free from Material misstatements whether due to fraud or error like this you'll write in your op opinion okay in your opinion financial statements are free from Material misstatements like this you will write which is positive okay you are confirming that financial statements are free from Material misstatement in case of limited assurance that is in case of review the type of wording will be based on our procedures we have not come across any uh areas which makes us to believe that financial statements are uh which makes us believe that there are material misstatements in the financial statements that means here in case of review you are saying that based on our procedures we have not come across any misstatements but there can be misstatements in the financial statements see in case of assurance that is reasonable Assurance you are confirming that financial statements are free from material misstatement but in case of review you are saying that you have not come across any material misstatements during your audit or review procedures but there can be misstatements in the financial statements that is here in case of review the conclusion is negatively worded that is the difference between reasonable assurance and limited Assurance okay so I have given what is difference between audit and a review now in order to deal with this review first of all audit has to be mandatorily conducted by chartered accountant only right now whether review should also be conducted mandatorily by a chared accountant yes only a chartered accountant can conduct review of financial statements other than a chared accountant no other person can conduct review of financial statements hope that is clear now in order to provide certain guidance certain procedures with respect to the review that that will be conducted by a charart accountant The Institute it has issued standards on review engagement basically 2400 and 201410 so s 2400 Sr 201410 what will be dealt by Sr 2400 if you see the name of the standard Sr 2400 engagement to review historical financial statements okay review of historical financial statements just a second okay I guess this P okay it's working so if you see Sr 2400 it deals with engagement to review historical financial statements if you see Sr 201410 the name is review of interim financial statements performed by independent auditor of the entity so the main difference between Sr 2400 and Sr 201410 is if review is conducted by a charted accountant other than auditor of entity in that case you need to apply SRE 2400 in the same way if review is conducted by a charted accountant who is also auditor of The Entity in that case you need to apply Sr 201410 this is a main difference between 2,400 and 201410 now what are the examples of situations where s 2400 will be applicable let's say there is a company that company it wanted to take a loan from A bank now as per the agreement of the as per the loan agreement of the bank in order to get the loan the financial statements of the entity has to be reviewed by a chartered accountant other than auditor of the company okay the bank wanted the financials of the company to be reviewed not audited by a charter accountant who is not auditor of the company auditor of the company he will however conduct audit of financial statements but we will not completely believe on auditor either we will appoint another chared accountant or you yourself appoint another accountant and conduct review of the financial statements another time again audit is not necessary you just conduct review of your financial statements and submit that review report okay this is one of the scenario where review of the financial statements may be conducted another scenario let's say there is a partnership form and for this partnership form however audit as per companies act it will not be applicable for partnership form tax audit can be applicable but for this partnership form tax audit is also not applicable its turnover is within the limits now even though tax audit is not applicable to the partnership firm the partners of the firm they voluntarily wanted to conduct review of financials of the firm by a charted accountant okay in this type of Engagement also the Char accountant who is accepting that engagement must comply with SRE 2400 hope hope that is clear now coming to the examples of where Sr 2004 410 will be applicable however we'll be discussing that while discussing that Sr 2014 but I'll just give one example of where that 2014 will be applicable in case of listed companies they need to conduct limited review and they need to submit that limited review report to stock exchanges as per lodr regulations now that limited review it will be conducted by statutory auditor of the company himself so here since the statutary aitor himself is conducting the review of quarterly financial statements for that type of Engagement Sr 201410 will be applicable hope that is clear so these are the situations where you will be applying 2400 and 2014 here are also the examples that I have given now while conducting this review engagement practitioner basically in case of audit we'll be calling him as auditor right but in case of review we'll be calling him as practitioner now the practitioner while conducting the review he must comply with all the relevant ethical requirements like Integrity objectivity confidentiality all that ethical requirements you need to comply including Independence hope that is clear and practitioner himself is responsible for ensuring appointment of quality reviewer for that particular review engagement hope that is clear now in order to accept the review engagement there are certain preconditions these are normal General okay the general preconditions that we have been discussing from almost in all the standards okay in standards on auditing we have discussed this in also in 3,400 series there also not 3,400 800 series there also we have discussed this preconditions for accepting the engagement now in order to accept the engagement first of all the applicable financial reporting framework that is being used for preparation of the financial statements that must be acceptable yes and also the management should agree for its responsibilities of preparation of financial statements as per applicable financial reporting framework and also to establish internal controls in the organization management they should agree that this is their responsibility only then the practitioner he will accept the engagement and also management should agree that they will provide the practitioner with all the information that is relevant in the context of preparation of financial statements and also the management will provide the additional information that has been asked by the practitioner and management will give unlimited access to all the persons within the entity for the uh for the purpose of practitioner to conduct inquiries okay all this must be access to all this must be provided to the practitioner by the management okay all information that management is aware of and additional information required by the practitioner and also unrestricted access to the persons within the organization all that information must be given access to the auditor next if the practitioner is not satisfied with any of the above okay if the management is not providing any of the above information or practitioner is not satisfied with the applicable financial reporting framework then what the practitioner should do see if the practitioner is not satisfied with above before accepting the engagement then in that case you discuss with the management you discuss with the those start with governance and ask them whether they will uh change it if they don't alter then you should not accept the engagement hope that is clear in case after accepting the engagement the practitioner became aware that he is not satisfied with the preconditions okay the preconditions for accepting the engagement are not present in that case what he he should do here also he should discuss the matters with the management and check whether those matters they can be resolved and what will be the appropriate action that he can take okay whether he can continue the engagement or he has to withdraw from the engagement if he cannot withdraw from the engagement how he has to report this matter in his uh report in his review report that he needs to consider if after accepting the engagement he comes uh he comes to know that precond conditions are not present hope that is clear next overview of Performing review engagement as per SRE 2400 there are certain steps for conducting the review engagement first of all just in case of auditor if you have been appointed as auditor what you will do first you will understand the entity and its en environment in order to identify the risks right here also in case of review you'll first of all understand the entity and you will also determine the materiality in the Second Step by this first step of understanding The Entity you'll come to know about the risks that are present in the entity and in the Second Step you'll determine materiality now for this materiality the professional Judgment of the auditor uh professional Judgment of the practitioner is required in case of audit also you will determine materiality so the professional judgment that is required for determining materiality as per audit and materiality as per review both is same okay the materiality will be same whether it is audit or it is review hope that is clear after that you will Design and perform the procedures review procedures now basically 99% of the procedures that the practitioner performs in case of review is inquiry and analytical procedures okay these two are the main major procedures that the a that the practitioner will perform in case of review however in certain necessary cases he will also perform certain other procedures but not to the extent that he performs in case of audit since in case of audit he needs to give reasonable Assurance he will extensively perform all the procedures but here in case of review he will give only limited Assurance so the procedures the review procedures that he performs will also be mostly Limited to this inquiry and analytical procedures next the practitioner he will also perform certain additional procedures in case of certain specific circumstances now in the standard there are certain four specific circumstances that have been described of those the first circumstance is related parties with respect to related parties during the entire review the practitioner has to be alert to find any conditions that will uh inform the auditor about existence of any related party relationships or related party transactions that were not earlier communicated to the practitioner okay that that procedure he need to apply in case of related parties and with respect to non-compliance with laws or regulation if the practitioner comes across non-compliance with laws or regulation during his review he has to first of all communicate it with management of the those charg with governance and also he should determine whether there is any responsibility on him to communicate this matter to any third party Outside The Entity generally in case of audit as per companies act if there is this uh you know non-compliance sorry as per 250 if there is non-compliance of law regulation you'll be reporting it in the audit report right in the same way here also you need to determine whe whether there is any requirement to communicate this non- compliance with any third party hope that is clear and next going concern if there are any events or conditions conditions that may cast significant doubt on entity's ability to continue as a going concern then the practitioner he has to see he has to determine what are the future actions of the management in order to mitigate these conditions and what is the feasibility of those future actions whether those future actions will mitigate the conditions or not this must be determined by the practitioner with respect to going concern assumption if there are any events or conditions that will cast significant doubt on and ability to continue as a going concern next whenever practitioner if if he wanted to use the work that is performed by other uh other person whether he might be expert or other practitioner or other auditor then he needs to determine whether the work that has been performed by such other person is adequate for the purposes of the practitioner based on that he needs to determine whether he can use his work or not these are certain procedures that you need to perform in case of those specific circumstances next whenever necessary apart from that inquiry and analytical procedures you can also perform other audit procedures if necessary hope that is clear next written representations the practitioner he should also obtain return representation from the management basically these are the normal return representations firstly with respect to the responsibility of the management uh regarding preparation of the financial statements as per applicable financial reporting framework whether management has fulfilled its responsibility or not this representation you need to ask from the management and also whether all the transactions that have taken place have been properly recorded and reflect refed in the financials even this representation you need to ask from the management and also you should ask from the management whether management has disclosed to the practitioner all the related party transactions and all the related party relationships that are known to the management with respect to related parties this representation the practitioner should get from the management and also whether management has disclosed All the known non- compliances with laws regulations even this written representation the management should give to the practitioner and also the information related to the frauds that has taken place during the year even that you need to give and with respect to the going concern assumption how the management has assessed its ability to continue as a going concern okay even this representation the management has to give to the practitioner and management whether it has properly adjusted all the adjusting subsequent events as per the irrelevant standard or not okay even with respect to this the management has to give written representation to the practitioner now what if if those written representations which the practitioner has requested are not given by the management then in that case discuss with the management or those start with governance why you are hesitating to give these written representations to me okay and you consider the reasons that are given by the management or those started with governance and determine whether there is any impact on the Integrity of the management because of that whether he can rely on the return representations that are previously provided by the same management okay if management is lacking Integrity then there might be chance that the previous return representations that have been given by the management even they might not be reliable so now whether I can rely on those written representations or not even this you need even from this angle you need to think and in case management uh you feel that there is a sufficient evidence in order to doubt about the Integrity of the management and because of that the written representations that are provided by the management are not reliable okay if you have sufficient evidence to believe this then you can either disclaim your opinion or disclaim your conclusion in the review report or you can withdraw from the uh agree from the engagement if possible and also if management is refusing refusing to give basic minimum rep uh written representations with respect to its responsibility for the financial statements in that case also you can determine whether to give disclaimer of opinion or to withdraw from the engagement now coming to the type of conclusions basically the type of conclusions it is similar to that of type of opinions okay unmodified conclusion in case of modified conclusion there will be qualified conclusion adverse conclusion and disclaimer of conf conclusion now what what would be the wording of each type of conclusion that we'll see first of all in case of unmodified conclusion if you are following fair presentation financial reporting framework then the wording of the conclusion paragraph will be like nothing has come to our attention that causes us to believe that financial statements do not give true and fil view okay that is negatively worded during our procedures nothing has come to our attention which causes us to believe that financial statements are not showing true and Fair View that means financial statements are showing true and Fair View okay based on uh that is you are just saying that we haven't found any misstatements but there might be misstatements hope you able to understand next compliance financial reporting framework here also based on our review procedures nothing has come to our attention which causes us to believe that the financial statements have not been prepared as per the financial reporting framework the only difference is in case of fair presentation framework you will use the terminology true and Fair View whereas in case of compliance framework you will not use that uh true and Fair View but instead you will say that the financial statements are either prepared or not prepared as per the applicable Financial reporting framework next in case of qualified conclusion and you are using fair presentation framework in that case except for the matters that are described in basis for qualified qualified conclusion paragraph nothing has come to our attention that causes us to believe that financial statements have not been prepared as per the sorry financial statements are not showing true and Fair View okay nothing has come to our attention which causes us to believe that financial statements are not showing true and Fair View if in case a compliance framework is used except for the matters that that are described in basis for basis for qualified conclusion paragraph nothing has come to our attention which causes us to believe that financial statements have not been prepared as per the financial reporting framework the applicable financial reporting framework next adverse conclusion in that case you will here you will say that due to significance of matter that is uh you know that is specified or described in basis for adverse conclusion paragraph financial statements are not showing true and fair you here you have concluded you have you are straight away saying that financial statements are not showing true and fair you because it is adverse conclusion okay how you will determine these types of conclusions again same rules that we have discussed in s 700 705 the same rules you will apply Bas based on materiality pervasiveness and the audit evidence based on that rules only you will determine whether to give unmodified or qualified adverse or disclaimer of conclusion and if you are giving disclaimer of conclusion then due to significance of matter that is described in the disclaimer for conclusion basis of basis for disclaimer of conclusion paragraph practitioner is unable to obtain sufficient appropriate audit evidence from the review procedures that he has performed this will be the terminology that he will be using and coming to the practitioner report even this is also General format first of all you'll be having title and addressy then there will be introductory paragraph in this introductory paragraph you need to identify the financial statements that you have reviewed and you should also identify the title of each of the financial statements and you should make a reference to the summary of significant accounting policies that have been used for preparation of these uh financial statements and also you need to state that financial statements have been reviewed okay you need to State the fact that you have reviewed the financial statements next there will be management responsibilities what are the responsibility of management that you will specify in that paragraph and you will also specify the responsibilities of the practitioner and if the financial statements are prepared as per special purpose financial reporting framework then in that paragraph you need to specify what is the purpose of these financial statements and who will be the intended users of these financial statements and if management is having choice for selection of the applicable financial reporting framework then you need to specify that it is responsibility of the management for selection of those applicable financial reporting framework and you should also give description of review of financial statements and its limitations and finally there will be a conclusion paragraph basis for conclusion paragraph and date signature and place of the signature and again the requirements with respect to m empis of matter paragraph other matter paragraph and other other regulatory requirements all that will be as it is applicable as in case of audit okay emphasis of matter paragraph you will give when the auditor wanted to emphasize a particular item that is present in the financial statements if it is very much important for the users understanding of the financial statements and other matter paragraph auditor he will provide those matters which he thinks are necessary for the user to understand about the audit in case of audit here about review and other reporting responsibilities finally you should also maintain documentation with respect to this review engagement that you have conducted okay this is uh a brief revision of Sr 2400 this chart you can get it from the link that I will be giving you in the description okay and if you want to purchase our classes you can visit our website lecture pdia doin and you can place your order hope that is clear now I'll be winding up this class as of now we'll be meeting in the next class with SRE 201410 okay take care bye-bye see [Music] you