Two PAs are discussing review engagements.
A: As I see it, in a review we are providing a lower level of assurance, so we don’t need the same extent of knowledge of the client’s business and industry as we do in an audit.
B: That seems to be what the profession’s review standards imply. But, at the same time, performing a review requires us to develop a “plausibility framework” that involves using enquiries and analytical procedures to assess whether the information being reported on is plausible in the circumstances. I don’t see how this can be done unless I have an in-depth understanding of the client’s business and its industry. To me this seems logically inconsistent: knowledge of the business and industry is critical in doing a review effectively, so how can I do a review with less knowledge than I need for an audit? And how do I know how much knowledge is “enough”?
A: I see your point. In some ways it seems knowledge of business is MORE critical in a review, not less, because in the audit you can rely on evidence. In a review you have to do it all by judgment.
B: And then, to make it even more confusing, there is also the “strategic systems approach” to auditing that some auditors use; that seems to rely heavily on gathering knowledge of the business, its strategy, and its industry environment, but less on gathering hard, transaction-based audit evidence. So how does an SSA audit differ from a review?

Discuss the differences between these types of engagement, the assurance levels provided, and the knowledge and procedures required. Are the standards consistent in your view? What factors do PAs need to consider in deciding how much knowledge is enough and what procedures are required in a particular assurance engagement?

  • CreatedJanuary 09, 2015
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