## Learning Outcomes

After reading this article, you should be able to explain the structure and required elements of a review report as per ISRE 2400, and clearly distinguish the reporting differences between limited assurance (review) and reasonable assurance (audit) engagements. You will be able to draft and evaluate typical conclusion wording for a review engagement, understand its implications for users, and recognise common exam pitfalls concerning reviews and reporting.

## ACCA Audit and Assurance (AA) Syllabus

For ACCA Audit and Assurance (AA), you are required to understand how review engagements differ from audits, with a particular focus on review engagement reporting. This article addresses:

- The objective and required report content of a review engagement as set out in ISRE 2400.
- The scope and meaning of a limited assurance conclusion in reviews, including reporting language.
- The differences in reporting for reviews compared to external audits (reasonable assurance).
- The procedure for drafting and evaluating an independent review report for financial statements.
- Limitations of review engagements, and communicating these limitations effectively to users.
- Typical scenarios in which review engagements (rather than audits) are appropriate.

## Test Your Knowledge

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, look more closely at that area during your revision._

1. Which level of assurance does a review engagement provide, and what is the typical form of conclusion expressed in the report?
2. State two essential elements that must be included in a review report according to ISRE 2400.
3. What is the main difference in the wording of the opinion between a review report and an audit report?
4. In a review engagement over financial statements, what should the practitioner do if significant misstatements are discovered that remain uncorrected?

## Introduction

Review engagements provide limited assurance on financial statements or other subject matters. Unlike audits, reviews primarily use enquiry and analytical procedures rather than comprehensive testing. The reporting of a review engagement must accurately reflect its limited scope and the corresponding assurance level.

> **Key Term: Review engagement**
> An engagement in which a practitioner expresses a limited assurance conclusion, based mainly on enquiries and analytical procedures, on whether financial statements are prepared in accordance with an identified framework.

### Reporting requirements under ISRE 2400

ISRE 2400 sets out the requirements for reporting in a review engagement. The review report must contain specific elements and use particular wording to convey the level of assurance and the scope of procedures.

> **Key Term: ISRE 2400**
> International Standard on Review Engagements 2400, which provides requirements and guidance for practitioners performing reviews of historical financial statements.

### Review report structure

A review report must include the following elements:

1. Title and addressee: Clearly identify the report as an independent review report and specify who it is addressed to.
2. Introductory paragraph: Describe the subject matter and identify the financial periods covered.
3. Scope paragraph: Outline the nature of a review, the procedures performed, and reference ISRE 2400.
4. Practitioner’s responsibilities: State that a review is limited to primarily enquiry and analytical review (not an audit), and that the practitioner does not express an audit opinion.
5. Assurance conclusion: Express a conclusion in a standard, negative form indicating nothing has come to the practitioner's attention to suggest material misstatement.
6. Basis of accounting: Reference the applicable financial reporting framework.
7. Date and signature: Include the date of the report and the practitioner’s signature and address.

> **Key Term: Limited assurance**
> A moderate level of assurance provided in which the practitioner states nothing has come to their attention to indicate the subject matter is materially misstated.

### Worked Example 1.1

**Question:** A small company not legally required to have an audit commissions a review of its financial statements for the year ended 31 December 20X4. What form of assurance should the reviewer provide, and how should this be expressed in the review report?

> **Answer:**
> The practitioner should provide limited assurance. The report should include the statement: "Based on our review, nothing has come to our attention that causes us to believe that the financial statements do not present fairly, in all material respects, in accordance with [applicable framework]."

### Typical conclusion wording

Unlike audit reports, which use positive assurance (“In our opinion, the financial statements present fairly…”), review engagements require a negatively worded conclusion. Typical review conclusion wording is:

- “Based on our review, nothing has come to our attention that causes us to believe that the financial statements are not prepared, in all material respects, in accordance with [applicable framework].”

This makes clear to users that the procedures performed were limited and that the assurance provided is not as extensive as an audit.

> **Key Term: Negative assurance**
> A type of assurance expressed where the practitioner states that, based on the procedures performed, nothing has come to their attention to indicate material misstatement.

### Differences in reporting: Review vs audit

![Review conclusion decision process under ISRE 2400 for sufficient evidence, material misstatement, inability to conclude, and withdrawal when matters are pervasive.](https://static.pastpaperhero.com/images/acca-aa-review-engagements-isre-2400-reporting-for-reviews_00.png)

_ISRE 2400 review reporting outcomes depend on evidential sufficiency, identified material misstatement, and whether limitations or misstatements are pervasive._

| Review Engagement (ISRE 2400)                                             | External Audit (ISA 700)                                                      |
| ------------------------------------------------------------------------- | ----------------------------------------------------------------------------- |
| Limited (moderate) assurance                                              | Reasonable (high) assurance                                                   |
| Based mainly on analytical procedures and enquiry                         | Includes detailed substantive testing and evaluation of internal controls     |
| Negative assurance (“Nothing has come to our attention…”)                 | Positive opinion (“In our opinion, the financial statements present fairly…”) |
| Explicitly states that no audit opinion is expressed                      | Provides an audit opinion                                                     |
| Concludes on whole set of financial statements or specific subject matter | Concludes on whole set of financial statements                                |

### Worked Example 1.2

**Question:** You are asked to draft a conclusion for a review engagement over consolidated financial statements prepared under IFRS. What is a correct way to phrase the conclusion?

> **Answer:**
> "Based on our review, nothing has come to our attention that causes us to believe that the consolidated financial statements do not present fairly, in all material respects, in accordance with IFRS."
>
> **Exam Warning:**
> In the exam, do not use audit opinion wording (e.g., “In our opinion…”) in a review report. Marks are frequently lost for confusing the assurance levels or using the wrong reporting language.

### Limitations and responsibility communication

A review engagement report must communicate:

- The scope was restricted compared to an audit.
- The practitioner’s work was primarily enquiry and analytical review, not detailed testing.
- Users should not interpret the review as providing the same assurance as an audit.

If during the review substantial misstatements are found and not appropriately dealt with, the practitioner must modify the report and, if necessary, withdraw from the engagement.

### Worked Example 1.3

**Question:** During a review, a material misstatement is identified and management refuses to correct it. What action should the practitioner take concerning the review report?

> **Answer:**
> The practitioner should modify the review conclusion by stating the matter giving rise to the modification and explain the effect on the financial statements. If unable to obtain sufficient appropriate evidence, the practitioner may be unable to conclude and should state this clearly.
>
> **Revision Tip:**
> Practise distinguishing between positive and negative assurance language—quick identification in exam scenarios is frequently tested.

### Typical review report structure

Below is a sample outline for a review engagement report:

1. Title: “Independent Practitioner’s Review Report”
2. Addressee (e.g., the Board of Directors, Shareholders)
3. Introductory paragraph (identifies statements reviewed)
4. Scope and practitioner’s responsibilities
5. Responsibilities of management
6. Basis of accounting
7. Conclusion (negative assurance)
8. Practitioner’s address, signature, and date

Always review the latest ISRE 2400 requirements for precise wording if asked to construct or evaluate a review report in the exam.

## Key Point Checklist

_This article has covered the following key knowledge points:_

- Distinguish a review report (ISRE 2400) from an audit report by the type of assurance and conclusion wording.
- List the required elements and standard sections for a review engagement report.
- Explain the meaning and significance of negative assurance and its expression in reporting.
- Identify the limitations of review engagements for users—scope and responsibility clarity.
- Advise on practitioner actions if significant issues are found during a review.

## Key Terms and Concepts

- Review engagement
- ISRE 2400
- Limited assurance
- Negative assurance


Review engagements (ISRE 2400) - Reporting for reviews