Ministry of Finance, Practice of Independent Auditing Announcement No.10: Review of Financial Statements

Issued: March 5 2002
Effective: July 1 2002
Applicability: "Review of financial statements" refers to the process by which a registered accountant acting on engagement by a client finds out, mainly through inquiries and analytical procedures, whether the financial statements comply, in all material respects, with the Enterprise Accounting Guidelines and the provisions of other State regulations regarding financial accounting (Article 2).

Main contents: In planning and performing a review of financial statements, the accountant shall exercise professional due diligence and obtain sufficient and appropriate review evidence in order to discover any matter that may exist and causes the financial statements to be materially misstated (Article 4). The accountant shall consider whether an engagement to review financial statements should be accepted on the basis of his/her knowledge of the entity whose financial statements are to be reviewed, his/her own professional skills and his/her ability to remain independent. If the accountant accepts the engagement, an engagement letter shall be signed with the client (Article 5). Among other things, the engagement letter shall state that the review shall not be relied upon for discovery of all material errors, frauds and non-compliance and that no audit opinion will be issued as the review is not an audit (Article 6). In determining the nature, timing and scope of the review procedures, the accountant shall consider, among other things, the extent to which management judgement may affect the subject matters and the materiality of the transactions and account balances (Article 10). If the accountant believes that the financial statements may have been materially misstated, additional procedures shall be adopted as necessary to draw the conclusion of the review (Article 14). If the scope of review is limited in an important way, the accountant shall note it in the report and express a qualified conclusion. If the limitation on scope is material, the accountant shall state in the report that no assurance is given with regard to the financial statements (Article 25).
Related legislation: Independent Audits Basic Guidelines