[The following paragraph was effective for interim periods within fiscal years beginning after December 15, 2002. It was amended as a result of the adoption of Auditing Standard No. 5, effective for reviews of interim periods ending on or after November 15, 2007. See PCAOB Release 2007-005A.
Return to the current version.]
Return to the current version.]
Inquiries and other review procedures. The following are inquiries the accountant should make and other review procedures the accountant should perform when conducting a review of interim financial information:
- Reading the available minutes of meetings of stockholders, directors, and appropriate committees, and inquiring about matters dealt with at meetings for which minutes are not available, to identify matters that may affect the interim financial information.
- Obtaining reports from other accountants, if any, who have been engaged to perform a review of the interim financial information of significant components of the reporting entity, its subsidiaries, or its other investees, or inquiring of those accountants if reports have not been issued. fn 11
- Inquiring of members of management who have responsibility for financial and accounting matters concerning:
- Whether the interim financial information has been prepared in conformity with generally accepted accounting principles consistently applied.
- Unusual or complex situations that may have an effect on the interim financial information. (See Appendix B [paragraph .55] of this section for examples of unusual or complex situations about which the accountant ordinarily would inquire of management.)
- Significant transactions occurring or recognized in the last several days of the interim period.
- The status of uncorrected misstatements identified during the previous audit and interim review (that is, whether adjustments had been recorded subsequent to the prior audit or interim period and, if so, the amounts recorded and period in which such adjustments were recorded).
- Matters about which questions have arisen in the course of applying the review procedures.
- Events subsequent to the date of the interim financial information that could have a material effect on the presentation of such information.
- Their knowledge of any fraud or suspected fraud affecting the entity involving (1) management, (2) employees who have significant roles in internal control, or (3) others where the fraud could have a material effect on the financial statements.
- Whether they are aware of allegations of fraud or suspected fraud affecting the entity, for example, received in communications from employees, former employees, analysts, regulators, short sellers, or others.
- Significant journal entries and other adjustments.
- Communications from regulatory agencies.
- Significant deficiencies, including material weaknesses, in the design or operation of internal controls which could adversely affect the issuer’s ability to record, process, summarize, and report financial data.
- Obtaining evidence that the interim financial information agrees or reconciles with the accounting records. For example, the accountant may compare the interim financial information to (1) the accounting records, such as the general ledger; (2) a consolidating schedule derived from the accounting records; or (3) other supporting data in the entity’s records. In addition, the accountant should consider inquiring of management as to the reliability of the records to which the interim financial information was compared or reconciled.
- Reading the interim financial information to consider whether, based on the results of the review procedures performed and other information that has come to the accountant's attention, the information to be reported conforms with generally accepted accounting principles.
- Reading other information that accompanies the interim financial information and is contained in reports (1) to holders of securities or beneficial interests or (2) filed with regulatory authorities under the Securities Exchange Act of 1934 (such as Form 10-Q or 10-QSB), to consider whether such information or the manner of its presentation is materially inconsistent with the interim financial information. fn 12 If the accountant concludes that there is a material inconsistency, or becomes aware of information that he or she believes is a material misstatement of fact, the action taken will depend on his or her judgment in the particular circumstances. In determining the appropriate course of action, the accountant should consider the guidance in section 550, Other Information in Documents Containing Audited Financial Statements, paragraphs .04 through .06).