FEE encourages the IAASB to ensure that the new standard is of the highest quality possible, and to remain committed to finalising it. This is a matter of priority for the benefits of the practitioners performing numerous such engagements in practice, as well as for users of review reports.
FEE notes that the main objective of revising this standard is to achieve consistency in the carrying out of review engagements. FEE recognises that revising this particular standard is a challenging task, as the variety of current practices influences the development of the new standard. Also, FEE notes that the exposure draft proposes a set of requirements that has the potential, given the comments made below, to achieve a high quality final standard.
FEE fully supports revising the standard on review engagements as more and more companies, especially in Europe, are being exempt from audit. Review engagements may therefore be used more extensively in the future so the standard is essential to develop the future role of practitioners. However when finalising the standard, the IAASB should carefully consider whether the standard as a whole is sufficiently clear and understandable in order to facilitate its wide application in practice.
The overarching aim for a standard on review engagements is to make them understandable, meaningful and clearly distinguishable from audit engagements. The distinction from audit is best addressed, from the point of view of users, through the review report and secondly, for the practitioners, through the nature and extent of review procedures that need to be undertaken. In order not to create a new expectation gap or widen the existing one, the standard should enable practitioners and users to understand how review engagements are distinguishable from audit engagements. This should be made clear throughout the standard.
The objective for a review engagement should more clearly identify the desired output of the engagement by explicitly identifying limited assurance, and should be aligned with other IAASB pronouncements on limited assurance.
More definitions relevant to a review engagement should be included in the standard to make it a stand alone standard. Especially terms for which there are significant differences compared to an audit should be clearly defined, such as “Evidence”. In order to facilitate consistent application, minimum analytical procedures should be specified in the standard itself and not be left to practitioners to define.
The general concept of a negative opinion, regardless of the wording of the opinion, may be difficult to understand in practice and may not contribute, in the interest of the users, to closing the expectation gap that already exists. However, FEE believes that limited assurance can probably best be conveyed through a negative opinion, as this makes the review opinion different from an audit opinion in its appearance. The specific wording of the opinion should be made simple and clear, using the most non-technical language possible.
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