Standard 2410: Review of Interim Financial Information Performed by the Independent Auditor of the Entity · Complied AI

Standard 2410Chapter 2

Review of Interim Financial Information Performed by the Independent Auditor of the Entity

1. The purpose of this Standard on Review Engagements (SRE) is to establish standards and provide guidance on the auditor’s professional responsibilities when the auditor undertakes an engagement to review interim financial information of an audit client, and on the form and content of the report. The term “auditor” is used throughout this SRE, not because the auditor is performing an audit function but because the scope of this SRE is limited to a review of interim financial information performed by the independent auditor of the financial statements of the entity.

2. For purposes of this SRE, interim financial information is financial information that is prepared and presented in accordance with an applicable financial reporting framework1 and comprises either a complete or a condensed set of financial statements for a period that is shorter than the entity’s financial year.

3. The auditor who is engaged to perform a review of interim financial information should perform the review in accordance with this SRE. Through performing the audit of the annual financial statements, the auditor obtains an understanding of the entity and its environment, including its internal control. When the auditor is engaged to review the interim financial information, this understanding is updated through inquiries made in the course of the review, and assists the auditor in focusing the inquiries to be made and the analytical and other review procedures to be applied. A practitioner who is engaged to perform a review of interim financial information, and who is not the auditor of the entity, performs the review in accordance with SRE 2400 (Revised), “Engagements to Review Financial Statements.” As the practitioner does not ordinarily have the same understanding of the entity and its environment, including its internal control, as the auditor of the entity, the practitioner needs to carry out different inquiries and procedures to meet the objective of the review.

(ICAI)

or Accounting Standards, notified by the Central Government by publishing the same as the Companies (Accounting Standards) Rules, 2006, or the Accounting Standards for Local Bodies issued by the ICAI, as may be applicable.

General Principles of a Review of Interim Financial

Information

4. The auditor should comply with the ethical requirements relevant to the audit of the annual financial statements of the entity. These ethical requirements govern the auditor’s professional responsibilities in the following areas: independence, integrity, objectivity, professional competence and due care, confidentiality, professional behavior, and technical standards.

5. The auditor should implement quality control procedures that are applicable to the individual engagement. The elements of quality control that are relevant to an individual engagement include leadership responsibilities for quality on the engagement, ethical requirements, acceptance and continuance of client relationships and specific engagements, assignment of engagement teams, engagement performance, and monitoring.

6. The auditor should plan and perform the review with an attitude of professional skepticism, recognizing that circumstances may exist that cause the interim financial information to require a material adjustment for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework. An attitude of professional skepticism means that the auditor makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by management of the entity.

Objective of an Engagement to Review Interim Financial

Information

7. The objective of an engagement to review interim financial information is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor’s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with an applicable financial reporting framework. The auditor makes inquiries, and performs analytical and other review procedures in order to reduce to a moderate level the risk of expressing an inappropriate conclusion when the interim financial information is materially misstated.

8. The objective of a review of interim financial information differs significantly from that of an audit conducted in accordance with Standards on Auditing (SAs). A review of interim financial information does not provide a basis for expressing an opinion whether the financial information gives a true and fair view, or is presented fairly, in all material respects, in accordance with an applicable financial reporting framework.

9. A review, in contrast to an audit, is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review may bring significant matters affecting the interim financial information to the auditor’s attention, but it does not provide all of the evidence that would be required in an audit.

Agreeing the Terms of the Engagement

10. The auditor and the client should agree on the terms of the engagement.

11. The agreed terms of the engagement are ordinarily recorded in an engagement letter. Such a communication helps to avoid misunderstandings regarding the nature of the engagement and, in particular, the objective and scope of the review, management’s responsibilities, the extent of the auditor’s responsibilities, the assurance obtained, and the nature and form of the report. The communication ordinarily covers the following matters:  The objective of a review of interim financial information.  The scope of the review.  Management’s responsibility for the interim financial information. 

Management’s responsibility for establishing and maintaining effective

internal control relevant to the preparation of interim financial information.  Management’s responsibility for making all financial records and related information available to the auditor  Management’s agreement to provide written representations to the auditor to confirm representations made orally during the review, as well as representations that are implicit in the entity’s records.  The anticipated form and content of the report to be issued, including the identity of the addressee of the report. 

Management’s agreement that where any document containing interim

financial information indicates that the interim financial information has been reviewed by the entity’s auditor, the review report will also be included in the document. An illustrative engagement letter is set out in Appendix 1 to this SRE. The terms of engagement to review interim financial information can also be combined with the terms of engagement to audit the annual financial statements.

Procedures for a Review of Interim Financial Information

Understanding the Entity and its Environment, Including its Internal

Control

12. The auditor should have an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both annual and interim financial information, sufficient to plan and conduct the engagement so as to be able to:

(b)

Select the inquiries, analytical and other review procedures that will provide the auditor with a basis for reporting whether anything has come to the auditor’s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework.

13. As required by SA 315, “Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment,” the auditor who has audited the entity’s financial statements for one or more annual periods has obtained an understanding of the entity and its environment, including its internal control, as it relates to the preparation of annual financial information that was sufficient to conduct the audit. In planning a review of interim financial information, the auditor updates this understanding. The auditor also obtains a sufficient understanding of internal control as it relates to the preparation of interim financial information as it may differ from internal control as it relates to annual financial information.

14. The auditor uses the understanding of the entity and its environment, including its internal control, to determine the inquiries to be made and the analytical and other review procedures to be applied, and to identify the particular events, transactions or assertions to which inquiries may be directed or analytical or other review procedures applied.

15. The procedures performed by the auditor to update the understanding of the entity and its environment, including its internal control, ordinarily include the following: 

Reading the documentation, to the extent necessary, of the preceding

year’s audit and reviews of prior interim period(s) of the current year and corresponding interim period(s) of the prior year, to enable the auditor to identify matters that may affect the current-period interim financial information.  Considering any significant risks, including the risk of management override of controls, that were identified in the audit of the prior year’s financial statements. 

Reading the most recent annual and comparable prior period interim

financial information.  Considering materiality with reference to the applicable financial reporting framework as it relates to interim financial information to assist in determining the nature and extent of the procedures to be performed and evaluating the effect of misstatements. 

Considering the nature of any corrected material misstatements and any

identified uncorrected immaterial misstatements in the prior year’s financial statements.  Considering significant financial accounting and reporting matters that may be of continuing significance such as material weaknesses in internal control.  Considering the results of any audit procedures performed with respect to the current year’s financial statements.  Considering the results of any internal audit performed and the subsequent actions taken by management.  Inquiring of management about the results of management’s assessment of the risk that the interim financial information may be materially misstated as a result of fraud.  Inquiring of management about the effect of changes in the entity’s business activities.  Inquiring of management about any significant changes in internal control and the potential effect of any such changes on the preparation of interim financial information.  Inquiring of management of the process by which the interim financial information has been prepared and the reliability of the underlying accounting records to which the interim financial information is agreed or reconciled.

16. The auditor determines the nature of the review procedures, if any, to be performed for components and, where applicable, communicates these matters to other auditors involved in the review. Factors to be considered include the materiality of, and risk of misstatement in, the interim financial information of components, and the auditor’s understanding of the extent to which internal control over the preparation of such information is centralized or decentralized.

17. In order to plan and conduct a review of interim financial information, a recently appointed auditor, who has not yet performed an audit of the annual financial statements in accordance with SAs, should obtain an understanding of the entity and its environment, including its internal control, as it relates to the preparation of both annual and interim financial information.

18. This understanding enables the auditor to focus the inquiries made, and the analytical and other review procedures applied in performing a review of interim financial information in accordance with this SRE. As part of obtaining this understanding, the auditor ordinarily makes inquiries of the predecessor auditor and, peruses the copies of the audited financial statements including the other relevant documents relating to the prior period financial statements such as supporting schedules to the audited financial statements. In doing so, the auditor considers the nature of any corrected misstatements, and any uncorrected misstatements aggregated by the predecessor auditor, any significant risks, including the risk of management override of controls, and significant accounting and any reporting matters that may be of continuing significance, such as material weaknesses in internal control.

Inquiries, Analytical and Other Review Procedures

19. The auditor should make inquiries, primarily of persons responsible for financial and accounting matters, and perform analytical and other review procedures to enable the auditor to conclude whether, on the basis of the procedures performed, anything has come to the auditor’s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework.

20. A review ordinarily does not require tests of the accounting records through inspection, observation or confirmation. Procedures for performing a review of interim financial information are ordinarily limited to making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures, rather than corroborating information obtained concerning significant accounting matters relating to the interim financial information. The auditor’s understanding of the entity and its environment, including its internal control, the results of the risk assessments relating to the preceding audit and the auditor’s consideration of materiality as it relates to the interim financial information, affects the nature and extent of the inquiries made, and analytical and other review procedures applied.

21. The auditor ordinarily performs the following procedures:  Reading the minutes of the meetings of shareholders, those charged with governance, and other appropriate committees to identify matters that may affect the interim financial information, and inquiring about matters dealt with at meetings for which minutes are not available that may affect the interim financial information.  Considering the effect, if any, of matters giving rise to a modification of the audit or review report, accounting adjustments or unadjusted misstatements, at the time of the previous audit or reviews.  Communicating, where appropriate, with other auditors who are performing a review of the interim financial information of the reporting entity’s significant components. 

Inquiring of members of management responsible for financial and

accounting matters, and others as appropriate about the following: VIEW ♦

Whether the interim financial information has been prepared and

presented in accordance with the applicable financial reporting framework. ♦ Whether there have been any changes in accounting principles or in the methods of applying them. ♦

Whether any new transactions have necessitated the application of a

new accounting principle. ♦

Whether the interim financial information contains any known

uncorrected misstatements. ♦

Unusual or complex situations that may have affected the interim

financial information, such as a business combination or disposal of a segment of the business. ♦

Significant assumptions that are relevant to the fair value

measurement or disclosures and management’s intention and ability to carry out specific courses of action on behalf of the entity. ♦

Whether related party transactions have been appropriately

accounted for and disclosed in the interim financial information. ♦ Significant changes in commitments and contractual obligations. ♦

Significant changes in contingent liabilities including litigation or

claims. ♦ Compliance with debt covenants. ♦ Matters about which questions have arisen in the course of applying the review procedures. ♦

Significant transactions occurring in the last several days of the

interim period or the first several days of the next interim period. ♦

Knowledge of any fraud or suspected fraud affecting the entity

involving:  Management; 

Employees who have significant roles in internal control; or

 Others where the fraud could have a material effect on the interim financial information. ♦

Knowledge of any allegations of fraud, or suspected fraud, affecting

the entity’s interim financial information communicated by employees, former employees, analysts, regulators, or others. ♦

Knowledge of any actual or possible noncompliance with laws and

regulations that could have a material effect on the interim financial information.  Applying analytical procedures to the interim financial information designed to identify relationships and individual items that appear to be unusual and that may reflect a material misstatement in the interim financial information. Analytical procedures may include ratio analysis and statistical techniques such as trend analysis or regression analysis and may be performed manually or with the use of computer-assisted techniques. Appendix 2 to this SRE contains examples of analytical procedures the auditor may consider when performing a review of interim financial information.  Reading the interim financial information, and considering whether anything has come to the auditor’s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework.

22. The auditor may perform many of the review procedures before or simultaneously with the entity’s preparation of the interim financial information. For example, it may be practicable to update the understanding of the entity and its environment, including its internal control, and begin reading applicable minutes before the end of the interim period. Performing some of the review procedures earlier in the interim period also permits early identification and consideration of significant accounting matters affecting the interim financial information.

23. The auditor performing the review of interim financial information is also engaged to perform an audit of the annual financial statements of the entity. For convenience and efficiency, the auditor may decide to perform certain audit procedures concurrently with the review of interim financial information. For example, information gained from reading the minutes of meetings of the board of directors in connection with the review of the interim financial information also may be used for the annual audit. The auditor may also decide to perform, at the time of the interim review, auditing procedures that would need to be performed for the purpose of the audit of the annual financial statements, for example, performing audit procedures on significant or unusual transactions that occurred during the period, such as business combinations, restructurings, or significant revenue transactions.

24. A review of interim financial information ordinarily does not require corroborating the inquiries about litigation or claims. It is, therefore, ordinarily not necessary to send an inquiry letter to the entity’s lawyer. Direct communication with the entity’s lawyer with respect to litigation or claims may, however, be appropriate if a matter comes to the auditor’s attention that causes the auditor to question whether the interim financial information is not prepared, in all material respects, in accordance with the applicable financial reporting framework, and the auditor believes the entity’s lawyer may have pertinent information.

25. The auditor should obtain evidence that the interim financial information agrees or reconciles with the underlying accounting records. The auditor may obtain evidence that the interim financial information agrees or reconciles with the underlying accounting records by tracing the interim financial information to:

(b)

Consider the adequacy of the disclosure about such matters in the interim financial information.

28. Events or conditions which may cast significant doubt on the entity’s ability to continue as a going concern may have existed at the date of the annual financial statements or may be identified as a result of inquiries of management or in the course of performing other review procedures. When such events or conditions come to the auditor’s attention, the auditor inquires of management as to its plans for future action, such as its plans to liquidate assets, borrow money or restructure debt, reduce or delay expenditures, or increase capital. The auditor also inquires as to the feasibility of management’s plans and whether management believes that the outcome of these plans will improve the situation. However, it is not ordinarily necessary for the auditor to corroborate the feasibility of management’s plans and whether the outcome of these plans will improve the situation.

29. When a matter comes to the auditor’s attention that leads the auditor to question whether a material adjustment should be made for the interim financial information to be prepared, in all material respects, in accordance with the applicable financial reporting framework, the auditor should make additional inquiries or perform other procedures to enable the auditor to express a conclusion in the review report. For example, if the auditor’s review procedures lead the auditor to question whether a significant sales transaction is recorded in accordance with the applicable financial reporting framework, the auditor performs additional procedures sufficient to resolve the auditor’s questions, such as discussing the terms of the transaction with senior marketing and accounting personnel, or reading the sales contract.

Evaluation of Misstatements

30. The auditor should evaluate, individually and in the aggregate, whether uncorrected misstatements that have come to the auditor’s attention are material to the interim financial information.

31. A review of interim financial information, in contrast to an audit engagement, is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement. However, misstatements which come to the auditor’s attention, including inadequate disclosures, are evaluated individually and in the aggregate to determine whether a material adjustment is required to be made to the interim financial information for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework.

32. The auditor exercises professional judgment in evaluating the materiality of any misstatements that the entity has not corrected. The auditor considers matters such as the nature, cause and amount of the misstatements, whether the misstatements originated in the preceding year or interim period of the current year, and the potential effect of the misstatements on future interim or annual periods.

33. The auditor may designate an amount below which misstatements need not be aggregated, because the auditor expects that the aggregation of such amounts clearly would not have a material effect on the interim financial information. In so doing, the auditor considers the fact that the determination of materiality involves quantitative as well as qualitative considerations, and that misstatements of a relatively small amount could nevertheless have a material effect on the interim financial information.

Management Representations

34. The auditor should obtain written representation from management that:

(g)

It has disclosed to the auditor all significant events that have occurred subsequent to the balance sheet date and through to the date of the review report that may require adjustment to or disclosure in the interim financial information.

35. The auditor obtains additional representations as are appropriate related to matters specific to the entity’s business or industry. An illustrative management representation letter is set out in Appendix 3 to this SRE.

Auditor’s Responsibility for Accompanying Information

36. The auditor should read the other information that accompanies the interim financial information to consider whether any such information is materially inconsistent with the interim financial information. If the auditor identifies a material inconsistency, the auditor considers whether the interim financial information or the other information needs to be amended. If an amendment is necessary in the interim financial information and management refuses to make the amendment, the auditor considers the implications for the review report. If an amendment is necessary in the other information and management refuses to make the amendment, the auditor considers including in the review report an additional paragraph describing the material inconsistency, or taking other actions, such as withholding the issuance of the review report or withdrawing from the engagement. For example, management may present alternative measures of earnings that more positively portray results of operations than the interim financial information, and such alternative measures are given excessive prominence, are not clearly defined, or not clearly reconciled to the interim financial information such that they are confusing and potentially misleading.

37. If a matter comes to the auditor’s attention that causes the auditor to believe that the other information appears to include a material misstatement of fact, the auditor should discuss the matter with the entity’s management. While reading the other information for the purpose of identifying material inconsistencies, an apparent material misstatement of fact may come to the auditor’s attention (i.e., information, not related to matters appearing in the interim financial information, that is incorrectly stated or presented). When discussing the matter with the entity’s management, the auditor considers the validity of the other information and management’s responses to the auditor’s inquiries, whether valid differences of judgment or opinion exist and whether to request management to consult with a qualified third party to resolve the apparent misstatement of fact. If an amendment is necessary to correct a material misstatement of fact and management refuses to make the amendment, the auditor considers taking further action as appropriate, such as notifying those charged with governance and obtaining legal advice.

Communication

38. When, as a result of performing the review of interim financial information, a matter comes to the auditor’s attention that causes the auditor to believe that it is necessary to make a material adjustment to the interim financial information for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework, the auditor should communicate this matter as soon as practicable to the appropriate level of management.

39. When, in the auditor’s judgment, management does not respond appropriately within a reasonable period of time, the auditor should inform those charged with governance. The communication is made as soon as practicable, either orally or in writing. The auditor’s decision whether to communicate orally or in writing is affected by factors such as the nature, sensitivity and significance of the matter to be communicated and the timing of such communications. If the information is communicated orally, the auditor documents the communication.

40. When, in the auditor’s judgment, those charged with governance do not respond appropriately within a reasonable period of time, the auditor should consider:

Notes, amendments & references (143)

44. In some jurisdictions, law or regulation governing the review of interim financial information may prescribe wording for the auditor’s conclusion that is different from the wording described in paragraph 43(i) or (j). Although the auditor may be obliged to use the prescribed wording, the auditor’s 3 Accounting Standards issued by the Institute of Chartered Accountants of India or Accounting Standards notified by the Central Government as the Companies (Accounting Standards) Rules, 2006, or the Accounting Standards for Local Bodies issued by the Institute of Chartered Accountants of India, as may be applicable. responsibilities as described in this SRE for coming to the conclusion remain the same.

Departure from the Applicable Financial Reporting Framework

45. The auditor should express a qualified or adverse conclusion when a matter has come to the auditor’s attention that causes the auditor to believe that a material adjustment should be made to the interim financial information for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework.

46. If matters have come to the auditor’s attention that cause the auditor to believe that the interim financial information is or may be materially affected by a departure from the applicable financial reporting framework, and management does not correct the interim financial information, the auditor modifies the review report. The modification describes the nature of the departure and, if practicable, states the effects on the interim financial information. If the information that the auditor believes is necessary for adequate disclosure is not included in the interim financial information, the auditor modifies the review report and, if practicable, includes the necessary information in the review report. The modification to the review report is ordinarily accomplished by adding an explanatory paragraph to the review report, and qualifying the conclusion. Illustrative review reports with a qualified conclusion are set out in Appendix 5 to this SRE.

47. When the effect of the departure is so material and pervasive to the interim financial information that the auditor concludes a qualified conclusion is not adequate to disclose the misleading or incomplete nature of the interim financial information, the auditor expresses an adverse conclusion. Illustrative review reports with an adverse conclusion are set out in Appendix 7 to this SRE.

Limitation on Scope

48. A limitation on scope ordinarily prevents the auditor from completing the review.

49. When the auditor is unable to complete the review, the auditor should communicate, in writing, to the appropriate level of management and to those charged with governance the reason why the review cannot be completed, and consider whether it is appropriate to issue a report.

Limitation on Scope Imposed by Management

50. The auditor does not accept an engagement to review the interim financial information if the auditor’s preliminary knowledge of the engagement circumstances indicates that the auditor would be unable to complete the review because there will be a limitation on the scope of the auditor’s review imposed by management of the entity.

51. If, after accepting the engagement, management imposes a limitation on the scope of the review, the auditor requests the removal of that limitation. If management refuses to do so, the auditor is unable to complete the review and express a conclusion. In such cases, the auditor communicates, in writing, to the appropriate level of management and those charged with governance the reason why the review cannot be completed. Nevertheless, if a matter comes to the auditor’s attention that causes the auditor to believe that a material adjustment to the interim financial information is necessary for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework, the auditor communicates such matters in accordance with the guidance in paragraphs 38-40.

52. The auditor also considers the legal and regulatory responsibilities, including whether there is a requirement for the auditor to issue a report. If there is such a requirement, the auditor disclaims a conclusion, and provides in the review report the reason why the review cannot be completed. However, if a matter comes to the auditor’s attention that causes the auditor to believe that a material adjustment to the interim financial information is necessary for it to be prepared, in all material respects, in accordance with the applicable financial reporting framework, the auditor also communicates such a matter in the report.

Other Limitations on Scope

53. A limitation on scope may occur due to circumstances other than a limitation on scope imposed by management. In such circumstances, the auditor is ordinarily unable to complete the review and express a conclusion and is guided by paragraphs 51-52. There may be, however, some rare circumstances where the limitation on the scope of the auditor’s work is clearly confined to one or more specific matters that, while material, are not in the auditor’s judgment pervasive to the interim financial information. In such circumstances, the auditor modifies the review report by indicating that, except for the matter which is described in an explanatory paragraph to the review report, the review was conducted in accordance with this SRE, and by qualifying the conclusion. Illustrative review reports with a qualified conclusion are set out in Appendix 6 to this SRE.

54. The auditor may have expressed a qualified opinion on the audit of the latest annual financial statements because of a limitation on the scope of that audit. The auditor considers whether that limitation on scope still exists and, if so, the implications for the review report.

Going Concern and Significant Uncertainties

55. In certain circumstances, an emphasis of matter paragraph may be added to a review report, without affecting the auditor’s conclusion, to highlight a matter that is included in a note to the interim financial information that more extensively discusses the matter. The paragraph would preferably be included after the conclusion paragraph and ordinarily refers to the fact that the conclusion is not qualified in this respect.

56. If adequate disclosure is made in the interim financial information, the auditor should add an emphasis of matter paragraph to the review report to highlight a material uncertainty relating to an event or condition that may cast significant doubt on the entity’s ability to continue as a going concern.

57. The auditor may have modified a prior audit or review report by adding an emphasis of matter paragraph to highlight a material uncertainty relating to an event or condition that may cast significant doubt on the entity’s ability to continue as a going concern. If the material uncertainty still exists and adequate disclosure is made in the interim financial information, the auditor modifies the review report on the current interim financial information by adding a paragraph to highlight the continued material uncertainty.

58. If, as a result of inquiries or other review procedures, a material uncertainty relating to an event or condition comes to the auditor’s attention that may cast significant doubt on the entity’s ability to continue as a going concern, and adequate disclosure is made in the interim financial information the auditor modifies the review report by adding an emphasis of matter paragraph.

59. If a material uncertainty that casts significant doubt about the entity’s ability to continue as a going concern is not adequately disclosed in the interim financial information, the auditor should express a qualified or adverse conclusion, as appropriate. The report should include specific reference to the fact that there is such a material uncertainty.

60. The auditor should consider modifying the review report by adding a paragraph to highlight a significant uncertainty (other than a going concern problem) that came to the auditor’s attention, the resolution of which is dependent upon future events and which may affect the interim financial information.

Other Considerations

61. The terms of the engagement include management’s agreement that where any document containing interim financial information indicates that such information has been reviewed by the entity’s auditor, the review report will also be included in the document. If management has not included the review report in the document, the auditor considers seeking legal advice to assist in determining the appropriate course of action in the circumstances4.

62. If the auditor has issued a modified review report and management issues the interim financial information without including the modified review report in the document containing the interim financial information, the auditor considers seeking legal advice to assist in determining the appropriate course of action in the circumstances, and the possibility of resigning from the appointment to audit the annual financial statements5.

63. Interim financial information consisting of a condensed set of financial statements does not necessarily include all the information that would be included in a complete set of financial statements, but may rather present an explanation of the events and changes that are significant to an understanding of the changes in the state of affairs and performance of the entity since the annual reporting date. This is because it is presumed that the users of the interim financial information will have access to the latest audited financial statements, such as is the case with listed entities. In other circumstances, the auditor discusses with management the need for such interim financial information to include a statement that it is to be read in conjunction with the latest audited financial statements. In the absence of such a statement, the auditor considers whether, without a reference to the latest audited financial statements, the interim financial information is misleading in the circumstances, and the implications for the review report.

Documentation

64. The auditor should prepare review documentation that is sufficient and appropriate to provide a basis for the auditor’s conclusion and to provide evidence that the review was performed in accordance with this 4 The Council of the ICAI, at its 308th meeting held in August 2011, considered an issue relating to difficulties being faced by the members of the Institute in compliance with paragraphs 61 and 62 of the SRE 2410 raised by the Auditing and Assurance Standards Board of the Institute. On a consideration of the matter, the Council was of the opinion that paragraphs 61 and 62 did not envisage the auditor to take steps to ensure that on every occasion when the review results were published by the management, it also published the review report therewith. The responsibility of the auditor was upto issuance of the review report on the results, at most till the time the interim results, along with the review report, were filed by the company with the concerned stock exchange. Further, since such filing led to the concerned interim results and the review report thereon becoming available in the public domain, the same would be construed as sufficient compliance by the auditor with the requirements of paragraphs 61 and 62 of SRE 2410. The complete text of the Announcement is published in Paragraph ‘C’, “Announcements/Clarifications” of Section 1, “Announcements of the Council regarding Status of Various Documents issued by the Institute of Chartered Accountants of India”, included in Volume I.A of the Handbook. 5 ibid SRE and applicable legal and regulatory requirements. The documentation enables an experienced auditor having no previous connection with the engagement to understand the nature, timing and extent of the inquiries made, and analytical and other review procedures applied, information obtained, and any significant matters considered during the performance of the review, including the disposition of such matters.

Effective Date

65. This SRE is effective for reviews of interim financial information for periods beginning on or after April 1, 2010.

Material Modifications vis-a-vis ISRE 2410, “Review of

Interim

Financial

Information

Performed

by the

Independent Auditor of the Entity”

Additions

Paragraph 43 of ISRE 2410 (Paragraph 43 of SRE 2410) deals with the basic elements of the written report of an auditor on the Review of Interim Financial Information, which also includes the location in the country or jurisdiction where the auditor practices. Since in India, Standard on Auditing (SA) 700(Revised) requires the auditor to mention the “Place of Signature”, i.e., name of specific location, which is ordinarily the city where the review report is signed, in his report, the requirement of mentioning the location in the country or jurisdiction where the auditor practices has been replaced with the requirement to mention the place of signature in the auditor’s report.

Deletion

Paragraph 18 of ISRE 2410 (Paragraph 18 of SRE 2410) deals with the procedures for obtaining the understanding of the entity and its environment for conducting the review of the interim financial information. These procedures also include the review of the predecessor auditor’s documentation for the preceding annual audit, and for any prior interim periods in the current year that have been reviewed by the predecessor auditor. Since in India, Clause 1 of Part I of the Second Schedule to the Code of Ethics provides that a Chartered Accountant in Practice shall be deemed to be guilty of professional misconduct if he discloses information acquired in the course of his professional engagement to any person other than his client, an auditor cannot provide access to his working paper to the another auditor. Therefore, keeping in view the requirements of the Code of Ethics, the requirement of reviewing the predecessor auditor’s documentation has been replaced with the requirement of perusing the copies of the audited financial statements including the other relevant documents relating to the prior period financial statements.

Appendix 1

Example of an Engagement Letter for a Review of Interim

Financial Information

The following letter is to be used as a guide in conjunction with the consideration outlined in paragraph 10 of this SRE and will need to be adapted according to individual requirements and circumstances. To the Board of Directors of ABC Company Ltd. (or the appropriate representative of senior management) We are providing this letter to confirm our understanding of the terms and objectives of our engagement to review the entity’s interim balance sheet as at September 30, 20X1 and the related statement of profit & loss and cash flows for the six-month period then ended. Our review will be conducted in accordance with Standard on Review Engagements (SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Institute of Chartered Accountants of India (ICAI) with the objective of providing us with a basis for reporting whether anything has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with the [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting when the financial reporting framework used is not Financial Reporting Standards6 applicable in India]. Such a review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures and does not, ordinarily, require corroboration of the information obtained. The scope of a review of interim financial information is substantially less than the scope of an audit conducted in accordance with Standards on Auditing whose objective is the expression of an opinion regarding the financial statements and, accordingly, we shall express no such opinion. We expect to report on the interim financial information as follows: [Include text of sample report.] Responsibility for the interim financial information, including adequate disclosure, is that of management of the entity. This includes designing, implementing and maintaining internal control relevant to the preparation and presentation of interim financial information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and 6 See footnote 4. making accounting estimates that are reasonable in the circumstances. As part of our review, we will request written representations from management concerning assertions made in connection with the review. We will also request that where any document containing interim financial information indicates that the interim financial information has been reviewed, our report will also be included in the document. A review of interim financial information does not provide assurance that we will become aware of all significant matters that might be identified in an audit. Further, our engagement cannot be relied upon to disclose whether fraud or errors, or illegal acts exist. However, we will inform you of any material matters that come to our attention. We look forward to full cooperation with your staff and we trust that they will make available to us whatever records, documentation and other information are requested in connection with our review. [Insert additional information here regarding fee arrangements and billings, as appropriate.] This letter will be effective for future years unless it is terminated, amended or superseded (if applicable). Please sign and return the attached copy of this letter to indicate your acknowledgement of, and agreement with, the arrangements for our review of the interim financial information including our respective responsibilities. XYZ & Co.

Chartered Accountants

Firm’s Registration Number

(Signature) (Name of the Member) (Designation7) Date: Place:

Acknowledged on behalf of ABC Company by

…………………….. (Signature)

Name and Designation

Date

7 Partner or proprietor, as the case may be.

Appendix 2

Analytical Procedures the Auditor May Consider When

Performing a Review of Interim Financial Information

Examples of analytical procedures the auditor may consider when performing a review of interim financial information include the following: 

Comparing the interim financial information with the interim financial

information of the immediately preceding interim period, with the interim financial information of the corresponding interim period of the preceding financial year, with the interim financial information that was expected by management for the current period, and with the most recent audited annual financial statements.  Comparing current interim financial information with anticipated results, such as budgets or forecasts (for example, comparing tax balances and the relationship between the provision for income taxes to pretax income in the current interim financial information with corresponding information in (a) budgets, using expected rates, and (b) financial information for prior periods).  Comparing current interim financial information with relevant non-financial information. 

Comparing the recorded amounts, or ratios developed from recorded

amounts, to expectations developed by the auditor. The auditor develops such expectations by identifying and applying relationships that are reasonably expected to exist based on the auditor’s understanding of the entity and of the industry in which the entity operates.  Comparing ratios and indicators for the current interim period with those of entities in the same industry.  Comparing relationships among elements in the current interim financial information with corresponding relationships in the interim financial information of prior periods, for example, expense by type as a percentage of sales, assets by type as a percentage of total assets, and percentage of change in sales to percentage of change in receivables. 

Comparing disaggregated data. The following are examples of how data

may be disaggregated: ♦

By period, for example, revenue or expense items disaggregated into

quarterly, monthly, or weekly amounts. ♦ By product line or source of revenue. ♦ By location, for example, by component. ♦

By attributes of the transaction, for example, revenue generated by

designers, architects, or craftsmen. ♦ By several attributes of the transaction, for example, sales by product and month.

Appendix 3

Example of a Management Representation Letter

The following letter is not intended to be a standard letter. Representations by management will vary from entity to entity and from one interim period to the next. (Entity Letterhead) (To Auditor)

(Date) Opening paragraphs if interim financial information comprises condensed financial statements: This representation letter is provided in connection with your review of the condensed balance sheet of ABC Entity as of June 30, 20X1 and the related condensed statements of profit & loss and cash flows for the three-month period then ended for the purposes of expressing a conclusion whether anything has come to your attention that causes you to believe that the interim financial information is not prepared, in all material respects, in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards8 applicable in India]. We acknowledge our responsibility for the preparation and presentation of the interim financial information in accordance with [indicate applicable financial reporting framework]. Opening paragraphs if interim financial information comprises a complete set of general purpose financial statements prepared in accordance with a financial reporting framework designed to achieve fair presentation: This representation letter is provided in connection with your review of the balance sheet of ABC Entity as of June 30, 20X1 and the related statements of income, changes in equity and cash flows for the three-month period then ended and a summary of the significant accounting policies and other explanatory notes for the purposes of expressing a conclusion whether anything has come to your attention that causes you to believe that the interim financial information does not give a true and fair view of (or “does not present fairly, in all material respects,”) the state of affairs of ABC Entity as at June 30, 20X1, and of its results of operations and its cash flows in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the 8 See footnote 4. financial reporting framework when the financial reporting framework used is not Financial Reporting Standards9 applicable in India]. We acknowledge our responsibility for the fair presentation of the interim financial information in accordance with [indicate applicable financial reporting framework]. We confirm, to the best of our knowledge and belief, the following representations:  The interim financial information referred to above has been prepared and presented in accordance with [indicate applicable financial reporting framework].  We have made available to you all books of account and supporting documentation, and all minutes of meetings of shareholders and the board of directors (namely those held on [insert applicable dates]).  There are no material transactions that have not been properly recorded in the accounting records underlying the interim financial information.  There has been no known actual or possible noncompliance with laws and regulations that could have a material effect on the interim financial information in the event of noncompliance. 

We acknowledge responsibility for the design and implementation of

internal control to prevent and detect fraud and error.  We have disclosed to you all significant facts relating to any known frauds or suspected frauds that may have affected the entity.  We have disclosed to you the results of our assessment of the risk that the interim financial information may be materially misstated as the result of fraud. 

We believe the effects of uncorrected misstatements summarized in the

accompanying schedule are immaterial, both individually and in the aggregate, to the interim financial information taken as a whole.  We confirm the completeness of the information provided to you regarding the identification of related parties.  The following have been properly recorded and, when appropriate, adequately disclosed in the interim financial information: 9 See footnote 4. ♦ Related party transactions, including sales, purchases, loans, transfers, leasing arrangements and guarantees, and amounts receivable from or payable to related parties; ♦

Guarantees, whether written or oral, under which the entity is

contingently liable; and ♦ Agreements and options to buy back assets previously sold.  The presentation and disclosure of the fair value measurements of assets and liabilities are in accordance with [indicate applicable financial reporting framework]. The assumptions used reflect our intent and ability to carry specific courses of action on behalf of the entity, where relevant to the fair value measurements or disclosure.  We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities reflected in the interim financial information.  We have no plans to abandon lines of product or other plans or intentions that will result in any excess or obsolete inventory, and no inventory is stated at an amount in excess of realizable value.  The entity has satisfactory title to all assets and there are no liens or encumbrances on the entity’s assets.  We have recorded or disclosed, as appropriate, all liabilities, both actual and contingent.  [Add any additional representations related to new accounting standards that are being implemented for the first time and consider any additional representations required by a new Standard on Auditing that are relevant to interim financial information.] To the best of our knowledge and belief, no events have occurred subsequent to the balance sheet date and through the date of this letter that may require adjustment to or disclosure in the aforementioned interim financial information. __________________________ (Senior Executive Officer) __________________________ (Senior Financial Officer)

Appendix 4

Examples of Review Reports on Interim Financial

Complete Set of General Purpose Financial Statements Prepared in

Accordance with a Financial Reporting Framework Designed to

Achieve Fair Presentation (see paragraph 43(i))

Report on Review of Interim Financial Information

(Appropriate addressee)

Introduction

We have reviewed the accompanying balance sheet of ABC Entity as of June 30, 20X1 and the related statements of profit & loss and cash flows for the three- month period then ended, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and fair presentation of this interim financial information in accordance with [indicate applicable financial reporting framework]. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with Standard on Review Engagements

(SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”10. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of (or “does not present fairly, in all material respects,”) the state of affairs of the entity as at June 30, 20X1, and of its results of operations and its cash flows 10 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. for the three month period then ended in accordance with [applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards11 applicable in India]. For ABC and Co.,

Auditor’s Signature

(Name of Member signing the Audit Report) (Designation12)

Membership Number

Place of Signature

Other Interim Financial Information (see paragraph 43(j))

We have reviewed the accompanying [condensed] balance sheet of ABC Entity as of June 30, 20X1 and the related [condensed] statements of profit & loss and cash flows for the three-month period then ended. Management is responsible for the preparation and presentation of this interim financial information in accordance with [indicate applicable financial reporting framework]. Our responsibility is to express a conclusion on this interim financial information based on our review.

(SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”13. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and 11 See footnote 4. 12 Partner or proprietor, as the case may be. 13 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with [applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards14 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation15)

14 See footnote 4. 15 Partner or proprietor, as the case may be.

Appendix 5

Examples of Review Reports with a Qualified Conclusion

for a Departure from the Applicable Financial Reporting

Framework

(SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”16. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

Based on information provided to us by management, ABC Entity has excluded from property and long-term debt certain lease obligations that we believe should 16 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. be capitalized to conform with [indicate applicable financial reporting framework]. This information indicates that if these lease obligations were capitalized at June 30, 20X1, property would be increased by Rs.______, long-term debt by Rs.______, and net income and earnings per share would be increased (decreased) by Rs.________, Rs._________, Rs.________, and Rs.________, respectively for the three-month period then ended.

Qualified Conclusion

Based on our review, with the exception of the matter described in the preceding paragraph, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of (or “does not present fairly, in all material respects,”) the state of affairs of the entity as at June 30, 20X1, and of its results of operations and its cash flows for the three month period then ended in accordance with [indicate applicable financial reporting framework, including the reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards17 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation18)

17 See footnote 4. 18 Partner or proprietor, as the case may be.

(SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”19. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on information provided to us by management, ABC Entity has excluded from property and long-term debt certain lease obligations that we believe should be capitalized to conform with [indicate applicable financial reporting framework]. This information indicates that if these lease obligations were capitalized at June 30, 20X1, property would be increased by Rs.______, long-term debt by Rs.______, and net income and earnings per share would be increased (decreased) by Rs.________, Rs._________, Rs.________, and Rs.________, respectively for the three-month period then ended. 19 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances.

Based on our review, with the exception of the matter described in the preceding paragraph, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards20 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation21)

20 See footnote 4. 21 Partner or proprietor, as the case may be.

Appendix 6

for a Limitation on Scope Not Imposed By Management

Except as explained in the following paragraph, we conducted our review in accordance with Standard on Review Engagements (SRE) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”22. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As a result of a fire in a branch office on (date) that destroyed its accounts receivable records, we were unable to complete our review of accounts receivable totaling Rs.________ included in the interim financial information. The 22 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. entity is in the process of reconstructing these records and is uncertain as to whether these records will support the amount shown above and the related allowance for uncollectible accounts. Had we been able to complete our review of accounts receivable, matters might have come to our attention indicating that adjustments might be necessary to the interim financial information.

Except for the adjustments to the interim financial information that we might have become aware of had it not been for the situation described above, based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of (or “does not present fairly, in all material respects,”) the state of affairs of the entity as at June 30, 20X1, and of its Results of Operations and its cash flows for the three-month period then ended in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards23 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation24)

We have reviewed the accompanying [condensed] balance sheet of ABC Entity as of June 30, 20X1 and the related [condensed] statements of profit & loss and cash flows for the three-month period then ended. Management is responsible 23 See footnote 4. 24 Partner or proprietor, as the case may be. for the preparation and presentation of this interim financial information in accordance with [indicate applicable financial reporting framework]. Our responsibility is to express a conclusion on this interim financial information based on our review.

Except as explained in the following paragraph, we conducted our review in accordance with Standards on Review Engagements (SRE) 2410, “Review of Interim Financial Information Performed by the Auditor of the Entity”25. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As a result of a fire in a branch office on (date) that destroyed its accounts receivable records, we were unable to complete our review of accounts receivable totaling Rs.________ included in the interim financial information. The entity is in the process of reconstructing these records and is uncertain as to whether these records will support the amount shown above and the related allowance for uncollectible accounts. Had we been able to complete our review of accounts receivable, matters might have come to our attention indicating that adjustments might be necessary to the interim financial information.

Except for the adjustments to the interim financial information that we might have become aware of had it not been for the situation described above, based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting 25 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. framework when the financial reporting framework used is not Financial Reporting Standards26 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation27)

26 See footnote 4. 27 Partner or proprietor, as the case may be.

Appendix 7

Examples of Review Reports with an Adverse Conclusion

(SRE) 2410, “Review of Interim Financial Information Performed by the Auditor of the Entity”28. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Adverse Conclusion

Commencing this period, management of the entity ceased to consolidate the financial statements of its subsidiary companies since management considers 28 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. consolidation to be inappropriate because of the existence of new substantial non-controlling interests. This is not in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards29 applicable in India]. Had consolidated financial statements been prepared, virtually every account in the interim financial information would have been materially different.

Adverse Conclusion

Our review indicates that, because the entity’s investment in subsidiary companies is not accounted for on a consolidated basis, as described in the preceding paragraph, this interim financial information does not give a true and fair view of (or “does not present fairly, in all material respects,”) the state of affairs of the entity as at June 30, 20X1, and of its results of operations and its cash flows for the three-month period then ended in accordance with [indicate applicable financial reporting framework, including a reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards30 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation31)

We have reviewed the accompanying [condensed] balance sheet of ABC Entity as of June 30, 20X1 and the related [condensed] statements of profit & loss and 29 See footnote 4. 30 See footnote 4. 31 Partner or proprietor, as the case may be. cash flows for the three-month period then ended. Management is responsible for the preparation and presentation of this interim financial information in accordance with [indicate applicable financial reporting framework]. Our responsibility is to express a conclusion on this interim financial information based on our review.

(SRE) 2410, “Review of Interim Financial Information Performed by the Independence Auditor of the Entity”32. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Commencing this period, management of the entity ceased to consolidate the financial statements of its subsidiary companies since management considers consolidation to be inappropriate because of the existence of new substantial non-controlling interests. This is not in accordance with [indicate applicable financial reporting framework, including the reference to the relevant jurisdiction of the financial reporting framework when the financial reporting framework used is not Financial Reporting Standards33 applicable in India]. Had consolidated financial statements been prepared, virtually every account in the interim financial information would have been materially different.

Our review indicates that, because the entity’s investment in subsidiary companies is not accounted for on a consolidated basis, as described in the preceding paragraph, this interim financial information is not prepared, in all material respects, in accordance with [indicate applicable financial reporting framework, including a reference to the jurisdiction of the financial reporting 32 In the case of a review of historical financial information other than interim financial information, this sentence should read as follows: “We conducted our review in accordance with Standard on Review Engagements 2410, which applies to a review of historical financial information performed by the independent auditor of the entity.” The remainder of the report should be adapted as necessary in the circumstances. 33 See footnote 4. framework when the financial reporting framework used is not Financial Reporting Standards34 applicable in India]. For ABC and Co.,

(Name of Member signing the Audit Report) (Designation35)

34 See footnote 4. 35 Partner or proprietor, as the case may be.