PHILIPPINE STANDARD ON REVIEW

ENGAGEMENTS 2400
(Previously PSA 910)

ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

CONTENTS
Paragraph
Introduction ... .............................................................................................................. 1-2
Objective of a Review Engagement ................................................................................ 3
General Principles of a Review Engagement .............................................................. 4-7
Scope of a Review .......................................................................................................... 8
Moderate Assurance ......................................................................................................... 9
Terms of Engagement ... .......................................................................................... 10-12
Planning .................................................................................................................. 13-15
Work Performed by Others ... ........................................................................................ 16
Documentation ... ........................................................................................................... 17
Procedures and Evidence ... ..................................................................................... 18-22
Conclusions and Reporting ... .................................................................................. 23-28
Effective Date
Acknowledgment
Appendix 1: Example of an Engagement Letter for a Review
of Financial Statements
Appendix 2: Illustrative Detailed Procedures that may be
Performed in an Engagement to Review Financial Statements
Appendix 3: Form of Unqualified Review Report
Appendix 4: Examples of Review Reports Other than Unqualified

Philippine Standard on Review Engagements (PSRE) 2400, “Engagements to

Review Financial Statements” should be read in the context of the “Preface to the
Philippine Standards on Quality Control, Auditing, Review, Other Assurance and
Related Services,” which sets out the application and authority of PSREs.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Introduction
1. The purpose of this Philippine Standard on Review Engagements (PSRE) is
to establish standards and provide guidance on the practitioner’s professional
responsibilities when a practitioner, who is not the auditor of an entity,
undertakes an engagement to review financial statements and on the form and
content of the report that the practitioner issues in connection with such a
review. A practitioner, who is the auditor of the entity, engaged to perform a
review of interim financial information performs such a review in accordance with
PSRE 2410, “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity.”
2. This PSRE is directed towards the review of financial statements. However, it is
to be applied, adapted as necessary in the circumstances, to engagements to
review other historical financial information. Guidance in the Philippine
Standards on Auditing (PSAs) may be useful to the practitioner in applying this
PSRE.∗

Objective of a Review Engagement

3. The objective of a review of financial statements is to enable a practitioner
to state whether, on the basis of procedures which do not provide all the
evidence that would be required in an audit, anything has come to the
practitioner’s attention that causes the practitioner to believe that the
financial statements are not prepared, in all material respects, in
accordance with the applicable financial reporting framework (negative
assurance).

General Principles of a Review Engagement

4. The practitioner should comply with the Code of Ethics for Professional
Accountants in the Philippines issued by the Philippine
Board of Accountancy (the Ethics
Code). Ethical principles governing the practitioner’s professional responsibilities are:
(a) Independence;
(b) Integrity;
(c) Objectivity;
(d) Professional competence and due care;
(e) Confidentiality;
(f) Professional behavior; and
(g) Technical standards.

___________________
∗ Paragraph 2 of this PSRE was amended in December 2007 to clarify the application of the PSRE.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

5. The practitioner should conduct a review in accordance with this PSRE.

6. The practitioner should plan and perform the review with an attitude of
professional skepticism recognizing that circumstances may exist which cause
the financial statements to be materially misstated.
7. For the purpose of expressing negative assurance in the review report, the
Practitioner should obtain sufficient appropriate evidence primarily
through inquiry and analytical procedures to be able to draw conclusions.

Scope of a Review
8. The term “scope of a review” refers to the review procedures deemed necessary in
the circumstances to achieve the objective of the review. The procedures required to
conduct a review of financial statements should be determined by the
practitioner having regard to the requirements of this PSRE, relevant
professional bodies, legislation, regulation and, where appropriate, the terms of
the review engagement and reporting requirements.

Moderate Assurance
9. A review engagement provides a moderate level of assurance that the
information subject to review is free of material misstatement, this is expressed in
the form of negative assurance.

Terms of Engagement
10. The practitioner and the client should agree on the terms of the
engagement. The agreed terms would be recorded in an engagement letter or
other suitable form such as a contract.
11. An engagement letter will be of assistance in planning the review work. It is in
the interests of both the practitioner and the client that the practitioner sends an
engagement letter documenting the key terms of the appointment. An
engagement letter confirms the practitioner’s acceptance of the appointment and
helps avoid misunderstanding regarding such matters as the objectives and scope of
the engagement, the extent of the practitioner’s responsibilities and the form of reports
to be issued.
12. Matters that would be included in the engagement letter include the following:
• The objective of the service being performed.
• Management’s responsibility for the financial statements.
• The scope of the review, including reference to this PSRE
.
• Unrestricted access to whatever records, documentation and other
information requested in connection with the review.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

• A sample of the report expected to be rendered.

• The fact that the engagement cannot be relied upon to disclose errors,
illegal acts or other irregularities, for example, fraud or defalcations that may
exist.
• A statement that an audit is not being performed and that an audit opinion
will not be expressed. To emphasize this point and to avoid confusion, the
practitioner may also consider pointing out that a review engagement will not
satisfy any statutory or third party requirements for an audit.
An example of an engagement letter for a review of financial statements
appears in Appendix 1 to this PSRE.

Planning
13. The practitioner should plan the work so that an effective engagement will
be performed.
14. In planning a review of financial statements, the practitioner should obtain
or update the knowledge of the business including consideration of the
entity’s organization, accounting systems, operating characteristics and the
nature of its assets, liabilities, revenues and expenses.
15. The practitioner needs to possess an understanding of such matters and other
matters relevant to the financial statements, for example, a knowledge of the
entity’s production and distribution methods, product lines, operating locations and
related parties. The practitioner requires this understanding to be able to make
relevant inquiries and to design appropriate procedures, as well as to assess the
responses and other information obtained.

Work Performed by Others

16. When using work performed by another practitioner or an expert, the
practitioner should be satisfied that such work is adequate for the
purposes of the review.

Documentation
17. The practitioner should document matters which are important in
providing evidence to support the review report, and evidence that the
review was carried out in accordance with this PSRE.

Procedures and Evidence

18. The practitioner should apply judgment in determining the specific
nature, timing and extent of review procedures. The practitioner will be
guided by such matters as the following:
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

• Any knowledge acquired by carrying out audits or reviews of the

financial statements for prior periods.
• The practitioner’s knowledge of the business including knowledge of the
accounting principles and practices of the industry in which the entity
operates.
• The entity’s accounting systems.
• The extent to which a particular item is affected by management judgment.
• The materiality of transactions and account balances.
19. The practitioner should apply the same materiality considerations as would be
applied if an audit opinion on the financial statements were being given.
Although there is a greater risk that misstatements will not be detected in a review than
in an audit, the judgment as to what is material is made by reference to the
information on which the practitioner is reporting and the needs of those relying on that
information, not to the level of assurance provided.
20. Procedures for the review of financial statements will ordinarily include the
following:
• Obtaining an understanding of the entity’s business and the industry in
which it operates.
• Inquiries concerning the entity’s accounting principles and practices.
• Inquiries concerning the entity’s procedures for recording, classifying
and summarizing transactions, accumulating information for disclosure
in the financial statements and preparing financial statements.
• Inquiries concerning all material assertions in the financial statements.
• Analytical procedures designed to identify relationships and individual
items that appear unusual. Such procedures would include:
○ Comparison of the financial statements with statements for prior
periods.
○ Comparison of the financial statements with anticipated results
and financial position.
○ Study of the relationships of the elements of the financial
statements that would be expected to conform to a predictable
pattern based on the entity’s experience or industry norm.
In applying these procedures, the practitioner would consider the types of
matters that required accounting adjustments in prior periods.
• Inquiries concerning actions taken at meetings of shareholders, the
board of directors, committees of the board of directors and other
meetings that may affect the financial statements.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

• Reading the financial statements to consider, on the basis of

information coming to the practitioner’s attention, whether the financial
statements appear to conform with the basis of accounting indicated.
• Obtaining reports from other practitioners, if any and if considered
necessary, who have been engaged to audit or review the financial
statements of components of the entity.
• Inquiries of persons having responsibility for financial and accounting
matters concerning, for example:
○ Whether all transactions have been recorded.
○ Whether the financial statements have been prepared in accordance
with the basis of accounting indicated.
○ Changes in the entity’s business activities and accounting principles
and practices.
○ Matters as to which questions have arisen in the course of applying
the foregoing procedures.
○ Obtaining written representations from management when
considered appropriate.
Appendix 2 to this PSRE provides an illustrative list of procedures which are
often used. The list is not exhaustive, nor is it intended that all the procedures
suggested apply to every review engagement.
21. The practitioner should inquire about events subsequent to the date of the
financial statements that may require adjustment of or disclosure in the
financial statements. The practitioner does not have any responsibility to
perform procedures to identify events occurring after the date of the review
report.
22. If the practitioner has reason to believe that the information subject to
review may be materially misstated, the practitioner should carry out
additional or more extensive procedures as are necessary to be able to
express negative assurance or to confirm that a modified report is
required.

Conclusions and Reporting

23. The review report should contain a clear written expression of negative
assurance. The practitioner should review and assess the conclusions
drawn from the evidence obtained as the basis for the expression of
negative assurance.
24. Based on the work performed, the practitioner should assess whether any
information obtained during the review indicates that the financial
statements are not presented fairly, in
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

all material respects, in accordance with the applicable financial reporting

framework.
25. The report on a review of financial statements describes the scope of the
engagement to enable the reader to understand the nature of the work
performed and make it clear that an audit was not performed and, therefore,
that an audit opinion is not expressed.
26. The report on a review of financial statements should contain the following
basic elements, ordinarily in the following layout:
(a) Title;2
(b) Addressee;
(c) Opening or introductory paragraph including:
(i) Identification of the financial statements on which the
review has been performed; and
(ii) A statement of the responsibility of the entity’s management
and the responsibility of the practitioner;
(d) Scope paragraph, describing the nature of a review, including:
(i) A reference to this PSRE applicable to review engagements,
;
(ii) A statement that a review is limited primarily to inquiries
and analytical procedures; and
(iii) A statement that an audit has not been performed, that the
procedures undertaken provide less assurance than an audit
and that an audit opinion is not expressed;
(e) Statement of negative assurance;
(f) Date of the report;
(g) Practitioner’s address; and
(h) Practitioner’s signature.
Appendices 3 and 4 to this PSRE contain illustrations of review reports.
27. The review report should:
(a) State that nothing has come to the practitioner’s attention based
on the review that causes the practitioner to believe the financial
statements are not presented

2 It may be appropriate to use the term “independent” in the title to distinguish the practitioner’s report
from reports that might be issued by others, such as officers of the entity, or from the reports of other
practitioners who may not have to abide by the same ethical requirements as an independent practitioner.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

fairly, in all material respects, in accordance with the applicable

financial reporting framework (negative assurance); or
(b) If matters have come to the practitioner’s attention, describe those
matters that impair a fair presentation, in all
material respects, in accordance with the applicable financial
reporting framework, including, unless impracticable, a
quantification of the possible effect(s) on the financial statements, and
either:
(i) Express a qualification of the negative assurance provided; or
(ii) When the effect of the matter is so material and pervasive to
the financial statements that the practitioner concludes that a
qualification is not adequate to disclose the misleading or
incomplete nature of the financial statements, give an adverse
statement that the financial statements are not presented fairly, in
all material respects,
in accordance with the applicable financial reporting
framework; or
(c) If there has been a material scope limitation, describe the limitation
and either:
(iii) Express a qualification of the negative assurance provided
regarding the possible adjustments to the financial statements that
might have been determined to be necessary had the limitation
not existed; or
(iv) When the possible effect of the limitation is so significant and
pervasive that the practitioner concludes that no level of
assurance can be provided, not provide any assurance.
28. The practitioner should date the review report as of the date the review is
completed, which includes performing procedures relating to events
occurring up to the date of the report. However, since the practitioner’s
responsibility is to report on the financial statements as prepared and
presented by management, the practitioner should not date the review report
earlier than the date on which the financial statements were approved by
management.
Effective Date
This PSRE is effective for engagements to review financial statements for periods
ending on or after December 31, 2003.
Acknowledgment
This PSRE is based on International Standard on Review Engagements 2400,
“Engagements to Review Financial Statements,” issued by the International Auditing
and Assurance Standards Board.
This PSRE 2400 differs from ISRE 2400 mainly with respect to the deletion of the
phrases “give a true and fair view,” “relevant national standards or practices,” and
“relevant national accounting standards,” or variants of these phrases, and the revision in
the components of “financial statements” in the example review engagement letter and
illustrative review reports presented in the appendices.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Appendix 1

Example of an Engagement Letter for a Review of Financial

Statements
The following letter is for use as a guide in conjunction with the consideration outlined in
paragraph 10 of this PSRE and will need to be varied according to individual
requirements and circumstances.

To the Board of Directors (or the appropriate representative of senior management): This
letter is to confirm our understanding of the terms and objectives of our
engagement and the nature and limitations of the services we will provide.
We will perform the following services:

We will review the financial statements of ABC Company, which comprise the statement of
financial position as at December 31, 19XX, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, in
accordance with the Philippine Standard on Review Engagements (PSRE) 2400. We will
not perform an audit of such financial statements and, accordingly, we will not express an
audit opinion on them. Accordingly, we expect to report on the financial statements as
follows:

(see Appendix 3 to this PSRE)

Responsibility for the financial statements, including adequate disclosure, is that of the
management of the company. This includes the maintenance of adequate accounting
records and internal controls and the selection and application of accounting policies.
(As part of our review process, we will request written representations from
management concerning assertions made in connection with the review.3)
This letter will be effective for future years unless it is terminated, amended or
superseded (if applicable).
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.
Please sign and return the attached copy of this letter to indicate that it is in accordance
with your understanding of the arrangements for our review of the financial statements.

XYZ & Co

Acknowledged on behalf of ABC Company by ( signed )

Name and Title

Date

_____________________
3 This sentence should be used at the discretion of the practitioner.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Appendix 2

Illustrative Detailed Procedures that may be Performed in an

Engagement to Review Financial Statements
1. The inquiry and analytical review procedures carried out in a review of
financial statements are determined by the practitioner’s judgment. The
procedures listed below are for illustrative purposes only. It is not intended that
all the procedures suggested apply to every review engagement. This Appendix
is not intended to serve as a program or checklist in the conduct of a review.

General
2. Discuss terms and scope of the engagement with the client and the engagement
team.
3. Prepare an engagement letter setting forth the terms and scope of the
engagement.
4. Obtain an understanding of the entity’s business activities and the system for
recording financial information and preparing financial statements.
5. Inquire whether all financial information is recorded:
(a) Completely;
(b) Promptly; and
(c) After the necessary authorization.
6. Obtain the trial balance and determine whether it agrees with the general ledger
and the financial statements.
7. Consider the results of previous audits and review engagements, including
accounting adjustments required.
8. Inquire whether there have been any significant changes in the entity from the
previous year (e.g., changes in ownership or changes in capital structure).
9. Inquire about the accounting policies and consider whether:
(a) They comply with the applicable financial reporting framework;
(b) They have been applied appropriately; and
(c) They have been applied consistently and, if not, consider whether
disclosure has been made of any changes in the accounting policies.
10. Read the minutes of meetings of shareholders, the board of directors and other
appropriate committees in order to identify matters that could be important to
the review.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

11. Inquire if actions taken at shareholder, board of directors or comparable

meetings that affect the financial statements have been appropriately reflected
therein.
12. Inquire about the existence of transactions with related parties, how such
transactions have been accounted for and whether related parties have been
properly disclosed.
13. Inquire about contingencies and commitments.
14. Inquire about plans to dispose of major assets or business segments.
15. Obtain the financial statements and discuss them with management.
16. Consider the adequacy of disclosure in the financial statements and their
suitability as to classification and presentation.
17. Compare the results shown in the current period financial statements with those
shown in financial statements for comparable prior periods and, if available,
with budgets and forecasts.
18. Obtain explanations from management for any unusual fluctuations or
inconsistencies in the financial statements.
19. Consider the effect of any unadjusted errors - individually and in aggregate.
Bring the errors to the attention of management and determine how the
unadjusted errors will influence the report on the review.
20. Consider obtaining a representation letter from management.

Cash
21. Obtain the bank reconciliations. Inquire about any old or unusual reconciling
items with client personnel.
22. Inquire about transfers between cash accounts for the period before and after
the review date.
23. Inquire whether there are any restrictions on cash accounts.

Receivables
24. Inquire about the accounting policies for initially recording trade receivables
and determine whether any allowances are given on such transactions.
25. Obtain a schedule of receivables and determine whether the total agrees with
the trial balance.
26. Obtain and consider explanations of significant variations in account balances
from previous periods or from those anticipated.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

27. Obtain an aged analysis of the trade receivables. Inquire about the reason for
unusually large accounts, credit balances on accounts or any other unusual
balances and inquire about the collectibility of receivables.
28. Discuss with management the classification of receivables, including
noncurrent balances, net credit balances and amounts due from shareholders,
directors and other related parties in the financial statements.
29. Inquire about the method for identifying “slow payment” accounts and setting
allowances for doubtful accounts and consider it for reasonableness.
30. Inquire whether receivables have been pledged, factored or discounted.
31. Inquire about procedures applied to ensure that a proper cutoff of sales
transactions and sales returns has been achieved.
32. Inquire whether accounts represent goods shipped on consignment and, if so,
whether adjustments have been made to reverse these transactions and include the
goods in inventory.
33. Inquire whether any large credits relating to revenue recorded have been issued
after the balance sheet date and whether provision has been made for such
amounts.

Inventories
34. Obtain the inventory list and determine whether:
(a) The total agrees with the balance in the trial balance; and
(b) The list is based on a physical count of inventory.
35. Inquire about the method for counting inventory.
36. Where a physical count was not carried out on the balance sheet date, inquire
whether:
(a) A perpetual inventory system is used and whether periodic comparisons
are made with actual quantities on hand; and
(b) An integrated cost system is used and whether it has produced reliable
information in the past.
37. Discuss adjustments made resulting from the last physical inventory count.
38. Inquire about procedures applied to control cutoff and any inventory
movements.
39. Inquire about the basis used in valuing each category of the inventory and, in
particular, regarding the elimination of inter-branch profits. Inquire whether
inventory is valued at the lower of cost and net realizable value.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

40. Consider the consistency with which inventory valuation methods have been
applied, including factors such as material, labor and overhead.
41. Compare amounts of major inventory categories with those of prior periods and
with those anticipated for the current period. Inquire about major fluctuations
and differences.
42. Compare inventory turnover with that in previous periods.
43. Inquire about the method used for identifying slow moving and obsolete
inventory and whether such inventory has been accounted for at net realizable
value.
44. Inquire whether any of the inventory has been consigned to the entity and, if so,
whether adjustments have been made to exclude such goods from inventory.
45. Inquire whether any inventory is pledged, stored at other locations or on
consignment to others and consider whether such transactions have been
accounted for appropriately.

Investments (Including Associated Companies and Marketable Securities)

46. Obtain a schedule of the investments at the balance sheet date and determine
whether it agrees with the trial balance.
47. Inquire about the accounting policy applied to investments.
48. Inquire from management about the carrying values of investments. Consider
whether there are any realization problems.
49. Consider whether there has been proper accounting for gains and losses and
investment income.
50. Inquire about the classification of long-term and short-term investments.

Property and Depreciation

51. Obtain a schedule of the property indicating the cost and accumulated
depreciation and determine whether it agrees with the trial balance.
52. Inquire about the accounting policy applied regarding the provision for
depreciation and distinguishing between capital and maintenance items.
Consider whether the property has suffered a material, permanent impairment
in value.
53. Discuss with management the additions and deletions to property accounts and
accounting for gains and losses on sales or retirements. Inquire whether all
such transactions have been accounted for.
54. Inquire about the consistency with which the depreciation method and rates
have been applied and compare depreciation provisions with prior years.
55. Inquire whether there are any liens on the property.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

56. Discuss whether lease agreements have been properly reflected in the financial
statements in conformity with current accounting pronouncements.

Prepaid Expenses, Intangibles and Other Assets

57. Obtain schedules identifying the nature of these accounts and discuss with
management the recoverability thereof.
58. Inquire about the basis for recording these accounts and the amortization
methods used.
59. Compare balances of related expense accounts with those of prior periods and
discuss significant variations with management.
60. Discuss the classification between long-term and short-term accounts with
management.

Loans Payable
61. Obtain from management a schedule of loans payable and determine whether
the total agrees with the trial balance.
62. Inquire whether there are any loans where management has not complied with
the provisions of the loan agreement and, if so, inquire as to management’s
actions and whether appropriate adjustments have been made in the financial
statements.
63. Consider the reasonableness of interest expense in relation to loan balances.
64. Inquire whether loans payable are secured.
65. Inquire whether loans payable have been classified between noncurrent and
current.

Trade Payables
66. Inquire about the accounting policies for initially recording trade payables and
whether the entity is entitled to any allowances given on such transactions.
67. Obtain and consider explanations of significant variations in account balances
from previous periods or from those anticipated.
68. Obtain a schedule of trade payables and determine whether the total agrees
with the trial balance.
69. Inquire whether balances are reconciled with the creditors’ statements and
compare with prior period balances. Compare turnover with prior periods.
70. Consider whether there could be material unrecorded liabilities.
71. Inquire whether payables to shareholders, directors and other related parties are
separately disclosed.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Accrued and Contingent Liabilities

72. Obtain a schedule of the accrued liabilities and determine whether the total
agrees with the trial balance.
73. Compare major balances of related expense accounts with similar accounts for
prior periods.
74. Inquire about approvals for such accruals, terms of payment, compliance with
terms, collateral and classification.
75. Inquire about the method for determining accrued liabilities.
76. Inquire as to the nature of amounts included in contingent liabilities and
commitments.
77. Inquire whether any actual or contingent liabilities exist which have not been
recorded in the accounts. If so, discuss with management whether provisions
need to be made in the accounts or whether disclosure should be made in the
notes to the financial statements.

Income and Other Taxes

78. Inquire from management if there were any events, including disputes with
taxation authorities, which could have a significant effect on the taxes payable
by the entity.
79. Consider the tax expense in relation to the entity’s income for the period.
80. Inquire from management as to the adequacy of the recorded deferred and
current tax liabilities including provisions in respect of prior periods.

Subsequent Events
81. Obtain from management the latest interim financial statements and compare
them with the financial statements being reviewed or with those for comparable
periods from the preceding year.
82. Inquire about events after the balance sheet date that would have a material
effect on the financial statements under review and, in particular, inquire
whether:
(a) Any substantial commitments or uncertainties have arisen subsequent to
the balance sheet date;
(b) Any significant changes in the share capital, long-term debt or working
capital have occurred up to the date of inquiry; and
(c) Any unusual adjustments have been made during the period between
the balance sheet date and the date of inquiry.
Consider the need for adjustments or disclosure in the financial statements.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

83. Obtain and read the minutes of meetings of shareholders, directors and
appropriate committees subsequent to the balance sheet date.

Litigation
84. Inquire from management whether the entity is the subject of any legal actions-
threatened, pending or in process. Consider the effect thereof on the financial
statements.

Equity
85. Obtain and consider a schedule of the transactions in the equity accounts,
including new issues, retirements and dividends.
86. Inquire whether there are any restrictions on retained earnings or other equity
accounts.

Operations
87. Compare results with those of prior periods and those expected for the current
period. Discuss significant variations with management.
88. Discuss whether the recognition of major sales and expenses have taken place
in the appropriate periods.
89. Consider extraordinary and unusual items.
90. Consider and discuss with management the relationship between related items
in the revenue account and assess the reasonableness thereof in the context of
similar relationships for prior periods and other information available to the
practitioner.
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Appendix 3

Form of Unqualified Review Report

REVIEW REPORT TO ...
We have reviewed the accompanying financial statements of ABC Company, which
comprise the statement of financial position as at December 31, 19XX, and thestatement of
comprehensive income, statement of changes in equity and statement of cash flows
for the year then ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to issue a report on these financial statements based on
our review.
We conducted our review in accordance with the Philippine Standard on Review
Engagements 2400. This Standard requires that we plan and perform the review to
obtain moderate assurance as to whether the financial statements are free of material
misstatement. A review is limited primarily to inquiries of company personnel and
analytical procedures applied to financial data and thus provides less assurance than an
audit. We have not performed an audit and, 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 financial statements are not presented
fairly, in all material respects, in accordance with Philippine Financial Reporting Standards
(or Philippine Financial Reporting Standard for Small and Medium-sized Entities).

PRACTITIONER
Date
Address
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Appendix 4

Examples of Review Reports Other than Unqualified

Qualification for a Departure from Philippine Financial
Reporting Standards
REVIEW REPORT TO …
We have reviewed the accompanying financial statements of ABC Company, which
comprise the statement of financial position as at December 31, 19XX, and the statement
of comprehensive income, statement of changes in equity and statement of cash flows
for the year then ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to issue a report on these financial statements based on
our review.
We conducted our review in accordance with the Philippine Standard on Review
Engagements 2400. This Standard requires that we plan and perform the review to
obtain moderate assurance as to whether the financial statements are free of material
misstatement. A review is limited primarily to inquiries of company personnel and
analytical procedures applied to financial data and thus provides less assurance than an
audit. We have not performed an audit, and, accordingly, we do not express an audit
opinion.
Management has informed us that inventory has been stated at its cost which is in excess of its
net realizable value. Management’s computation, which we have reviewed, shows that
inventory, if valued at the lower of cost and net realizable value as required by Philippine
Financial Reporting Standards, would have been decreased by $X, and net income and
shareholders’ equity would have been decreased by $Y.
Based on our review, except for the effects of the overstatement of inventory described
in the previous paragraph, nothing has come to our attention that causes us to believe
that the accompanying financial statements are not
presented fairly, in all material respects, in accordance with Philippine Financial Reporting
Standards.
PRACTITIONER
Date
Address
 ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Adverse Report for a Departure from Philippine Financial

Reporting Standards
REVIEW REPORT TO …
We have reviewed the accompanying financial statements of ABC Company, which comprise
the statement of financial position as at December 31, 19XX, and the statement of
comprehensive income , statement of changes in equity and statement of cash flows for the
year then ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to issue a report on these financial statements based on
our review.
We conducted our review in accordance with the Philippine Standard on Review
Engagements 2400. This Standard requires that we plan and perform the review to obtain
moderate assurance as to whether the financial statements are free of material
misstatement. A review is limited primarily to inquiries of company personnel and
analytical procedures applied to financial data and thus provides less assurance than an
audit. We have not performed an audit and, accordingly, we do not express an audit
opinion.
As noted in footnote X, these financial statements do not reflect the consolidation of the
financial statements of subsidiary companies, the investment in which is accounted for on a
cost basis. Under Philippine Financial Reporting Standards, the financial statements of the
subsidiaries are required to be consolidated.
Based on our review, because of the pervasive effect on the financial statements of the
matter discussed in the preceding paragraph, the accompanying financial statements are not
presented fairly, in all material respects, in accordance with Philippine Financial
Reporting Standards.

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