Accepting a review engagement and agreeing its terms under AR-C 90

In this lesson you will

Apply the AR-C 90 independence and acceptance requirements
List the management agreements AR-C 90.13 adds to the AR-C 60 preconditions
Draft an engagement letter that meets AR-C 90.16
Evaluate a request to change an audit to a review under AR-C 90

Independence and skepticism come first

AR-C 90 states that you must be independent of the entity to perform a review. If you find during the engagement that independence is impaired, you should withdraw. The review report itself states that you are required to be independent. AR-C 90.11 requires you to plan and perform the review with professional skepticism.

Before accepting, run the firm's acceptance and continuance procedures, confirm independence for every team member, and evaluate any nonattest services under ET 1.295. The independence confirmation form documents the team check.

Review-specific acceptance conditions

AR-C 90 says you should not accept a review when management or those charged with governance impose a scope limitation that you believe will leave you unable to perform procedures to support a review report. There is no "disclaimer of conclusion" in AR-C 90; scope problems end in withdrawal.

AR-C 90.13 adds three management agreements to the AR-C 60 preconditions:

responsibility for preparing and fairly presenting the statements with all informative disclosures, plus the special purpose framework items when that framework is used
providing a representation letter at the end of the engagement
including your review report in any document containing the statements that says they were reviewed, unless a different understanding is reached

If these cannot be satisfied, AR-C 90 says you should not accept. If you discover after acceptance that a precondition is not met, AR-C 90.15 requires you to discuss it and decide whether it can be resolved, whether to continue, and whether and how to address it in the report.

The engagement letter

AR-C 90.16 requires written terms that include:

the objectives of the engagement
management's responsibilities from AR-C 60 and AR-C 90.13
your responsibilities
the limitations of a review, including a statement that a review is substantially less in scope than an audit and that you will not express an opinion
the applicable financial reporting framework
the expected form and content of your report, and a statement that it may differ

AR-C 90 also requires signatures by you or your firm and by management or those charged with governance. The review engagement letter template covers each item. SSARS No. 26 removed the requirement that the terms be agreed before the engagement starts (effective on issuance in June 2022), which aligns AR-C 90 with AR-C 70 and AR-C 80; get the letter signed before fieldwork anyway. Add practical terms the standard does not require but disputes are made of: deliverable dates, the covenant deadline, fee and change-order terms, and who prepares the statements.

Changing from an audit to a review

When an audit client asks to switch, AR-C 90 requires you to consider the reason (particularly any scope restriction), the additional audit effort and the estimated cost to complete. AR-C 90 says that if audit procedures are substantially complete or the cost to finish is relatively insignificant, consider the propriety of accepting the change. If you accept with reasonable justification, AR-C 90 calls for an appropriate review report, and AR-C 90 bars any reference to the original audit, audit procedures performed or the scope limitation.

AR-C 90 is the hard line: if management refused to let you correspond with legal counsel in the audit, you are, except in rare circumstances, precluded from accepting a review of those statements.

Common findings

No signed engagement letter, or a letter missing the "substantially less in scope" limitation.
Review accepted with an undisclosed independence impairment from bookkeeping or payroll services.
Switch from audit to review accepted after the client refused the legal letter.
Engagement letter that says "compilation and review," leaving the deliverable unclear.

See the step-by-step review guide for the full workflow.

Worked example

An audit-to-review request at Northgate Fabrication, Inc.

Northgate Fabrication, Inc. engaged your firm for a December 31, 2026 audit with a budget of 240 hours. In March 2027 the CFO asks to switch to a review because the bank has relaxed its covenant. Facts:

Hours incurred: 96. Estimated remaining: 144. The audit is 40% complete (96 / 240).
The bank's amended agreement, dated February 20, 2027, requires reviewed statements.
Management has sent the attorney letter request without objection.
No scope restriction has been imposed.

Evaluation under AR-C 90: the reason is a documented change in user requirements, not an attempt to avoid audit procedures. The audit is not substantially complete; 144 hours remain, so the cost to finish is not insignificant. AR-C 90 does not apply because counsel correspondence was allowed.

Conclusion: reasonable justification exists. The firm issues a new review engagement letter under AR-C 90.16, performs the AR-C 90 review procedures, and issues a review report with no mention of the audit engagement, the audit procedures or the change (AR-C 90).

Self-check

Answer each question before you open the answer.

During a review you learn a staff member on the team holds stock in the client. What does AR-C 90 require?
Show answer
Independence is impaired. AR-C 90 requires independence for a review and says you should withdraw when it is impaired. You cannot cure it with a report disclosure as you could in a compilation.
What review-specific agreements does AR-C 90.13 require from management before acceptance?
Show answer
Responsibility for preparing and fairly presenting the statements with all informative disclosures (plus special purpose framework items), providing a representation letter at the end, and including your review report with any document that says the statements were reviewed.
An audit client refused to let you contact its lawyer and now wants a review. Can you accept?
Show answer
Except in rare circumstances, no. AR-C 90 precludes accepting a review of those statements when management refused to allow correspondence with legal counsel in the audit.
Which limitation statement must the review engagement letter contain?
Show answer
That a review is substantially less in scope than an audit and that you will not express an opinion on the financial statements (AR-C 90.16(d)).

Sources

Back to the syllabus

Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error