The review report, modified conclusions and additional paragraphs

• Draft a review report with every AR-C 90.76 element
• Choose between qualified and adverse conclusions using materiality and pervasiveness
• Add emphasis-of-matter, other-matter and going concern sections correctly
• Report on supplementary information that accompanies reviewed statements

Required elements

AR-C 90 requires a written report, and AR-C 90.76 lists its content, which includes:

• a title that includes the word "independent"
• an addressee
• an introductory paragraph identifying the entity, the statements and the periods, stating they were reviewed, that a review includes primarily analytical procedures and inquiries of management, and that a review is substantially less in scope than an audit so no opinion is expressed
• a "Management's Responsibility for the Financial Statements" section
• an "Accountant's Responsibility" section stating the review was conducted under SSARSs, that those standards require procedures to obtain limited assurance, that you believe the results provide a reasonable basis for your conclusion, and that you are required to be independent and meet other ethical responsibilities
• a conclusion section
• the firm signature, city and state, and the report date

The report date is no earlier than the date you obtained sufficient appropriate review evidence, including that all statements and notes were prepared and management asserted responsibility for them.

The unmodified conclusion wording in AR-C 90 is, in substance: "Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in accordance with [the applicable financial reporting framework]." The review report template has the full text.

Modified conclusions

AR-C 90 requires a modified conclusion when the statements are materially misstated. SSARS No. 25 added the adverse conclusion. AR-C 90 sets the choice:

"Pervasive" (defined in AR-C 90) means not confined to specific elements, or if confined, a substantial portion of the statements, or for disclosures, fundamental to users' understanding.

AR-C 90 requires a "Qualified Conclusion" or "Adverse Conclusion" heading and a "Basis for" paragraph immediately before it. AR-C 90 requires you to quantify the effects in the basis paragraph if management determined them or you know them from your procedures; if not, state that management has not determined them. For omitted disclosures, describe the omitted information and include it when practicable.

Scope problems do not produce a modified conclusion. They lead to additional procedures or withdrawal.

Additional paragraphs

• Emphasis of matter: refers only to matters presented or disclosed, under a separate heading, and states the conclusion is not modified. AR-C 90 requires one when prior statements are restated to correct a material misstatement.
• Other matter: for matters not in the statements that are relevant to the review or report.
• Going concern: when substantial doubt remains, AR-C 90 requires a section headed "Substantial Doubt About the Entity's Ability to Continue as a Going Concern" that draws attention to the note and states the conclusion is not modified. AR-C 90 prohibits conditional language. If disclosure is inadequate, AR-C 90 requires a qualified or adverse conclusion.
• Communication: AR-C 90 requires you to tell management when you expect to add an emphasis-of-matter or other-matter paragraph, with the proposed wording.

Supplementary information

AR-C 90 requires you to state your responsibility for accompanying supplementary information in an other-matter paragraph or separate report. AR-C 90 gives the wording when the information was subjected to your review procedures; AR-C 90 gives it when it was not. AR-C 90 covers required supplementary information.

Common report errors

• Title without "independent."
• Old-format report missing the independence and ethics statement.
• Qualified conclusion used for a scope limitation.
• Effects of a known departure not quantified when management determined them.

The review report modifications guide has illustrations.

Qualified or adverse at Eastfield Building Supply, Inc.