1. Overview

Interim financial information may be condensed or in the form of complete financial statements, and may cover:

1. a period less than a full year; or

2. a 12-month period ending on a date other than the entity's fiscal year-end.

1.1. Non-issuers (SAS)

An auditor may conduct a review of the interim financial information of a non issuer if:

1. the latest financial statements have been audited;

2. the auditor either has been engaged to audit the entity's current year financial statements, or audited the entity's latest annual financial statements and the appointment of another auditor to audit the current year financial statements is not effective before the beginning of the period covered by the review;

3. the same financial reporting framework is used for the interim financial statements as was used in the annual financial statements; and

4. the interim financial information is condensed information, it conforms with an appropriate financial reporting framework, it includes an explanatory note, and it accompanies the latest audited financial statements (or those statements are made readily available). The explanatory note should indicate that the information does not represent complete financial statements, and that it should be read in conjunction with the latest annual financial statements.

1.2. Issuers (PCAOB)

Certain entities are required by the SEC to file quarterly reports. The SEC requires that an independent auditor review such quarterly information before the quarterly report is filed. Many entities are required by the SEC to include selected quarterly financial data in their annual reports or in other SEC filings. A review of such quarterly information is also required. An auditor performing an initial audit of financial statements that include selected quarterly data should also perform a review of that data as part of the overall audit.

Although auditing standards do not require a written report on a review of interim financial information, if a client states, in a document filed with a regulatory agency or issued to shareholders or third parties, that an auditor has reviewed the interim financial information included therein, the review report must also be included in that document.

2. Procedures

• Understanding with the client should be established.

• Learn and/or obtain sufficient understanding of the entity, its environment, including internal control.

• Inquiries should be addressed to the appropriate individuals.

• Analytical procedures should be performed.

• Review-other procedures should be performed.

• Client representation letter should be obtained from management.

• Professional judgment should be used to evaluate results.

• Auditor (CPA) should communicate results.

3. Other uses of interim financial information

Normally, there is no need to refer to the review in the audit report because interim financial information is not a required part of the financial statements. However, modifications to the audit report are necessary in the following circumstances: 

• When interim financial information included in a note to the financial statements is not marked unaudited, the auditor would disclaim an opinion on the interim financial information.

• When interim financial information accompanies the audited financial statements, the auditor should include an other-matter paragraph in the auditor's report when all of the following conditions exist:

  • The interim financial information that has been reviewed is included in a document containing audited financial statements.

  • The interim financial information accompanying the audited financial statements does not appear to be presented in accordance with the applicable financial reporting framework.

  • The auditor's separate review report that refers to the departure from the applicable financial reporting framework is not presented with the interim financial information.

• For issuers, when quarterly information required by the SEC has not been reviewed, an explanatory paragraph with an appropriate heading should be added to the auditor's report, indicating that the auditor was unable to review such information.

• For issuers, when quarterly information required by the SEC is omitted, an explanatory paragraph with an appropriate heading should be added to the auditor's report, indicating that the company has not presented such information.