SAS No. 36 Engagements to Review Financial Statements  


Issued by Auditing Standards Committee in Taiwan on 21 November, 2001.


The objective of a review of financial statements is to enable an auditor 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 auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with the generally accepted accounting principles. 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.      

The auditor 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. For the purpose of expressing negative assurance in the review report, the auditor should obtain sufficient appropriate evidence primarily through inquiry and analytical procedures to be able to draw conclusions.

In planning a review of financial statements, the auditor 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.  

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

The auditor 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 Statement.

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; the entity’s procedures for recording, classifying and summarizing transactions, accumulating information for disclosure in the financial statements and preparing financial statements; and concerning all material assertions in the financial statements.
  • 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.
  • 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 auditor would consider the types of matters that required accounting adjustments in prior periods.
  • Reading the financial statements to consider, on the basis of information coming to the auditor’s attention, whether the financial statements appear to conform with the basis of accounting indicated.
  • Obtaining reports from other auditors, 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.

The review report should contain a clear written expression of negative assurance. The auditor should review and assess the conclusions drawn from the evidence obtained as the basis for the expression of negative assurance. Based on the work performed, the auditor should assess whether any information obtained during the review indicates that the financial statements are not presented fairly, in all material respects, in accordance with the generally accepted accounting principles.

Effective date

This Statement is effective from 31 December, 2001.

  Address: 20th. F., No.17, Sec.1, Chengde Rd., Taipei, Taiwan Tel:886-2-2549-0549
Copyright(c) Accounting Research and Development Foundation in Taiwan