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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit-related and assurance services

Kestrel LLP is asked by Dorin Co to carry out agreed-upon procedures on trade receivables for a prospective buyer. The buyer's representative suggests the procedures be described as 'review the receivables balance and check it is reasonable'. How should the practitioner respond under ISRS 4400 (Revised)?

The practitioner should insist the procedures be described objectively and clearly, without vague or subjective terms such as 'review' or 'reasonable'. ISRS 4400 (Revised) requires wording that is not open to varying interpretation, so that the engaging party and users understand exactly what was done.

  1. AAccept the wording, since the practitioner will judge what is reasonable during the work
  2. BAccept it but add a statement in the report that the practitioner is confident in the balance
  3. CInsist on procedures that are described objectively, in terms that are clear, not open to varying interpretation, and which do not use vague termsCorrect
  4. DReplace the procedures with an audit of the balance so that an opinion can be given

Explanation

ISRS 4400 (Revised) requires procedures to be described in clear, objective terms, avoiding vague or subjective wording such as 'review' or 'reasonable' that could be interpreted differently by different parties. Accepting the wording would allow differing interpretations, and converting to an audit is unnecessary and changes the engagement.

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