ANNOUNCEMENT REGARDING COMPLIANCE WITH PARAGRAPHS 61 AND 62 OF

THE STANDARD ON REVIEW ENGAGEMENTS (SRE) 2410

1. The Council of the Institute of Chartered Accountants of India, at its 308th meeting, considered

an issue relating to difficulties being faced by the members of the Institute in compliance with

paragraphs 61 and 62 of the SRE 2410, Review of Interim Financial Information Performed by

the Independent Auditor of the Entity, raised by the Auditing and Assurance Standards Board

of the Institute.

2. The Council noted that paragraphs 61 and 62 of SRE 2410 require as under:

61. The terms of the engagement include managements agreement that where any

document containing interim financial information indicates that such information has

been reviewed by the entitys auditor, the review report will also be included in the

document. If management has not included the review report in the document, the

auditor considers seeking legal advice to assist in determining the appropriate course of

action in the circumstances.

62. If the auditor has issued a modified review report and management issues the

interim financial information without including the modified review report in the

document containing the interim financial information, the auditor considers seeking

legal advice to assist in determining the appropriate course of action in the

circumstances, and the possibility of resigning from the appointment to audit the

annual financial statements.

3. The Council noted that a number of entities were publishing interim financial results with a

declaration that the results have been approved by the Board of Directors at its meeting held

on xxxxx and have been subjected to limited review by the statutory auditors. The

companies, however, were not publishing the review report along with such published results.

Accordingly, it was either that the auditors had not obtained an agreement with the

management that they would publish the review report along with the reviewed results or

that despite the said agreement, the management had not complied therewith. The Council

noted that in the latter cases, the auditor would be penalised under the requirements of SRE

2410 even when the default/ breach had been committed by the management.

4. The Council was of the view that it is not practically feasible for the auditor to ensure that

every document released by the management containing the interim financial information

indicating that such information has been reviewed by the entitys auditor, the review report

has been included in the said document.

5. On a consideration of the matter, the Council is of the opinion that paragraphs 61 and 62 did

not envisage the auditor to take steps to ensure that on every occasion when the review

results were published by the management, it also published the review report therewith.

The responsibility of the auditor was upto issuance of the review report on the results, at

most till the time the interim results, along with the review report, were filed by the company

with the concerned stock exchange. Further, since such filing led to the concerned interim

results and the review report thereon becoming available in the public domain, the same

would be construed as sufficient compliance by the auditor with the requirements of

paragraphs 61 and 62 of SRE 2410.

6. The Council, however, felt that if, subsequent to the issuance of the review report, the auditor

became aware of situations where the management had not published the review report

especially where the review report contained auditors reservations, he would need to bring

the same to the attention of the management and, if considered necessary, take legal advice.