Before you review or sign for another firm
What a firm should check on its own side before it agrees to review, audit, compile or sign financial statements that another firm prepared.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Another firm asks whether you would review a client's statements it has prepared, or audit them, or act as the accounting officer who compiles and signs. It is a common arrangement, especially where the preparing firm is not registered for the work or the client needs a practitioner independent of the books. It is also work where it is easy to forget that your firm, not the referring one, is taking on an engagement with all its obligations.
This article covers what to check before you say yes: who the client is, your own acceptance and conflict checks, independence, your methodology, and the version you will stand behind.
Who the client really is
The engagement is with the entity whose statements you will review, audit or sign, not with the firm that prepared them. The entity's directors or trustees appoint you, sign your engagement letter, are responsible for the statements and receive your report. The preparing firm is a third party: helpful, often the day-to-day contact, but not your client.
That has practical consequences:
- The engagement letter is addressed to the entity and signed by its directors.
- Your enquiries are made of management, not only of the preparer.
- Your fee is agreed with, and owed by, the entity, whatever arrangement the two firms have between them.
- Your report is addressed as the law and the standard require, not to the preparing firm.
Acceptance and conflict checks on your side
Acceptance is your firm's decision under your own system of quality management. The IAASB's page on ISQM 1 describes the standard that requires audit and review firms to design, implement and operate a system of quality management tailored to the firm and its engagements, and acceptance and continuance sit within that system.
In Achekam, a firm can record a client acceptance review after a conflict check against its own clients and contacts, and only a signed-in partner can approve it. Run that check on the entity, its directors and its related entities exactly as you would for any new client. Customer due diligence there is a tick-box confirmation by the preparer, and Achekam runs no automatic FICA, CIPC or sanctions check, so the identification work itself is yours.
Ask the referring firm and the entity what you would ask any new client: why the work is needed, who will rely on the report, whether a previous practitioner declined or resigned, and whether any disputes are known.
Ask one more question that is specific to this arrangement: what does the preparing firm expect of you? A preparer who hopes for a quick sign-off on a tight deadline, or who assumes you will rely on its working papers, needs to hear early how you work. Settle the timetable, the access you will need to the client's records and people, and how queries will flow, before the engagement letter is signed rather than after the first difficult finding.
Independence from the entity and the preparing firm
For a review or an audit, independence from the entity is required. Two situations deserve extra thought:
- Your relationship with the preparing firm. A steady flow of referrals from one firm can create a self-interest or familiarity threat: a reviewer may hesitate to report something that embarrasses the preparer. Consider it, and record how you address it.
- Your firm's other work for the entity. If you also keep its books, prepare its tax or provide other services, weigh the self-review threat before accepting.
Achekam lets staff record annual independence declarations and any interest, relationship or gift involving a client, and anyone can check whether a person has an active independence exception for a client. Know the limits, though. Achekam has no way to approve an independence declaration, so every declaration stays awaiting the quality partner, and assigning a person to an engagement does not check the independence register. Check the register yourself before staffing the job.
Your own methodology and working papers for the job
The preparing firm's working papers are not yours. You perform the procedures your standard requires, under your own methodology, and document them in your own file.
Achekam ships working-paper template packs written in its own words, covering among other things ISRE 2400 and 2410 reviews and ISRS 4400 and 4410 engagements, for a firm to adopt and approve; the catalogue is marked as unapproved platform content until the firm adopts it. If you expect to do this kind of work regularly, adopt and approve the packs you need before the first engagement arrives, not halfway through one.
Standing behind only the version you received
The most important protection is that your report covers one defined set of statements.
- Reviews and audits. A firm can send a frozen set of statements to another firm on Achekam, or to an outside practitioner by e-mailed link, for an independent review under ISRE 2400 (Revised) or an audit, and the reviewer's signed report is bound to that version. An audit report needs a partner whom the reviewing firm records as an IRBA registered auditor, and Achekam does not check that with IRBA.
- Compilation or sign-off by an external officer. A firm can have another firm's officer compile its prepared statements under ISRS 4410 (Revised), or act as accounting officer and sign them, and the statements are issued only in the version that officer released.
If the preparing firm changes anything after you received the set, a new version comes to you for a fresh look. Never let your report travel with statements you have not seen.
The mechanics from the receiving side are covered in independent review by another firm and an external officer signing off. The checks above come first, because they decide whether you should be doing the work at all.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
