COMPANIES, whose shares/stocks are traded on the Jamaica Stock Exchange (JSE), are required prepare interim financial statements. The JSE may consider introducing a rule which requires an accountant's review of the interim financial information as is done in England and the Unites States of America.
The objective of a review of interim financial information is to provide the accountant, based on applying his or her knowledge of financial reporting practices to significant accounting matters of which he or she becomes aware through inquiries and analytical procedures, with a basis for reporting whether material modifications should be made for such information to conform with generally accepted accounting principles. The objective of a review of interim financial information differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review of interim financial information does not provide a basis for the expression of such an opinion, because the review does not contemplate:
- tests of accounting records through inspection, observation, or confirmation,
- obtaining corroborating evidential matter in response to inquiries, or
- the application of certain other procedures ordinarily performed during
an audit.
A review may bring to the accountant's attention significant matters affecting
the interim financial information, but it does not provide assurance that the
accountant will become aware of all significant matters that would be disclosed
in an audit.
To perform a review of interim financial information, the accountant needs
to have sufficient knowledge of a client's internal control as it relates to
the preparation of both annual and interim financial information to:
- Identify types of potential material misstatements in the interim financial
information and consider the likelihood of their occurrence.
- Select the inquiries and analytical procedures that will provide the accountant
with a basis for reporting whether material modifications should be made for
such information to conform with generally accepted accounting principles.
Knowledge of the client's internal control includes knowledge of the control environment, risk assessment, control activities, information and communication, and monitoring.
Mr. Raphael E. Gordon is the managing partner of KPMG Peat Marwick, Past President of the Institute of Chartered Accountants of Jamaica, a member of the Public Accountancy Board, and Jamaica's representative on the Association of Chartered Certified Accountants International Assembly.
