Independent Review or Independent Regret? How to Say No Without Ruining Your Reputation

2 Jul

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In the world of professional accountancy, few decisions carry more weight than accepting a new client. For practitioners undertaking Independent Reviews under ISRE 2400 (Revised), this decision is not just about capacity or revenue. It is about ethics, quality, integrity, and risk.

An Independent Review is a limited assurance engagement. The practitioner performs inquiry and analytical procedures to determine whether anything has come to their attention suggesting that the financial statements are not prepared, in all material respects, in accordance with an applicable financial reporting framework. It is not an audit, and it is certainly not a formality. Practitioners must approach client acceptance and pre-engagement procedures with intention and care.

What is an Independent Review?

An Independent Review is not a lesser form of an audit. It is a distinct engagement governed by ISRE 2400 (Revised). The practitioner performs limited procedures and expresses a conclusion based on limited assurance.

Unlike an audit, which provides reasonable assurance through detailed testing and verification, an Independent Review involves fewer procedures and a higher level of engagement risk. It is ideal for entities exempt from audit but still requiring external assurance. These may include companies with lower public interest scores or those seeking funding or fulfilling compliance obligations.

Under ISRE 2400, the engagement must be conducted by someone who is not the entity’s auditor. This separation preserves the objectivity and credibility of the review.

Before You Say Yes: The Client Take-On Process

Accepting a new Independent Review is not a casual decision. The standard sets out detailed guidance on what must be considered before engagement.

Establish That There Is a Rational Purpose

Begin by confirming the reason for the engagement. If the client cannot articulate a clear, rational purpose for the review, the engagement should not proceed. Valid reasons include regulatory compliance, satisfying lenders or investors, or voluntary assurance to improve governance.

2. Evaluate Management Integrity

Assess the honesty and ethical posture of those responsible for the financial statements. This includes reviewing past behaviour, openness during initial discussions, and how they respond to questions about internal controls. If you have cause to doubt their integrity, the engagement must be declined.

3. Ensure the Financial Reporting Framework Is Acceptable

Verify that the financial statements are prepared using a recognised framework. This could include IFRS, IFRS for SMEs, or an approved special purpose framework. Understand who the intended users of the financial statements are, and confirm that the framework is suitable for those users.

4. Assess Availability and Reliability of Information

Consider whether the necessary records and personnel will be available to support the review. If you suspect that records are incomplete, unavailable, or inaccurate, the engagement cannot proceed under ISRE 2400.

5. Evaluate Ethical and Independence Requirements

You must comply with all relevant ethical requirements, including independence. Identify potential threats such as self-review, familiarity, or advocacy. Use your firm’s quality control system to conduct formal conflict checks. If threats cannot be mitigated with safeguards, the engagement must be declined.

Pre-Engagement Procedures: Setting the Stage

Once the client has passed the initial acceptance criteria, it is time to formalise the engagement. ISRE 2400 requires several essential steps to be completed before work begins.

Prepare and Sign the Engagement Letter

The engagement letter must include the following:

The objective and scope of the engagement
Management’s responsibilities, including preparation of the financial statements and access to all information
The practitioner’s responsibilities and confirmation that an audit will not be performed
The applicable financial reporting framework
The form and content of the review report
The fee structure
Any restrictions on use or distribution of the report

The engagement must not begin until the letter is signed.

Confirm Preconditions for Engagement

The standard requires the practitioner to confirm the following preconditions:

The financial reporting framework is acceptable
Management acknowledges its responsibilities
There are no limitations that would restrict the practitioner’s ability to complete the engagement
If any of these conditions are not met, the practitioner may not accept the engagement under ISRE 2400.

Consider Engagement Quality and Team Competence

Ensure the engagement team has the required knowledge and experience. ISQC 1 (or ISQM 1 and ISQM 2) places responsibility on the firm to assign properly qualified personnel. Check whether the latest monitoring findings or internal quality reviews have raised concerns relevant to the proposed engagement.

Complete Risk-Based Planning

Perform a preliminary risk assessment. Understand the client’s industry, the complexity of its transactions, and the likelihood of material misstatements. Use this information to tailor your planned inquiries and analytical procedures.

Use of a Practical Checklist

A practical checklist ensures that nothing important is missed during client take-on and pre-engagement. This may include:

Confirmation of a rational engagement purpose
Verification of ethical and independence requirements
Review of the financial reporting framework
Documentation of preconditions for engagement
Initial fraud risk indicators
Consideration of going concern risks
File sign-offs by the engagement partner

Checklists support both quality and efficiency and are valuable during regulatory reviews.

Common Pitfalls to Avoid

Some of the most frequent errors include:

Accepting engagements without understanding the purpose
Starting work before the engagement letter is signed
Failing to confirm access to records and key personnel
Overlooking related party risks or fraud indicators
Accepting clients despite unresolved ethical threats

Each of these can invalidate the conclusion and create legal exposure for the firm.

A Decision Worth Getting Right

Client take-on and pre-engagement are not administrative hurdles. They are critical components of a high-quality Independent Review that protects the public interest and the practitioner.

When approached with care, they set the foundation for a successful engagement. When rushed or ignored, they expose the firm to unnecessary risk. The message is clear: take your time, ask the right questions, document your decisions, and always choose integrity over convenience.

This is not just about compliance with a standard. It is about upholding your professional values and delivering a service that clients and stakeholders can trust.

If you say yes, say it for the right reasons, and say it with the confidence that you have done your due diligence.

Join CIBA for a CPD on Pre-Engagement Procedures for Independent reviews in terms of ISRE2400 here

Independent Reviewers, Read This Before You Say “Yes” to That New Client

🗓️ 7 July 2025
🕑 14:00–16:00
📍 Live Webinar | 3 CPD Units

Before You Review, Protect You: Client Take-On & Pre-Engagement Done Right

Most Independent Review problems don’t start with the numbers—they start with the client.
This high-impact 2-hour session dives into the crucial client acceptance and pre-engagement procedures required under ISRE 2400 (Revised). From eligibility and risk flags to independence threats and engagement letters, we’ll unpack the exact steps you need to protect your practice before you commit.

✅ Is the company even eligible for a review?
✅ Can you stay independent?
✅ Are your pre-engagement files audit-ready?

You’ll leave with real examples, working templates, and the clarity to say yes or no with confidence.

🔓 FREE for CIBA Channel 1 subscribers
💳 R345 (VAT incl.) for non-subscribers

📩 Register now and stay compliant before you’re committed: here

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