Review Engagement Letter Template for England and Wales

A Review Engagement Letter is a crucial legal document that formalises the relationship between an accounting firm and a client company when conducting limited assurance reviews of financial statements. Unlike audit engagements, review engagements provide limited assurance and involve less extensive procedures, making this agreement essential for clearly defining the scope and limitations of the work to be performed.

When do you need this document?

You need a Review Engagement Letter whenever your company requires an independent review of financial statements that falls short of a full audit. This is particularly common for smaller companies that want professional assurance on their financial reporting without the extensive procedures and costs associated with statutory audits. Many companies use review engagements for interim financial statements, management accounts, or when seeking investment where full audit assurance is not required. Banks and lenders often accept review reports for loan applications, making this document valuable for companies seeking financing. Additionally, parent companies may require subsidiaries to obtain review reports rather than full audits for consolidation purposes.

Key legal considerations

The engagement letter must clearly define the scope of work and explicitly state the limitations of review procedures compared to audit procedures. You should ensure the document addresses professional liability limitations and includes appropriate disclaimers regarding the level of assurance provided. The letter must specify compliance with relevant professional standards, particularly ISRE 2400, and outline the respective responsibilities of both parties. Fee arrangements, including payment terms and any additional costs for extra work, should be clearly documented. The document should also address confidentiality obligations, data protection compliance under UK GDPR, and the circumstances under which the engagement may be terminated. Professional indemnity insurance arrangements and liability caps are essential elements that protect both parties from potential disputes.

Legal requirements in England and Wales

Under England and Wales law, review engagement letters must comply with the Companies Act 2006, particularly regarding financial reporting requirements and director responsibilities. The engagement must adhere to ISRE 2400 (Revised) standards and FRC Ethical Standards, ensuring the accounting firm maintains independence and objectivity throughout the review process. Data protection compliance under the Data Protection Act 2018 and UK GDPR is mandatory when handling client financial data. The letter should reference ICAEW Code of Ethics requirements where applicable and ensure the reviewing firm has appropriate professional qualifications and regulatory authorisation. Money laundering reporting obligations under the Proceeds of Crime Act 2002 may also apply, requiring specific clauses addressing suspicious transaction reporting. The document must clearly state that a review engagement does not constitute a statutory audit and cannot replace audit requirements where these are legally mandated.