Lucia Johnson, of Johnson and Lecy, CPAs, has completed the first-year audit of Tidwell Publishing Co., a publicly held company, for the year ended December 31, 2011. She is now working on a review of interim financial statements for the quarter ended March 31, 2012. Johnson has never done an interim review of a public company, but her firm does extensive compilation and review work. She therefore has one of her most experienced assistants, Fred Blair, do the work. She instructs him to follow the firm's standard review services procedures for SSARS reviews and to do high-quality work because Tidwell is a high-risk client. Blair completes the review of Tidwell's statements and Johnson carefully reviews Blair's work. No exceptions are found. Each page of the client's financial statements is marked "reviewed." The following report is issued.
SECURITIES AND EXCHANGE COMMISSION
We have reviewed the accompanying balance sheet of Tidwell Publishing Co. as of March 31, 2012, and the related statements of income, retained earnings, and changes in financial position for the year then ended, in accordance with the standards of the Public Company Accounting Oversight Board (United States). All information included in these financial statements is the representation of the management of Tidwell Publishing Co.
A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.
Johnson & Levy, CPAs
March 31, 2012
Required
a. Is it appropriate to do a review service for a publicly held company? Explain.
b. Evaluate the approach taken by Johnson and Blair on the engagement.
c. Evaluate the report.