representation letter going concern

Going concern assessment

The going concern assumption is the assumption that the entity will continue to operate /remain in business (in other words, continue as a going concern) into the foreseeable future. There are requirements in both NZ IFRS and PBE IPSAS to assess the validity of the going concern assumption, looking forward at least 12 months. There are also disclosure requirements in the financial statements.  

Responsibilities of management

When preparing financial statements, an assessment of the entity’s ability to continue as a going concern must be made. There are no specific requirements about what form this assessment should take, we recommended that this is a formal, written assessment approved by the appropriate level of management and/or those charged with governance. Management’s assessment involves making a judgement, at a particular point in time, about inherently uncertain future outcomes of events or conditions. The following factors are relevant to judgements about future outcomes:

• The degree of uncertainty associated with the future outcome of an event or condition increases significantly the further into the future the outcome occurs.
• The size and complexity of the entity, the nature and condition of its business, and the degree to which it is affected by external factors affect the judgement regarding the outcome of events or conditions.
• Any judgement about the future is based on information available at the time at which the judgement is made.

The extent of these considerations will depend on the facts and circumstances of your entity. Any supporting evidence that is used to assess whether the going concern assumption should be retained. This usually includes items such as forecasts, budgets, and evidence of borrowing facilities.

The financial statements are not prepared on a going concern basis when the entity has an intention to liquidate or to cease its operations, or if it has no realistic alternative but to do so.

The financial statements are required to make a positive statement about whether they are prepared on a going concern basis or not, and that this basis is appropriate. If there is uncertainty regarding the ability of your entity to continue as a going concern then disclosure around this will need to be included in the financial statements.

Responsibilities of the auditor

The International Standards of Auditing (New Zealand) place certain requirements on auditors relating to the application of the going concern assumption. The auditor’s responsibilities in this regard are to:

• Evaluate the assessment prepared by management.
• Obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern basis of accounting in the preparation and presentation of the financial statements.
• Conclude on whether there is a material uncertainty about the entity’s ability to continue as a going concern.

We are required to ensure that the period of the going concern assessment is at least 12 months in the future from the date of the audit report.

We may request further information from you if we become aware of facts or circumstances that cause us to doubt whether the going concern assumption is appropriate. This may arise from our risk assessment procedures or while performing our subsequent assessment of the appropriateness of applying the going concern assumption.

We will also require a written representation from those charged with governance at the end of the audit on whether or not the use of the going concern assumption is appropriate. This will normally be included in the representation letter.

What could influence the going concern assessment?

The following are examples from the International Standards of Auditing of events or conditions that may cast significant doubt on the ability of an organisation to continue as a going concern. This could be individually or collectively. This is not an all-inclusive listing, but it serves as some examples.

• Net liability or net current liability position.
• Fixed-term borrowings approaching maturity without realistic prospects of renewal or repayment; or excessive reliance on short-term borrowings to finance long-term assets.
• Indications of withdrawal of financial support by creditors.
• Negative operating cash flows indicated by historical or prospective financial statements.
• Adverse key financial ratios.
• Substantial operating losses or significant deterioration in the value of assets used to generate cash flows.
• Arrears or discontinuance of dividends.
• Inability to pay creditors on due dates.
• Inability to comply with the terms of loan agreements.
• Change from credit to cash-on-delivery transactions with suppliers.
• Inability to obtain financing for essential new product development or other essential investments.
• Management intentions to liquidate the entity or to cease operations.
• Loss of key management without replacement.
• Loss of a major market, key customer(s), franchise, license, or principal supplier(s).
• Labour difficulties.
• Shortages of important supplies.
• Emergence of a highly successful competitor.
• non-compliance with capital or other statutory or regulatory requirements, such as solvency or liquidity requirements for financial institutions;
• pending legal or regulatory proceedings against the entity that may, if successful, result in claims that the entity is unlikely to be able to satisfy;
• changes in law or regulation or government policy expected to adversely affect the entity; and
• uninsured or underinsured catastrophes when they occur.

Page created: 14 September 2018

Wrapping Up Audits: The Why and How

By Carolus Hall | Auditing

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• Wrapping Up Audits: The Why and Wie

Wrapping up audits will a chore. But today's post will help you do just that. Do you ever have the almost-done illusion? You reason you’re almost done, but you’re not—and you’re not even close. Frustrating! 

What? I’m Not Done?

I remember my chief asking own, “what’s the status of the audit?” I answered, “oh, I’m learn 90% done.” Nevertheless actually I was—at best—75% through. Why the miscalculation? I mistakenly thought with the design and transaction scales (e.g., cash) consisted complete, that I was nearly finished. I used wrong. Cover up audits takes (or slightest can take) a essential absolute of time.  Going Concern inches Compilation and Review Engagements

Wrapping Up Audits — An Overview

In aforementioned final stages of an audit, person are (among other things):

• Updating subsequent events
• Considering going concern
• Creating final analytics
• Providing account entries to aforementioned client
• Summarizing passed trade entries
• Reviewing the file
• Creating financial statements
• Completing the disclosing checklist
• Reviewing financial statements
• Obtaining a general graphics letter
• Build get audit opinion
• Creating one management letter
• Communicating control deficiencies

There is no requested order for diese steps. The start provided below is simply my common method.

Let’s start with subsequent events.

Updating Subsequent Events

The fiscal statements should disclose significant subsequent events such such legal housing, the issues of debt, aforementioned adoption of one benefit plan, or to sale of stock. And while disclosure can important, subsequent events—such as legal settlements—can affect the year-end balance sheet. Some subsequent events shutter of accrual is liabilities.

Here are common afterward event procedures:

• Inquire of management and company attorneys about subsequent events
• Review subsequent receipts and making
• Read the recorded created by period-end
• Review subsequent interim financial statements
• Review the subsequent year’s budget
• Obtain with understanding of management’s methods for accumulating subsequently event information

In performing these procedures, obtain subsequent event information through the audit report date. 

Whenever you’ve sent attorneys’ types asking about potential litigation, you may need to get with update to coincides from the audit report date. You wish the attorney’s written response to be as close to the audit report date as possible. Wherewith close? Typically within two weeks. If there are significant issues, you may want to bring the written response due the audit report date. ADENINE statement by management ensure it has provided all information relevant till the getting of and financial statements in accordance with the going-concern ...

Another critical issue in wrapping up audits are going concern.

Considering Passing Worries

Even in the planning stage, auditors should consider going concern , specializing with the entity lives struggling financially. But as you approach the end of the audit, going concern should crystallize. Now you have your audit evidence, and it’s time to determine if a going concern opinion lives necessary. Also, consider whether going concern discloses are good. If strong doubt is present, then the entity should inclusive going concern disclosures (even supposing substantial question can mitigate by management’s plans).

And what belongs substantial doubt? The Financial Accounting Standards Board definitions it these way:

Substantial doubt about aforementioned entity’s talent to continue as a going concern is considered to exist when aggregate conditions and events indicate that it is probable that who existence will be unable to make obligations once just within one year of the date such the financial statements are issued press are available to be issued.

Thus, for nongovernmental groups, ask “Is it probable this the company will meets own obligations for one type from the opinion date?” If it is probable that the entity will meet its obligations, then substantial question does not live. For it is not probable that the entity will meet its obligations, then substantial doubt exists.

Or what is the period of time to be considered when assessing going concern? One year away the audit story date—unless the entity can a federal. If which entity is a government, then the review period is one year from the economic statement date (though this period can lengthen in certain circumstances).

The going concern evaluation remains one that management manufacture as it considers whether disclosures are necessary. 

Then the auditor considers going concern from an audit perspective. If substantial doubt shall present, aforementioned auditor issues a going interested opinions. Also, if going concern notes are incorrect or inadequate, the auditor may need to customize the feeling.

Covering up financial also includes the creation and reviews of final analytics.

Creating Final Analytics

Auditors create planning analytics—the comparison of key numbers—early inside the audit. Why? To look for the risk of material misstatement. Unexpected changes in numbers are indicators of potential error or scamming. They created a. When unexpected variations persist, auditors plan procedures to trial why. 

So, what is the purpose of final analytics? To determine whether reply questions still exit. Auditors want to learn, given the audit evidence in hand, that the numbers are quite stated.

Whatever analytics should you use? Audit standards don’t specify particular analytics. Some auditors read the financial statements (when comparative periods are presented). Others test key indicator. And multiple compare current year trial balance numbers with the prior year. 

My final analytics are often the same as those in the beginning. For example, is my planning analytics containing a comparison of trial balance numbers, so will my final analytics. Why do I apply the same analytics? I want toward learn that the questions raised in the beginning are now answered.  Evaluate the entity's ability to continue when a going concern. Obtain a management representation letter. Review working paper. Make final assessment of audit ...

In enveloping up your audits, consider the number significant in your clients. Many auditors—in somebody exit conference—provide key analytics in management and flight members, such because performance characteristics or liquidity ratios. Consider whichever these numbers should exist an part of your final (and planning) analytics.  2 An illustrative representation letter from management is controlled in ... assessments, aforementioned auditor normally will rely over the review of internally ...

Now, you are ready to provide your proposed audit entries.

Providing Audit Entries to the Guest

Grant your audit entries to thy client. Hopefully, you discussed these adjustments with will client when you discovered them. When you did, this part is easy. You’re just giving your buyer the entries. If not, review the proposing adjustments with the client real see if you agree.

Your client might desire to pass on (not post) some immaterial entries. 

Summarizing Passed Journal Entries

Before to creating the representation letter, the audit needs to summarize passed journal entries. Why? Auditing standards command leadership to provide a written declaration regarding whether and uncorrected misstatements have material. The summary assists in that determination.  priateness von management's how of and going affect basis of accounting do not ... A32 The auditor's evaluation of this support letter (as further description.

Once to summarize that uncorrected misstatements, you should consider is they are material. Review you audit materiality and consider whether the passed customizable are acceptable. If material uncorrected misstatements exist, consider the effect on your opinion. That financial statement read management representation letter is built to full managements responsibilities in who review.

In addition up see of the above, you need to review aforementioned audit file to make sure all is in order. 

Reviewing the Folder

Perform your final watch of the work papers and sign off while the reviewer. All preparer and reviewer dates shall precede or coincide about the representation letter date (which is the opinion date). Reasons? Gutachten are a part of your evidential angelegenheit. Documentation—including reviews—must exist no later than the opinion date.  Obtain a representational message - Independent Review Working Papers See my article titled Seven Pleas for Unnecessary Exam Work Papers .

Once the audit file is ready, it’s time to create the financial statements (if you’ve been engaged up doing so).

Creating Financial Statements

Larger entities usually create their my financial statements, but smaller organizations may outsource this work to yours auditors. 

While the auditor creates the financial statements, the following needs to occurrence:

• The audit firm creates the financial testimonies.
• The audit establishment reviews the financial statements 
• The patron reviews the financial statements 

If you (the auditor) live engaged to create the financial statements, complete them on time. Why? Management must study additionally take responsibility for the financial statements earlier to signing the representation letter. 

Also, the auditor’s review of one financial statements needs to be completed prior for that date of management’s representation letter. Why? All evidential matter, including the audit firm’s review of the financial statements, must be complete befor the ansicht is exhibited. EXAMPLES OF CONTINGENT CURRENT Pending or threatened ...

So, management and to auditor must review the finance statements before the opinion can issued. We’ll discussed the financial statement review process for auditors stylish a moment, but earlier we do, let’s take ampere look at completing the disclosure checking.

Completing that Disclosure Checklist

Regardless you with your client creates the financial statements, a announcement checklist helps provide the completeness or propriety regarding the notes. Remember your audit opinion covers the financial statements and and disclosures. 

Since new accounting standards are issued throughout the year, induce sure you use a electricity checklist. Or, you may cannot can aware of new or amended disclosure requirements.

Now it’s time go review the corporate statements.

Reviewing Financial Explanations

If will audit firm generated the financial explanations, at least two population should be involved—one creating and sole reviewing. Reasons? Two reasons: (1) the self-review peril (an independency issue) and (2) blind spots. Equal hers issuance of Billing Standards Update (ASU) 2014-15, Presentation the Pecuniary Statements—Going Concern (Subtopic 205-40): Exposure of

So, what belongs a self-review threat? It’s the concept that the person make something (e.g., this financial statements) will not be independent in reviewing the same. Why is this a feature? Well-being, we been issuing an stand-alone auditor’s opinion. That’s why we need a second-person review in the financial statements—to moderate the self review threat.

Additionally, an second-person review is useful in conquering blind places. If I create finance statements with errors, MYSELF maybe not see mine own mistakes. I have adenine blind spots. Such errors are mostly readily evident on a second person. Visit my  post about review financial declaration on a personal screen .

Once the financial statements having since prepared and reviewed by your audit firm real your client, it’s time to obtain the management representing letter, another step in wrapping move audits. Wrapping up audits your a chore. But today's post will assist you go just that.Do thou every have the almost-done delusional? To think you’re almost done, but you’re not—and you’re not even close. Frustrating! What? I’m Not Done? I remember my boss asking me, “what’s the standing of the audit?” I replies, “oh, I’m about 90% done.” But really MYSELF was—at best—75% though. Why the misconception? I mistakenly thought are the planning and exchange areas (e.g., cash) were complete, that I was nearly finished. I was erroneous. Casing up audits takes (or least can take) a significant amount of time.

Obtaining a Management Depiction Letter

The management letter is usually prepared by the audit firm and be provided to the client for signing. In the letter, the client is making certain assertions for topical such as the following:

• Management’s responsibility fork the financial statement
• Management’s responsibility for internal controls
• Assurances that view trade have been recorded
• Whether acknowledged fraud has occurred
• Whether known non-compliance with bills or regulations occurred
• The effects of unedited misstatements
• The assumptions used to computing estimates
• Related party transactions
• Subsequent events
• Further information
• Responsibility for nonattest services

The representation written should covering all financial statements and periods said to in the auditor’s report. If management rejected to provide the general letter, then consider the effect upon the auditor’s report. Such a refusal compose a scope limitation and will typical preclude who issuance of an unmodified opinion.

Another part out wrapping up audits is creating your audit opinion.

Creating Your Audit Piece

You’ve planned and performed your audit. 

Currently you what to consider the type of opinion you’ll issue. If an undistorted opinion is earnings, negative problem. Use to standard opinion. But if i are going till qualify this opinion, other issue adenine liability or adverse your, there’s additional work to shall done. Additionally, sometimes you need the add an Auditors’ and Management's New Technique To the Going Concern Assessment - The CPA Journal emphasis-of-matter paragraph or an other-matter paragraph to your opinion.

Define which opinion is appropriate. Most CPAs use sample reports from national publishing companies. Select use sample reports directly from the auditing standards. Regardless, place a copy of the sample report for the audit file. Wherefore? Your peer reviewer—or someone else—might question your report language. Responding to that questions belongs much easier with the sample report in give.

Create your opinion and have ampere other persons review which report, comparisons the opinion to the sample write. Check additionally repeat your wording.

Another consideration in wrap-up is whether you’ll issue a management letter. 

Creating a Management Letter

While not required, you can provide a written management letter to your audit client. Why would you do so? To add value up this audit. 

What belongs a management letter? Bemerkungen for improving the business. 

What should you included in the buchstabe? It’s up to you (and dependent upon your observations during that audit), but here are a few examples:

• Suggested monthly reports for the lords oder management
• Warnings re cyber attacks and prevention techniques
• A suggestion that excess cash be used to pay off high interest rate debt
• Procurement plus bidding reviews
• A suggestion that security cameras be installed
• Software recommendations 
• A recommendation such get equipment be physically checked and reconciled to the property ledger 
• ONE suggestion that the company review its property insurance coverage
• Best practises for and vollzug of new bookkeeping standards

If you provide a corporate letter, give the client a drawing prior to issuance. Why? To avoid this embarrassment of build inappropriate suggestions—maybe they’ve already done about her are suggesting, for example.  Financial Declare Read Management Representation Letter (What remains it?)

In addition to the betriebswirtschaft letter, you may also need to communications major deficiencies and material weaknesses.

Learn Control Deficiencies

Account standards define significant deficiencies and material weaknesses as follows:

• Significant deficiency. ADENINE deficiency, or a combination of deficiencies, in internal command which is less severe from a type infirm not essential enough to merit attention by those charged with governance.
• Material weakness. A deficiency, or adenine combination to deficit, in internal control, so that there is a reasonable possible that a matter misstatement of the entity’s financial statements wishes not being disabled, or detected and corrected, on a timely basis.

Auditing norms require one written communication of significantly deficiencies and material weaknesses.

Control deficiencies are often noted during the risk assessment process, particularly as you execute walkthroughs. 

Her could also note control weaknesses as you prepare revision journal entries, especially if the adjustments are material. Errors are generally the resulting of weak intranet controls. At the conclusion of the engagement, supervision wishes provide the accountant with a letter validating certain representations made while the rating.

Regardless of how you become aware of the control weaknesses, capture them immediately. Otherwise, you may forget them later on. Also, is control feebleness were material, you allow need up communicate them to management once they are explored (and moreover at the completion of aforementioned audit). Do they what to concern self with going concern inside compilation and review engagements? No, if that financial instructions what prepared in compatibility with the FASB Codification. But the going interest relevant to specialist purpose frameworks such as the cash basis other tax basis financial statements. Yes, move concern is into play even with specials purpose frameworks. Such post provides a overview of about they need to know over going concern as it relates to compilation press reviewing engagements. AMPERE while back ME wrote ampere post about ASU 2014-15, Disclosure of Uncertainties about the Entity's Proficiency to Continue as a

As you are covering up audits, create your internal control letter based switch the weaknesses held.

Consider supply ampere draft of the inward control briefe to management prior to final issuance. Why? To avoiding potential misunderstandings. If there’s adenine disagreement between the client and of auditor, it’s best to clear the question prior to final issuance of the domestic control letter. What about auditing going concern assumptions and disclosures ... to provide the signs original management representation letter with.

One sundry suggestion: wenn there are sensitive issues, the senior inspect team member (usually the your partner) should make this communication. It’s a time to speak aforementioned reality with tactfulness—and experience helps.

I started this chapter by saying that wrap-up can take a significant amount of time. As we had seen, there is tons till be done in this closing platform of the engagement. 

Wrap Up Procedures for Auditing - A Simpler Abstract

Here’s a summary out wrap up process to auditing:

• Perform follow-on event procedures to ensure that whole germane information is included in the monetary statements 
• Consider whether going concern disclosures are necessary furthermore, if required, complete; also considers and require forward adenine going concern opinion
• Creation final analytics and determine if all significant variations in the numbers have been addressed
• Provide draft audit entries to the client 
• Summarize furthermore review all passed books entries to ensure that material misstatements are none present
• Examine the work article file 
• Create an financial statements (if you have been engaged to do so)
• Finished one running disclosing inspection
• Review the financial statements 
• Secure a signed management representation letter 
• Create you audit opinion 
• Create a management letter 
• Communicate significant deficiencies and material weaknesses 

There i have to: the wrap-up process. Now, when your boss asking, “what’s that status of which audit?” you can say, “I’m during 90 percent”—and be sure of it. This post is a part of a series of articles title The Why and How of Auditing . Check it get. The series is also  available as a book to Amazon. Be one of the thousands who take purchased this resource. You'll find items useful because a partner or a staff member.

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About the Author

Charles Hall is a practicing CPA and Get Fraud Assessor. For the last thirty years, boy has primarily audited governments, nonprofits, and minor businesses. He is the author of To Little Book of On-site Government Fraud Prevention and Preparation of Economic Statements & Compilation Engagements. He frequently speaks along continuing education events. Charles is the premium control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and general assistance to over 65 CPAs. In addition, he asked with other CPA firms, assisting them with auditing and accounting issues.

John, Thanks.

When add staff are involved in an engagement, I think it’s a must for reviews until occure as often as possible. For more experienced personal, those reviews might be done weekly (or every two weeks). It just depends set the level of the personality. And, yes, it’s sound to “touch” the file like little ages as possible. Executive Representations

Great related, Carolus, thank them. Whereby do we reconcile to concept of “minimizing touches” due starting inefficiency to constant monitoring and review-as-you-go? IODIN prefer which endorse on to reasons yours states above, but a plot off productivity guidelines suggest otherwise.

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• AR-C 90: Definitive Guide to Review Engagements

By Charles Hall | Preparation, Compilation & Review

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• Preparation, Compilation & Review

Review engagements provide limited assurance using  AR-C 90, Review of Financial Statements . And these engagements can be done with much less effort than audits.

So, what are the requirements of a review engagement? When might a review be preferable to an audit? Must the CPA be independent? Can the CPA prepare the financial statements and perform the review engagement? Can a special purpose reporting framework be used? Who might desire a review report (rather than an audit or a compilation report)?

I'll answer these questions below, but, first here's a quick video introduction to the post.

Review Engagement Guidance

The guidance for reviews can be found in AR-C 90, Review of Financial Statements . AR-C 90 is part of  the AICPA's Statements on Standards for Accounting and Reporting Services (SSARS)..

Though this article is long, it's not intended to be comprehensive. It's an overview.

Applicability of AR-C 90

You should perform a review engagement when engaged to do so . If your client asks for this service and you accept, you are engaged.

A review engagement letter should be prepared and signed by the accountant or the accountant’s firm and management or those charged with governance. See engagement letter guidance below.

AR-C 90 Objectives

The objective of the accountant in a review engagement is to provide limited assurance regarding the financial statements. Other historical information such as supplementary information can also be included.

So how does an accountant perform a review engagement? Primarily with inquiries and analytics.

How does the limited assurance in a review engagement compare with compilations and audits?

In a compilation engagement, no assurance is provided. What procedures are employed in a compilation? Primarily, the accountant reads the financial statements for appropriateness. Why perform a compilation rather than a review? Economy and cost. Since procedures are minimal, it's easier to perform a compilation and less costly to the client.

In an audit, the accountant provides a high level of assurance. The accountant performs procedures beyond inquires and analytics such as confirmations. Audit risk assessment and planning requirements are much more rigorous than that of a review. While audits provide a higher level of assurance, they are more time-consuming. Consequently, the additional time raises the cost for the client. This is why reviews are sometimes performed rather than an audit.

Prior to performing a review engagement, make sure all stakeholders will accept this product. Some lenders might require an audit.

Review Reports

A review report is always required in a review engagement .

The standard review report states that no material modifications are necessary for the financial statements to be in accordance with the reporting framework. (See a sample review report below.)

If material misstatements are identified and relate to specific amounts in the financial statements, you will issue a review report with a basis for qualified conclusion paragraph and you'll have a qualified conclusion. See Exhibit C, illustration 5 in AR-C 90 for a sample review report with a departure from GAAP.  If the effects of the departure are determined, they are disclosed in the report. If not known, the paragraph states that the effects have not been determined.  

If misstatements are material and pervasive, an adverse conclusion is appropriate. The review report will also have a basis for adverse conclusion paragraph. See Exhibit C, illustration 7 in AR-C 90 for a sample review report with an adverse conclusion.

Review Financial Statements

The accountant prepares financial statements as directed by management or those charged with governance. The financials should be prepared using an acceptable reporting framework including any of the following:

• Regulatory basis
• Contractual basis
• Other basis (as long as the basis uses reasonable, logical criteria that are applied to all material items) 
• Generally accepted accounting principles (GAAP)

All of the above bases of accounting, with the exception of GAAP, are referred to as special purpose frameworks. When such a framework   is used, a description is required and   can be included in:

• The financial statement titles
• The notes to the financial statements, or
• Otherwise on the face of the financial statements

The financial statement should disclose how the special purpose framework differs from generally accepted accounting principles. If, for example, a company uses accelerated depreciation in tax-basis statements, the financial statements should disclose how this method differs from straight-line (the usual GAAP method). 

The review report language changes when a company uses a special purpose reporting framework. See Exhibit C, illustration 3 in AR-90 for a tax-basis review report. 

Which Financial Statements?

Management specifies the financial statements to be prepared. Normally a company desires a balance sheet, an income statement, and a cash flow statement. The accountant can, however, issue just one financial statement (e.g., income statement). 

Who prepares the financial statements? The company or the CPA firm can prepare them.

Can the cash flow statement be omitted? GAAP requires a cash flow statement when a statement of financial condition and an income statement are included. Compilation standards allow for the omission of the GAAP cash flow statement if the omission is noted in the compilation report. Not so in a review engagement. The cash flow statement must be included when GAAP is used.

But is the cash flow statement required when the tax-basis of accounting is used? No, the cash flow statement can be omitted when the financial statements are tax-basis.

Disclosures in Reviewed Financial Statements

What about disclosures? Are they required in a review engagement?

In compilation engagements , disclosures can be omitted. Not so in a review engagement. Full disclosure is required, regardless of the reporting framework.

References to Review Report and Notes

Should a reference to the review report and the notes be included at the bottom of each financial statement page? While not required by the SSARS, it is acceptable to add a reference such as:

• See Accountant’s Report and accompanying notes
• See Accountant’s Review Report and accompanying notes, or
• See Independent Accountant’s Review Report and accompanying notes

Review Engagement Documentation Requirements

The accountant should prepare and retain the following documentation:

• Engagement letter
• A copy of the reviewed financial statements 
• Accountant’s review report 
• Communications with management and those charged with governance about significant matters arising during the engagement
• Communications with other accountants that reviewed or audited financial statements of significant components 
• Emphasis-of-matter or other-matter paragraph communications with management or others
• The representation letter (see Exhibit B of AR-C 90 for sample wording)
• Information about how any inconsistencies were addressed when the accountant identified information that was inconsistent with the accountant's findings regarding significant matters affecting the financial statements

The review documentation should be sufficient to enable an experienced accountant, having no previous connection to the engagement to understand:

• the nature, timing, and extent of the review procedures,
• the evidence obtained and the accountant's conclusions based on that evidence
• significant matters and the related conclusions and judgments

Review Engagement Letter

While it is possible for the accountant to perform only a review and not prepare the financial statements, most review engagement letters will state that the following will be performed by the accountant:

• Preparation of the financial statements (a nonattest service)
• A review engagement (an attest service)

Since a nonattest service and an attest service are being provided, the accountant will add language to the engagement letter describing the client’s responsibility for the nonattest service. 

See illustrative engagement letters in Exhibit A of AR-C 90 .

AICPA independence standards require the accountant to consider whether he is independent when the CPA performs an attest service (e.g., review) and a nonattest service (e.g., preparation of financial statements) for the same client. If management does not possess the skill, knowledge, and experience to oversee the preparation of the financial statements and accept responsibility, the accountant may not be independent.

So, must the accountant be independent? Yes, independence is required in review engagements.

AR-C 90 Review Procedures

The accountant should:

• Make inquiries,
• Perform analytical procedures, and
• Perform other procedures, as appropriate

Direct your procedures to areas with increased risks of material misstatement. An understanding of the entity and the industry in which the entity operates will better enable you to identify potential misstatements.

1. Review Inquiries

AR-90.29 provides a series of inquiries that should be made of management and others. Those questions include matters such as fraud, subsequent events, related party transactions, and litigation. Additionally, once you create your analytical procedures, you may have questions regarding unexpected changes.

The accountant should remain alert for related party transactions outside the normal business course. Inquiries should be made about such transactions. 

2. Review Analytical Procedures

Apply analytical procedures to the numbers. What kind? Well, that depends. What numbers are most important? What numbers are most likely to be misstated? What types of analytics illuminate the client's business? Consideration of such factors will lead you to the right analytics.

Here are examples:

• Comparing the current year's financial statement numbers with the prior year
• Comparing the current year trial balance numbers with the prior year
• Ratios such as debt/equity or current assets/current liabilities or depreciation/total depreciable assets
• Computing numbers with nonfinancial information such as the number of units sold times the average price 
• Comparing quarterly revenues by location

As you can see, judgment is required. Moreover, you need to develop expectations before computing the numbers. AR-C 90 says that the expectations should enable you to identify material misstatements. So the expectations have to be precise enough to yield that result. 

Here are the five steps I use:

• Develop expectations
• Compute the numbers
• See if the numbers align with expectations
• Follow up with additional inquiries if expectations are not met
• Develop a conclusion

I find that many accountants fail to document their expectations. Or if expectations are documented, a second problem occurs: The numbers don't align with the expectation and there's no documented follow-up. If the numbers don't align with expectations, make sure you determine why.

Expectations

How do we develop expectations?

It is helpful to discuss current operations with management before computing your numbers. You want to know, for example, if sales rose during the year or if there were reductions in the workforce. The conversation informs your expectations.

Also, if you've previously worked with the client, you are familiar with their profit margins or debt levels. This prior knowledge informs your expectations.

Finally, you might also read the minutes (if there are any) before computing your numbers.

3. Other Review Procedures

AR-C 90 states that procedures include inquiry, analytics, and other procedures. The third element--other procedures-- is a general category that encompasses reading the financial statements and responding to risks. You might, for example, identify potential misstatements as you perform analytical procedures. If revenues are up 25% but you expected them to be stable, you'll perform additional procedures to see why.

Interestingly (at least to me), AR-C 90.A45 states that you can perform audit procedures in a review engagement. Though your review engagement letter states you are not performing an audit, your review file can include audit procedures. Why would the AICPA provide this latitude? To give you the ability to reach beyond your typical review procedures (inquiry and analytics). You need a basis for the limited assurance you are providing. And in some situations, you may need audit procedures to get you there.

Materiality in Review Engagements

AR-C 90 requires accountants to determine and use materiality. This makes sense given the review report says the following:

Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America.

You can't know what a "material modification" is without knowing what materiality is. So, the accountant should use materiality in the planning and conduct of the review engagement. AR-C 90 says the determination of materiality is a matter of professional judgment. 

Review Representation Letter

A signed representation letter is required in all review engagements.

The date of the representation letter will agree with the date of the review report. In no event should the date of the representation letter precede the date of the review report. (The accountant is not required to have physical possession of the letter on the date of the review report. But the accountant should have the signed letter before releasing the financial statements.)

Provide the draft of the financial statements to the client promptly so they can review them and assume responsibility. Thereafter, the client can sign the representation letter.

Additionally, the representation letter should cover all financial statements and all periods in the report.

Exhibit B of AR-90 provides a sample representation letter.

Review Report Sample

The following is a review report sample (sometimes referred to as an accounting review report):

Independent Accountant's Review Report

[ Appropriate Addressee ]

I (We) have reviewed the accompanying financial statements of XYZ Company, which comprise the balance sheets as of December 31, 20X2 and 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management's (owners') financial data and making inquiries of company management (owners). A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I (we) do not express such an opinion.

Management's Responsibility for the Financial Statements

Management (Owners) is (are) responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

Accountant's Responsibility

My (Our) responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require me (us) to perform procedures to obtain limited assurance as a basis for reporting whether I am (we are) aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. I (We) believe that the results of my (our) procedures provide a reasonable basis for my (our) conclusion.

We are required to be independent of XYZ Company and to meet our ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews.

Accountant's Conclusion

Based on my (our) reviews, I am (we are) not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

[ Signature of accounting firm or accountant, as appropriate ]

[ Accountant's city and state ]

[ Date of the accountant's review report ]

Exhibit C of  AR-C 90 provides seven review report illustrations.

Reporting When There are Other Accountants

What are your responsibilities if you are performing the review of a consolidated entity that includes a subsidiary audited or reviewed by another accountant? 

First, obtain and read the subsidiary report.

Second, decide whether to refer to the other accountants in your review report. If reference is made, AR-C 90.122 states the accountant should clearly indicate in the accountant's review report that the accountant used the work of other accountants. The report should also include the magnitude of the portion of the financial statements audited or reviewed by the other accountants." See Illustration 6 in Appendix C of AR-C 90 for sample report language. If you refer to the other accountant, you will state that your conclusion, as it relates to the entity reviewed by the other accountants, is based solely on their report.

Third, regardless of whether you decide to refer to the other accountants, communicate with the other accountants. Determine the following:

• That the other accountants are familiar with the relevant reporting framework and review or auditing standards, as applicable. 
• Advise them that you are including the subsidiary's financials in the consolidation and that their report will be relied upon, and when applicable, that the other accountant's report will be referred to in your review report. 
• Communicate the ethical requirements of the engagement, mainly independence. 
• And finally, advise them that you are reviewing matters affecting the intercompany eliminations.

Going Concern in Review Engagements

If the reporting framework requires that management evaluate going concern (FASB has such a requirement), then you should perform going concern review procedures. Those procedures include:

• Determining whether the going concern basis of accounting is appropriate
• Reviewing management's evaluation of whether substantial doubt exists
• When there is substantial doubt, reviewing management's plans to mitigate the conditions
• Reviewing going concern disclosures

See my article about going concern in relation to FASB standards. 

If the applicable reporting framework does not require management to evaluate going concern but you become aware of conditions or events that raise substantial doubt about the entity's ability to continue as a going concern, do the following:

• Ask management if the going concern basis of accounting is appropriate
• Ask management about their plans to address the adverse effects of the conditions or events
• Review the going concern disclosures to see if they are appropriate

Other Historical Information in Review Engagements

In addition to historical financial statements, AR-C 90 may be applied to the following:

• Profit participation, or
• Income tax provisions
• Supplementary information
• Required supplementary information
• Tax return information

Review Engagements Conclusion

There you have it. Now you know how to perform a review engagement.

The main purpose of a review is to provide limited assurance in regard to the information. Inquiries and analytics are required. A signed representation letter is also required.

If you desire to issue financial statements without a compilation or review report, consider the use of AR-C 70, Preparation of Financial Statements .

If you desire to issue financial statements without a review report, consider using AR-C 80, Compilation Engagements .

The AICPA provides the full text of AR-C 90 online . You can download the PDF if you like. Once you download the document, you can use control-f to find particular words. I find this useful.

For additional SSARS-related articles see:

• AR-C 70: The Definitive Guide to Preparations
• AR-C 80: The Definitive Guide to Compilations

About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty-five years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention, The Why and How of Auditing, Audit Risk Assessment Made Easy, and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles consults with other CPA firms, assisting them with auditing and accounting issues.

Hello Charles – My client is selling his business (Sch C). The buyer’s bank is requesting reviewed financial statements prior to closing. The person paying for the work is the buyer. For the engagement letter, do both the seller (I am thinking here about the management representations) and the buyer need to sign the EL? Do you have another suggestion? Thank you.

It’s permissible for you to prepare the financial statements in a review engagement as long as management reviews them (after you prepare them) and assumes responsibility for them. The client (designated person) assuming responsibility for the financial statements must have sufficient skill, knowledge, and experience to perform this role. If the client does not understand the financials, they can’t assume responsibility, and you would not be independent–and could not perform the review engagement.

Lyli, I’d consider whether the records are sufficient before accepting the engagement. It sounds like the transaction detail from the general ledger is not available. If not, you may not want to accept the engagement. You can do a compilation or a review on an entity that has sufficient records. If your independence is impaired, you cannot perform a review engagement. A compilation can be performed, even when your independence is impaired, but you’ll need to disclose your lack of independence in your compilation report. I hope this helps.

Can a CPA prepare financial statements as part of a review engagement? Long story short. A new property management company took over after some irregularities of the previous management company. No tax returns were filed for 2021 and 2022. The current board obtained some bookkeeping records (balance sheet and the general ledger), but only printed reports, not the actual records from the accounting system. At first, we were engaged to do a compilation but the mistatements are so significant that a review would be more appropriate. The client intended to use the new financials for applying to loans, going to litigation proceedings against the former management company and for filing taxes. Can we modified our engagement to a review and as part of such review issue new financial statements? If yes, the reviewed financials should be part of the Independent Accountant’s Report? Our independence would be impaired considering we had to prepare the financials almost from scratch, because the records provided are not reliable? In this case, management was not responsible for preparing the financials under reviewed, who will sign the management representation letter? I couldn’t find a template for this case. Thanks.

I would subject all numbers to review procedures (inquiry and analytics). You may want to use quarterly or monthly comparisons within the first year.

The following if from an audit article I wrote, but should help:

First Option One option is to compute expected numbers using non-financial information. Then compare the calculated numbers to the general ledger to search for unexpected variances.

Second Option A second option is to calculate ratios common to the entity’s industry and compare the results to industry benchmarks.

While industry analytics can be computed, I’m not sure how useful they are for a new company. An infant company often does not generate numbers comparable to more mature entities. But we’ll keep this choice in our quiver–just in case.

Third Option A more useful option is the third: comparing intraperiod numbers.

Discuss the expected monthly or quarterly revenue trends with the client before you examine the accounting records. The warehouse foreman might say, “We shipped almost nothing the first six months. Then things caught fire. My head was spinning the last half of the year.” Does the general ledger reflect this story? Did revenues and costs of goods sold significantly increase in the latter half of the year?

Fourth Option The last option we’ve listed is a review of the budgetary comparisons. Some entities, such as governments, lend themselves to this alternative. Others, not so–those that don’t adopt budgets.

When performing a financial statement Review for the first year can you cover the income statement and cashflow as Reviewed or do they have to be Compiled since the prior year was not Reviewed?

It’s fine to manually create your analytics. Most people still use Excel to do so. The main thing is to document your expectations and then create analytics for material areas. I hope your peer review goes well.

With review analytics, is it acceptable to do it manually or use some type of computer system to assist? Can you recommend a few if the latter? I’m worried about peer review and if it’s done manually, will that be less acceptable?

You can provide a balance sheet using GAAP and it can be subject to a review engagement. But you will need disclosures in addition to the balance sheet. You’ll also need to follow all AR-C 90 guidance.

Licensing bureau is requesting review balance sheet only. Is this in conformity with GAAP

Naina, either is fine, but I prefer the first since it highlights that you are independent. Charles

Hello Mr.Charles,

I have been looking for some illustrative reviewed financial statements. On the report I have seen some firms say “Financial Statements and Independent Accountant’s Report” and few say “Reviewed Financial Statements”. Can you please advice what is the correct title to be disclosed on a Review report. Any help is highly appreciated.

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Lesson: Updating the Representation Letter

This lesson covers the process of updating the representation letter under various circumstances, such as when a predecessor auditor is requested to reissue a report or when performing subsequent event procedures in connection with filings under the Security Act of 1933. The importance of obtaining an updated management representation letter to address any information that may have come to management's attention since the previous representations were made, as well as ensuring that any necessary subsequent event adjustments are disclosed, is highlighted. Throughout the lesson, Nick Palazzolo, CPA, emphasizes the significance of management taking responsibility for these changes and keeping the auditor informed.

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NPR defends its journalism after senior editor says it has lost the public's trust

David Folkenflik

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust. Saul Loeb/AFP via Getty Images hide caption

NPR is defending its journalism and integrity after a senior editor wrote an essay accusing it of losing the public's trust.

NPR's top news executive defended its journalism and its commitment to reflecting a diverse array of views on Tuesday after a senior NPR editor wrote a broad critique of how the network has covered some of the most important stories of the age.

"An open-minded spirit no longer exists within NPR, and now, predictably, we don't have an audience that reflects America," writes Uri Berliner.

A strategic emphasis on diversity and inclusion on the basis of race, ethnicity and sexual orientation, promoted by NPR's former CEO, John Lansing, has fed "the absence of viewpoint diversity," Berliner writes.

NPR's chief news executive, Edith Chapin, wrote in a memo to staff Tuesday afternoon that she and the news leadership team strongly reject Berliner's assessment.

"We're proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories," she wrote. "We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world."

NPR names tech executive Katherine Maher to lead in turbulent era

She added, "None of our work is above scrutiny or critique. We must have vigorous discussions in the newsroom about how we serve the public as a whole."

A spokesperson for NPR said Chapin, who also serves as the network's chief content officer, would have no further comment.

Praised by NPR's critics

Berliner is a senior editor on NPR's Business Desk. (Disclosure: I, too, am part of the Business Desk, and Berliner has edited many of my past stories. He did not see any version of this article or participate in its preparation before it was posted publicly.)

Berliner's essay , titled "I've Been at NPR for 25 years. Here's How We Lost America's Trust," was published by The Free Press, a website that has welcomed journalists who have concluded that mainstream news outlets have become reflexively liberal.

Berliner writes that as a Subaru-driving, Sarah Lawrence College graduate who "was raised by a lesbian peace activist mother ," he fits the mold of a loyal NPR fan.

Yet Berliner says NPR's news coverage has fallen short on some of the most controversial stories of recent years, from the question of whether former President Donald Trump colluded with Russia in the 2016 election, to the origins of the virus that causes COVID-19, to the significance and provenance of emails leaked from a laptop owned by Hunter Biden weeks before the 2020 election. In addition, he blasted NPR's coverage of the Israel-Hamas conflict.

On each of these stories, Berliner asserts, NPR has suffered from groupthink due to too little diversity of viewpoints in the newsroom.

The essay ricocheted Tuesday around conservative media , with some labeling Berliner a whistleblower . Others picked it up on social media, including Elon Musk, who has lambasted NPR for leaving his social media site, X. (Musk emailed another NPR reporter a link to Berliner's article with a gibe that the reporter was a "quisling" — a World War II reference to someone who collaborates with the enemy.)

When asked for further comment late Tuesday, Berliner declined, saying the essay spoke for itself.

The arguments he raises — and counters — have percolated across U.S. newsrooms in recent years. The #MeToo sexual harassment scandals of 2016 and 2017 forced newsrooms to listen to and heed more junior colleagues. The social justice movement prompted by the killing of George Floyd in 2020 inspired a reckoning in many places. Newsroom leaders often appeared to stand on shaky ground.

Leaders at many newsrooms, including top editors at The New York Times and the Los Angeles Times , lost their jobs. Legendary Washington Post Executive Editor Martin Baron wrote in his memoir that he feared his bonds with the staff were "frayed beyond repair," especially over the degree of self-expression his journalists expected to exert on social media, before he decided to step down in early 2021.

Since then, Baron and others — including leaders of some of these newsrooms — have suggested that the pendulum has swung too far.

Author Interviews

Legendary editor marty baron describes his 'collision of power' with trump and bezos.

New York Times publisher A.G. Sulzberger warned last year against journalists embracing a stance of what he calls "one-side-ism": "where journalists are demonstrating that they're on the side of the righteous."

"I really think that that can create blind spots and echo chambers," he said.

Internal arguments at The Times over the strength of its reporting on accusations that Hamas engaged in sexual assaults as part of a strategy for its Oct. 7 attack on Israel erupted publicly . The paper conducted an investigation to determine the source of a leak over a planned episode of the paper's podcast The Daily on the subject, which months later has not been released. The newsroom guild accused the paper of "targeted interrogation" of journalists of Middle Eastern descent.

Heated pushback in NPR's newsroom

Given Berliner's account of private conversations, several NPR journalists question whether they can now trust him with unguarded assessments about stories in real time. Others express frustration that he had not sought out comment in advance of publication. Berliner acknowledged to me that for this story, he did not seek NPR's approval to publish the piece, nor did he give the network advance notice.

Some of Berliner's NPR colleagues are responding heatedly. Fernando Alfonso, a senior supervising editor for digital news, wrote that he wholeheartedly rejected Berliner's critique of the coverage of the Israel-Hamas conflict, for which NPR's journalists, like their peers, periodically put themselves at risk.

Alfonso also took issue with Berliner's concern over the focus on diversity at NPR.

"As a person of color who has often worked in newsrooms with little to no people who look like me, the efforts NPR has made to diversify its workforce and its sources are unique and appropriate given the news industry's long-standing lack of diversity," Alfonso says. "These efforts should be celebrated and not denigrated as Uri has done."

After this story was first published, Berliner contested Alfonso's characterization, saying his criticism of NPR is about the lack of diversity of viewpoints, not its diversity itself.

"I never criticized NPR's priority of achieving a more diverse workforce in terms of race, ethnicity and sexual orientation. I have not 'denigrated' NPR's newsroom diversity goals," Berliner said. "That's wrong."

Questions of diversity

Under former CEO John Lansing, NPR made increasing diversity, both of its staff and its audience, its "North Star" mission. Berliner says in the essay that NPR failed to consider broader diversity of viewpoint, noting, "In D.C., where NPR is headquartered and many of us live, I found 87 registered Democrats working in editorial positions and zero Republicans."

Berliner cited audience estimates that suggested a concurrent falloff in listening by Republicans. (The number of people listening to NPR broadcasts and terrestrial radio broadly has declined since the start of the pandemic.)

Former NPR vice president for news and ombudsman Jeffrey Dvorkin tweeted , "I know Uri. He's not wrong."

Others questioned Berliner's logic. "This probably gets causality somewhat backward," tweeted Semafor Washington editor Jordan Weissmann . "I'd guess that a lot of NPR listeners who voted for [Mitt] Romney have changed how they identify politically."

Similarly, Nieman Lab founder Joshua Benton suggested the rise of Trump alienated many NPR-appreciating Republicans from the GOP.

In recent years, NPR has greatly enhanced the percentage of people of color in its workforce and its executive ranks. Four out of 10 staffers are people of color; nearly half of NPR's leadership team identifies as Black, Asian or Latino.

"The philosophy is: Do you want to serve all of America and make sure it sounds like all of America, or not?" Lansing, who stepped down last month, says in response to Berliner's piece. "I'd welcome the argument against that."

"On radio, we were really lagging in our representation of an audience that makes us look like what America looks like today," Lansing says. The U.S. looks and sounds a lot different than it did in 1971, when NPR's first show was broadcast, Lansing says.

A network spokesperson says new NPR CEO Katherine Maher supports Chapin and her response to Berliner's critique.

The spokesperson says that Maher "believes that it's a healthy thing for a public service newsroom to engage in rigorous consideration of the needs of our audiences, including where we serve our mission well and where we can serve it better."

Disclosure: This story was reported and written by NPR Media Correspondent David Folkenflik and edited by Deputy Business Editor Emily Kopp and Managing Editor Gerry Holmes. Under NPR's protocol for reporting on itself, no NPR corporate official or news executive reviewed this story before it was posted publicly.

Abortion shapes Joe Biden's and Donald Trump's legacies. It may help one of them win reelection.

WASHINGTON — Abortion is the leading political cause of our time, the most controversial and consequential since the fight for civil rights in the 1960s.

Half a century after the right to abortion was established by the Supreme Court – then rescinded in 2022 – the issue promises to be the dominant driver of this year’s presidential race.

No matter who wins, the legacy of the two leading candidates – both of them men – will be tied to a decision that primarily affects the lives of women.

Joe Biden , a devout Catholic, is personally opposed to abortion and once said the Supreme Court had gone too far in Roe v. Wade , the 1973 decision that guaranteed a woman's right to an abortion. But throughout his five-decade career in public office, Biden has set his personal beliefs aside and supported the right to choose to end a pregnancy. Now the incumbent president, he is leading the charge to write reproductive freedom protections into federal law .

Donald Trump , the former president and presumptive GOP nominee, declared himself “pro-choice in every respect” in a television interview more than two decades ago. But when he first ran for president in 2016, he courted religious conservatives by proclaiming his opposition to abortion and even suggested women who get illegal abortions deserve “some sort of punishment.” Once in office, he stacked the Supreme Court with conservative justices who delivered the death blow to Roe v. Wade .Running again just four years after losing his reelection bid to Biden, Trump now boasts, "I was able to terminate Roe v. Wade. " Yet earlier this week, he angered anti-abortion activists by saying individual states should set their own restrictions on a woman’s right to choose and later announcing that he would not sign a national abortion ban if given a second term.

Prep for the polls: See who is running for president and compare where they stand on key issues in our Voter Guide

How the two candidates navigate the minefield of abortion politics over the next few months could determine which one of them returns to the White House.

“If Biden wins, it's going to cement the importance of abortion rights as an issue to the electorate,” said Mary Ziegler, a law professor at the University of California, Davis and an expert on the law, history and politics of reproductive issues.

In Trump’s case, “abortion is already part of his legacy because of the overruling of Roe,” Ziegler said, “and I think he’s going to face, if he’s elected, really unprecedented questions about what this is going to mean.”

A rematch nobody wanted: Some big differences define Biden vs. Trump in 2024

'More right than you are'

Biden entered public office just as the debate over abortion was about to upend U.S. politics for decades.

Only 30 at the time, Biden was sworn in as the new Democratic senator from Delaware on Jan. 3, 1973. Three weeks later, on Jan. 22, the Supreme Court handed down its ruling in Roe.

In his memoir "Promises To Keep," Biden recalled heading to vote in the Senate for the first time and being asked by Sen. Abraham Ribicoff, D-Conn., where he stood on the issue. Biden told his new colleague that while he was personally opposed to abortion, he didn’t think he had the right to impose his view on others.

Ribicoff’s advice: “Pick a side. You’ll be much better off politically.”

Biden decided to stake out middle ground. He lamented to Washingtonian magazine in 1974 that the Supreme Court “went too far” with Roe and said he didn’t think a woman has “the sole right to say what should happen to her body.” That same year, however, he informed an angry group of anti-abortionist advocates that he would not back a constitutional amendment to ban the procedure.

“I am not sure my stand against such a constitutional amendment is right, nor am I sure the anti-abortionist stand is right,” he told the group, according to an account in the Wilmington Morning News. But, he said, “right now I think I am more right than you are.”

Biden’s position was not all that unusual at the time, said author Joshua Prager, who has written about the history of the abortion movement. Abortion had yet to turn into the potent political weapon it would become, and several other prominent Democrats of the era were either ambivalent about the issue or opposed abortion rights altogether.

“For a long time, abortion was completely apolitical. It was not in any way political or partisan," said Prager, whose book “The Family Roe: An American Story” chronicled the life of Norma McCorvey , who as “Jane Doe” was the plaintiff in the lawsuit that led to the landmark Roe v. Wade ruling.

Throughout his Senate career, Biden resisted most efforts to restrict abortion access while objecting to federal funding of abortions.

In 1981, he authored what would become known as the Biden Amendment, which prohibited foreign aid from being used for biomedical research on abortion. He also consistently supported a separate measure known as the Hyde Amendment , which banned the use of federal funds for abortion except for cases of rape, incest or when pregnancy endangered the life of the expectant woman.

Biden would not change his position on Hyde until five years ago, when he was a candidate for president. Under pressure from his fellow Democrats , he announced on June 6, 2019, that he no longer supported the measure even though he had instructed his staff the day before to say that he did.

Biden suggested the reason for his about-face was that Hyde's restrictions would interfere with his desire to provide a broad range of health services to women. But his shift was widely seen as an acknowledgement of the significance that Democratic voters had come to place on abortion rights.

Occasionally, Biden's middle-of-the-road approach led to seemingly contradictory actions. In 1999, for example, he voted in favor of a Republican measure to ban a late-term procedure that critics have labeled “partial birth abortion.” That same day, however, he supported Democratic legislation endorsing Roe v. Wade as “an important constitutional right” that should not be overturned.

Throughout the early 2000s, before he left the Senate to become vice president, Biden voted to repeal a regulation that barred U.S. foreign aid from being used to perform or promote abortions. First put in place by Ronald Reagan, the so-called “Mexico City Policy,” also known among its opponents as a “global gag rule,” would become the equivalent of a political ping-pong ball. Whether or not it was in effect depended on whether the president was a Republican or Democrat.

Trump restored the policy early in his presidency. Biden rescinded it just a week after taking office.

Trump's evasions and contradiction

Trump's history on the abortion issue has been filled with evasions and contradictions, some of which are combining to create a massive election obstacle as he campaigns for another term as president.

The candidate who once described himself as "pro-choice" ultimately became the president who did more than anybody to undo abortion rights, appointing three conservative Supreme Court justices who would be part of the majority that overturned Roe v. Wade.

Now seeking to be the first president in more than 125 years to regain the White House after losing it, Trump is warning Republicans to be "careful" about how they deal with the issue because it has hurt them in elections.

In a new approach, revealed in a video he posted Monday, Trump is seeking to appeal to his anti-abortion base by saying he supports state efforts to ban or restrict the practice. He also has stressed the need for exceptions in cases of rape, incest and to protect the mother.

"The states will determine by vote or legislation or perhaps both," Trump said. "Whatever they decide must be the law of the land. In this case, the law of the state."

'One person responsible': Biden campaign blames Trump after Arizona abortion ruling

A long and winding road

For Trump, abortion has been a long and winding road filled with inconsistencies. He has often adjusted his positions on the issue.

Back in 1999, a time when he was thinking of running for president on the Reform Party ticket, Trump told NBC's "Meet The Press" that "I’m very pro-choice. I hate the concept of abortion. I hate it. I hate everything it stands for. I cringe when I listen to people debating the subject. But you still – I just believe in choice."

During Trump's first presidential campaign in 2016, members of anti-abortion groups expressed worry about his commitment to their cause. The then-businessman and television celebrity sought to allay their worries by pledging to appoint conservative jurists to the Supreme Court.

Trump kept that promise. He appointed justices Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett to the high court, completing the majority that overturned Roe.

The post-Roe era

When Republican legislators rushed to ban abortion in their states after Roe's demise, Trump became the one expressing concern. He blamed abortion for Republican losses in the 2022 congressional elections – a demonstration of the issue's power to drive voters to the ballot box.

Noting the success of abortion rights candidates and referendums in conservatives states like Alabama and Kansas , Trump has warned Republicans to be careful about how they discuss the issue.

During a "Meet The Press" appearance this past September, Trump dodged when asked about a 15-week ban. "It could be state or it could be federal," he said. "I don't frankly care."

Things got to the point where some of Trump's opponents in the GOP primary, particularly Florida Gov. Ron DeSantis , accused the Republican presidential candidate of being soft on pro-life issues. Trump countered that DeSantis' proposal to ban abortion after six weeks was a bad idea.

Trump also has called for compromise on abortion, though combatants on all sides say that is highly unlikely.

"I would sit down with both sides and I'd negotiate something," Trump told 'Meet The Press,' "and we'll end up with peace on that issue for the first time in 52 years."

Skeptical abortion-rights supporters accused him of saying whatever would benefit him politically.

"We all know that Trump cannot be trusted and will say whatever it takes to get back into the White House," said Jenny Lawson, executive director of Planned Parenthood Votes. "That includes lying about his support for a national abortion ban."

Where is abortion banned or protected? A year after the fall of Roe v. Wade, abortion access is reshuffled on state lines

'The power of women in America'

Biden and the Democrats, meanwhile, are seeking to cast Trump as the leader of the abortion ban movement.

Shortly after Trump announced that abortion restrictions should be left to the states, Biden’s reelection campaign responded with a digital ad featuring a woman who, choking back tears, said she suffered a miscarriage and nearly died twice from sepsis because doctors in Texas would not perform an abortion.

“Donald Trump did this,” the video concludes.

Trump's state-federal distinction is meaningless, Democrats said, because he has supported a series of "extreme" state abortion bans. Biden and others said Trump is trying to make people forget his central role in overturning Roe.

"Donald Trump and all those responsible for overturning Roe don't have a clue about the power of women in America," Biden said. "But they are about to find out.”

Abortion has proved to be a winning issue for Democrats at the ballot box since the Supreme Court’s decision overturning Roe. Another ruling this week by the Arizona Supreme Court that upheld a 160-year-old abortion ban could further fire up voters in what is expected to be a key swing state in this year’s presidential race.

Biden's reelection team is making the restoration of abortion rights a central theme of his campaign. Biden has taken multiple steps to protect reproductive freedom since Roe was overturned, such as issuing orders that protect access to medication, making legal representation available to women who choose to travel out of state for the procedure and expanding coverage for no-cost contraception.

In March, the White House took the unprecedented step of sending Vice President Kamala Harris to an abortion clinic in Minnesota to highlight the administration’s efforts to safeguard reproductive rights. Her visit was the first ever by a president or vice president to a clinic that provides abortion services.

Biden also continues to press Congress to write into federal law the abortion protections provided under Roe, the ruling that he once declared had gone too far.

With abortion once again a pivotal election issue, Biden's campaign is eager to compare his record to Trump's.

"For more than 50 years, Joe Biden has fought to protect Roe and women's right to choose,” said Lauren Hitt, a spokeswoman for Biden’s re-election campaign. "Donald Trump on the other hand says he is proud to have overturned Roe and says women should be punished for getting an abortion. That's the choice facing women this November."

Asked about Trump’s complicated history with abortion, Trump campaign spokeswoman Karoline Leavitt insisted he "has long been consistent in supporting the rights of states to make decisions on abortion." In 2018, however, Trump pushed for a federal ban on all abortions after 20 weeks. In 2023, speaking before a crowd of religious conservatives, he again endorsed the idea of national abortion restrictions but did not back any specific legislation.

Whether Biden or Trump wins in November, their history on abortion rights will help shape how they are remembered for years to come.

Reach Michael Collins on X, formerly Twitter, @mcollinsNEWS and David Jackson @djusatoday.

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