A group of investors from overseas, who own a large forestry company in New Zealand managed by an independent agent, engaged you by email to review the financial statements prepared by the independent agent's accountant. These investors are thinking about selling the company and for that purpose they engaged you. They also believe that you are performing an audit, and you believe that you agreed to perform a review. They also inform you that they are suspecting that their independent agent might be perpetrating fraud. Question13：Other Assurance EngagementBased on scenario 4 state and discuss the procedures you should have taken to avoid the situation in scenario 4.Question 14：Other Assurance EngagementsBriefly explain the difference between a review engagement and an audit engagement.Question 15：Based on scenario 4 briefly discuss the extent of your responsibilities regarding the fraud. Also briefly discuss if those responsibilities are any different if you have performed an audit engagement rather than a review engagement.

Question 13: To avoid the situation in scenario 4, the following procedures should have been taken:

1. Clarification of Engagement: It is crucial to clarify the nature of the engagement from the onset. This could be done by providing a detailed engagement letter outlining the scope, objectives, and limitations of the service to be provided.

2. Communication: Regular and open communication with the client is essential. This would help in understanding their expectations and addressing any misconceptions they might have about the nature of the engagement.

3. Fraud Detection: If there are suspicions of fraud, it is important to discuss this with the client and decide on the appropriate course of action. This might involve engaging a forensic accountant or reporting the suspicions to the relevant authorities.

Question 14: A review engagement and an audit engagement are different in terms of their scope, objectives, and the level of assurance provided.

• A review engagement involves performing analytical procedures and inquiries to provide a moderate level of assurance that the financial statements are free of material misstatement. It is less extensive than an audit.

• An audit engagement, on the other hand, involves a thorough examination of the financial statements and underlying records to provide a high level of assurance that the financial statements are free from material misstatement.

Question 15: In a review engagement, the responsibility for detecting fraud is limited. The procedures performed in a review are not designed to detect fraud. However, if during the course of the review, the reviewer becomes aware of any indications of fraud, they are required to investigate further.

If an audit was performed instead, the auditor has a greater responsibility to detect fraud. This is because an audit involves a more in-depth examination of the financial statements and underlying records. However, it is important to note that even in an audit, there is no absolute guarantee that fraud will be detected, especially if there is collusion or sophisticated fraud schemes.