Limited Review of Quarterly Results

What is a limited review?

A limited review is an examination of a company's interim financial results — usually quarterly — that gives a lower level of assurance than a full audit. The auditor performs mainly inquiries and analytical procedures and reports whether anything has come to their attention suggesting the results aren't fairly presented.

Listed companies must publish quarterly financial results under Regulation 33 of SEBI's Listing Regulations, and those results must be either audited or subjected to a limited review by the statutory auditor. The review is performed under the ICAI's Standard on Review Engagements 2410.

The key terms

A few terms describe the quarterly cycle:

Regulation 33

The SEBI rule requiring listed entities to publish quarterly and annual financial results in a prescribed format, within set time limits.

Limited review

A review of interim results, based mainly on inquiry and analysis, that gives negative assurance rather than a full audit opinion.

SRE 2410

The ICAI standard governing reviews of interim financial information by the entity's own auditor.

Negative assurance

The reviewer states that nothing has come to their attention that suggests the results are materially misstated — not that they're correct.

Standalone and consolidated

Listed companies with subsidiaries publish both, and both are reviewed.

Board approval

Results are approved by the board, generally after being reviewed by the audit committee.

Modified conclusion

If the reviewer finds issues, the review report is modified, which the company must disclose.

Why it matters

Quarterly results move markets, so they're closely regulated:

It's mandatory for listed companies

Quarterly results must be audited or reviewed. There's no option to publish unreviewed numbers.

Strict timelines

Results must be filed with stock exchanges within set periods after the quarter end. Late filing attracts SEBI and exchange action.

Market confidence

Investors rely on quarterly numbers. Reviewed results give them a basic level of comfort.

Early warning

Issues found in a quarterly review can be fixed before they become audit qualifications at year end.

Consistency

Quarterly processes force a regular close, making the annual audit faster.

Disclosure of modifications

A modified review conclusion has to be disclosed and explained, which markets notice.

Board accountability

Directors approve results they're responsible for. A proper review supports that.

Who is this for?

Under SEBI rules, the limited review is carried out by the company's statutory auditor. For unlisted companies, a voluntary review can be arranged for investors or lenders.

Limited review vs. audit

The two give different levels of assurance:

What we'll need from you

Quarterly financials

Closed books and draft results for the quarter, standalone and consolidated.

Explanations

Commentary on significant movements, new transactions, and changes in estimates.

Subsidiary information

Quarterly results of significant subsidiaries, for the consolidated review.

Board and committee minutes

Minutes for the quarter, to identify significant events.

Key judgements

Provisions, impairments, and other estimates made during the quarter.

Timetable

The board meeting date and filing deadline.

Review fees depend on the size and complexity of the group and the number of entities reviewed.

How a quarterly review works

Each quarter follows a compressed cycle:

1. 1

   Quarter-end close

   Management closes the books and prepares draft standalone and consolidated results.

2. 2

   Inquiries

   The reviewer discusses significant transactions, estimates, and events with management.

3. 3

   Analytical review

   Results are compared with prior periods and expectations, and unusual movements investigated.

4. 4

   Consolidation review

   The consolidation process and significant subsidiaries are reviewed.

5. 5

   Review report

   The reviewer issues its report, with an unmodified or modified conclusion.

6. 6

   Approval and filing

   The audit committee reviews and the board approves the results, which are filed with the exchanges and published.

After the results are filed

A few things follow each quarter:

Publication

Results are published as required, and placed on the company's website.

Resolve issues

Matters raised during the review are fixed before the next quarter or the annual audit.

Investor communication

Many companies hold earnings calls or issue presentations alongside results.

Annual audit

The fourth quarter's figures feed into the annual audited results.

Process improvement

Shorten the close each quarter by fixing recurring bottlenecks.

Monitor rule changes

SEBI updates formats and timelines from time to time, so processes should keep up.

Benefits and responsibilities