Reference no: EM133171597

Question - You are the audit senior assigned to a review engagement of a retirement home, Sunny Ways Residence Inc., owned and operated by Aiden and Sophia Giardini. After spending a long and successful career in the hospitality business, Aiden and Sophia decided to apply what they learned to develop a quality senior living experience. In addition to their life savings, the Giardinis obtained financing from family members, a mortgage and operating loan from Midas Bank.

The residence, which has 45 suites, is located in a quiet residential community in Southern Ontario. The Giardini family, along with dedicated staff, offer a friendly home environment. Seniors are able to enjoy an independent lifestyle with comfortable accommodations, personal care and other supportive services. The seniors pay a monthly fee (based upon the size and location of the suite) that ranges from $2650 to $3750. The fee includes accommodations, meals, personal care, and social activities. In addition to the monthly fee, Sunny Ways provides several optional services, such as enhanced professional care, foot care and physiotherapy, and a beauty/barber salon. These services are charged on a fee for service basis.

Over the years, Sunny Ways has developed an excellent reputation, occupancy is at 100% and there is a long waiting list. Much of this success has been attributed to Aiden and Sophia's active involvement and commitment to personalized service and care. Seniors, who generally start their stay with Sunny Ways in their late 70s or early 80s, are often at the point in their lives where they no longer want to maintain a home. The proceeds from the sale of their home, along with their pension, fund their rental fees.

Your firm, Bermundsy & Eden LLP, has performed a review engagement for Sunny Ways Residence Inc. since its inception in 2000. This is the first time you have been assigned to a review engagement and you are excited about actually putting into practice what you have learned in your Introductory Audit Course. You are also working with a brand new recruit, Fatima. You and Fatima have just finished the initial planning meeting with the Aiden and Sophia and are discussing the changes that occurred during the 2016 fiscal year ending March 31st. At the start of the meeting Fatima admits she did not know much about Review Engagements since her Introductory Audit Course did not cover the topic and she wonders if you can help her understand a few matters.

Explain why a review engagement rather than an audit would work for Sunny Ways Residence Inc.

Discuss four differences between an audit and a review engagement.