Financial Statement Reviews
If a full audit is not required, we can provide review services on financial statements. Less extensive than an audit, but more involved than a compilation, a review engagement consists primarily of analytical procedures we apply to the financial statements, and various inquiries we make of your company's management team. In a review, inquiries and analytical procedures are conducted, providing limited assurance that no material modifications should be made to the financial statements in order for the statements to be in conformity with GAAP or other applicable financial reporting framework.
If you need a closer examination of your books, but an audit is not required, and a compilation is not thorough enough, you should consider a review. A review is a mid-level assessment performed by an independent accountant (*sometimes not your current CPA).
Responsibilities and the results of the engagement are communicated in our review report. Although review procedures are much less in-depth than audit procedures, we use our knowledge of your industry to identify and share our recommendations to improve the results of your operations.
In a review, the CPA designs and performs analytical procedures, inquiries, and other procedures, as appropriate, based on the accountant’s understanding of the industry, his or her knowledge of the client, and his or her awareness of the risk that he or she may unknowingly fail to modify the accountant’s review report on financial statements that are materially misstated. A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records; or other procedures ordinarily performed in an audit.
The CPA issues a report stating the review was performed in accordance with Statements on Standards for Accounting and Review Services; that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements; that a review includes primarily applying analytical procedures to management’s financial data and making inquiries of management; that a review is substantially less in scope than an audit and that the CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with the applicable financial reporting framework.
Why might a business request a review engagement? It can be a good middle ground, providing the advantages of a CPA's technical expertise without the work and expense of an audit.