When managing your company’s financial records, understanding the differences between audit and review engagements is pivotal. Both auditor services offer assurance over your financial statements, but they vary significantly in scope and depth.
Do you know the key distinctions that set them apart? In this article, we’ll define audit and review engagements and take a look at their differences so you can better understand which service is best suited for your organization’s needs.
What is an Audit?
An audit is a deep dive into an organization’s financial standing. Think of it as a meticulous inspection of all your financials, from your balance sheets to your income statements to your internal controls.
During an audit, a registered auditing professional examines your financial statements and expresses their opinion to provide reasonable assurance on the accuracy and completeness of your documents according to Generally Accepted Accounting Principles (GAAP). An audit is often required due to SEC filings, loan applications, or financial verification from your board of directors.
What is a Review Engagement?
A review engagement is similar to an audit in that it follows GAAP but is less intensive. During a review, an assurance professional conducts a cursory review of your financial statements to ensure there are no glaring misstatements in your records. Typically, your accountant will perform analytics to ensure your numbers are accurate and make inquiries, but unlike an audit, their opinion only provides limited assurance of the accuracy and completeness of your documents according to GAAP.
Smaller businesses might opt for a review instead of an audit to get an overall understanding of their company’s finances when an audit is not required.
3 Key Differences Between an Audit and Review Engagements
Audits and review engagements are very similar services, providing an overview of your organization’s financial standing. However, there are a few key differences between the two. Let’s take a look at them.
1. Assurance Levels
An audit provides a high level of assurance because it is an in-depth examination of an organization’s financial statements. This means that those who rely on an audit to make financial decisions can trust that the information they have on hand is fairly represented and accurate.
A review, though, provides a limited level of assurance. This means that an auditing professional has performed far fewer procedures than would be in an audit but has reviewed them using a limited number of procedures and did not find any misstatements when an unqualified audit opinion is issued.
2. Scope and Depth
Audits are much more detailed than reviews. During an audit, an auditor will perform substantive procedures such as testing invoices, payments, and bank records, reviewing internal controls, and performing analytics and inquiries, whereas, in a review, a reviewer will only typically complete analytics and inquiries.
3. Cost and Time
Cost and time are among the most significant differences between an audit and a review engagement. Audits can be costly, as your auditing team may bill by the hour or per project. Because an audit involves examining your internal controls and performing substantive procedures, you can expect your auditing team to spend more time testing your reports.
A review is less intense, requires less time reviewing your documents, and can be more cost-efficient due to the limited number of procedures required.
Partner with Assurance Dimensions for Your Audit and Review Engagements
Whether you need an audit or a review engagement, partnering with the right accounting team will make the process go much more smoothly. Your accountant will be able to guide you through the review and audit process and help you determine which level of assurance your organization needs.
At Assurance Dimensions, we have over 75 years of industry experience conducting audits and review engagements. What sets us apart from other firms?
We offer a competitive pricing model, which means no hidden fees or extra costs, and you can be confident in the value of our services. Our remote auditing procedures through our secure cloud-based software means you never have to leave your office.
If you’re interested in learning more about our audit services or compilations and review engagements, contact us today to learn more.