What is the difference between an AICPA audit and a review? When companies need their financial statements reviewed, they look to two distinct auditor services to provide different levels of assurance. But do you know which is the necessary method?
To help you understand the difference between an AICPA audit and a review, we’ll explore their distinctions to help you decide which method best suits your business needs.
AICPA Audit: A Comprehensive Examination
The American Institute of Certified Public Accountants (AICPA) outlines the standards for private company audits. An AICPA audit is a detailed examination of your company’s financial statements conducted by an independent and unbiased Certified Public Accountant (CPA).
What Is the Purpose of an AICPA Audit?
An audit is meant to offer the highest level of assurance that the finances of your business are free from material misstatement or error and conform with the generally accepted accounting principles (GAAP). This level of assurance is significant for private companies that must provide financial statements to potential investors, lenders, and creditors. The audit report provides a big-picture view of your company’s financial standing in terms of its assets, liabilities, and equity.
What To Expect During Your Audit
An AICPA audit is a structured approach for your audit team to thoroughly review your financial statements and deliver an opinion. There are several stages to an AICPA, including:
- Planning for the audit
- A conference with the client to discuss the plan for the audit
- A survey to gather information from the client
- A review of internal controls
- Fieldwork and transaction testing
- An audit report of findings
- Follow-up with the client after the audit
- Confirmation of certain assets and liabilities with third parties
AICPA Review: A Limited Assurance Engagement
A review is a less extensive analysis of a company’s financial statements. It’s a limited examination done by a CPA firm. They look at your financial statements to see if they make sense and seem reasonable, offering a limited level of assurance that no material modifications are necessary.
A review is narrower in scope than an AICPA audit, still providing an evaluation of your company’s financial records but limiting the audit team’s inspection to analytical procedures and inquiries of management.
Key Differences Between AICPA Audit and Review
- Level of Assurance: An audit provides a high level of assurance, while a review offers limited assurance that no material modifications need to be made to the financial statements.
- Procedures and Scope: An audit involves a comprehensive examination of a company’s financial records, whereas a review is limited to inquiry and analytical procedures.
- Reporting Format and Content: An audit results in an opinion letter and formal report, while a review produces a report that states the CPA’s limited assurance.
- Time Considerations: Generally, an audit is more time-consuming than a review as it involves testing internal controls, verifying balances, and performing other procedures.
- Legal Requirements and Applicability: An AICPA audit may be required for certain regulated private companies, privately-held companies with absentee owners, for bonding requirements, or when lenders require a thorough analysis of financial statements. A review can be helpful for companies that need to provide periodic updates on their finances but don’t require a full audit.
Do You Need An Audit or a Review?
Multiple factors go into determining the level of assurance and procedure necessary for your company’s financials. Consult with a certified public accountant to understand the differences between an AICPA audit and a review and which would be best for you.
At Assurance Dimensions, we specialize in providing accounting services tailored to your unique business needs. We apply over 75 years of combined experience to ensure that your comprehensive audit, review, and compilation will be accurate and actionable. Contact us to schedule a call.
