So, your lender or stakeholders are asking for reviewed financial statements, and you’re not sure what to expect from your audit firm.
What is the best step forward?
In this post, we’ll discuss the difference between reviewed financial statements and audits. But first, let’s define what a reviewed financial statement is.
What Are Reviewed Financial Statements?
A financial statement that is reviewed is precisely what it sounds like– a review of financial records and statements. A trusted accounting firm, like Assurance Dimensions, conducts this review to ensure your financial statements are error-free and follow generally accepted accounting principles (GAAP). Your audit firm will likely run inquiries or analytical procedures to ensure there are no inaccuracies in your financial statements. However, they will not take the extra steps to verify if the information presented in your financial statements matches other data, like your internal controls and bank records.
Think of reviewed financial statements as the answer to, “Does my organization’s finances make sense?” It’s a general overview and understanding of finances but not an in-depth analysis like a financial statement audit. For your audit firm to conduct a review of your financial statements, you’ll need to provide them with your:
- Balance sheet
- Income statement
- Statement of cash flows
- Any other relevant documents
Differences Between Reviews and Audits
As previously mentioned, reviewed financials do not provide an in-depth look at your finances. Reviews only provide limited assurance but are generally less expensive and take less time to complete. Reviewed financial statements offer a plausible explanation of your financial statements.
On the other hand, an audit is a detailed examination of your financial statements, transactions, and internal controls. For some businesses and organizations, audits are required by law. Because of this, an audit is more time-consuming and usually more expensive than a review. An audit provides reasonable assurance and an audit firm’s opinion on the accuracy and completeness of your financial statements.
When to Choose A Review Over an Audit
There are certain instances where reviewed financial statements can be more beneficial than a full audit. For example, for small and mid-sized businesses, it can be helpful to have reviewed financial statements for internal use, to secure new investors, satisfy investors’ requirements or obtain a bank loan. Reviews provide a third-party confirmation of the legitimacy of your financial statements. If something is off, your audit firm will note it in their opinion.
If you’re unsure if your organization needs an audit or if reviewed financial statements will suffice, check with your compliance department, audit firm, or attorney to ensure you adhere to all applicable laws and regulations.
Partner with Assurance Dimensions
Although reviews do not provide an in-depth analysis like an audit, they still offer valuable insight to your organization’s leaders, investors, and stakeholders. Plus, they take less time and provide you with a level of assurance to know your financial statements are in order.
At Assurance Dimensions, we’re committed to providing you with efficient and timely assurance and audit services. That’s why we offer our services remotely. With over 75 years of industry experience, we provide a personalized approach and tailor our services to your needs. If you’re interested in compilation and review engagements, contact us today.
