What’s the difference between an audit and a review?
An audit and a review have similarities, but they are different types of assurance engagements.
“An assurance engagement” is an engagement in which a practitioner obtains sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the measurement or evaluation of an underlying subject matter against criteria.” —International Auditing and Assurance Standards Board (IAASB)
Certified Public Accountants (CPAs) can perform different levels of assurance engagements – a review, for example, has a lower level of assurance and less testing of financials. An audit, however, requires a higher level of assurance with significantly more testing of financials.
Understanding a Review
An accountant may be asked to review current financial statements or historical financial statements with a limited level of assurance. An accountant will utilize analytical procedures and client inquiry to evaluate financial information and nonfinancial information with limited assurance. Once completed, a review report is issued to report any material modifications that may be necessary. Some reviews may find no material issues while others may include potential findings such as errors, misstatements or fraud. The report is generally provided to the board, a bank or other financing entity, or other third-party to help them to make business or financial decisions.
Understanding an Audit
An audit offers the highest level of assurance providing objective examination and evaluation of financial statements. Often requested by a third party who oversees an organization, and audit offers an unbiased and accurate representation of transactions to ensure they are free of misstatements. Audits also allow accountants to report weaknesses of a business internal accounting controls that they might encounter during auditing procedures. Audits are significantly more thorough than reviews and take more time and labor to complete on both the side of the business being audited and the accounting firm responsible. Audit procedures are developed to respond to risks identified by that auditors. These may include inspection, observation, third-party confirmation, and examination of documents.
Do you need review or audit support?
If you or your organization is need of audit services, help to prepare for an audit, needs to undergo a mock audit or needs help compiling records and documentation for an audit, the team at MCK CPAs & Advisors is here to help. Contact us today to get started.