Overview of Financial Statement Reviews

A limited level of assurance that the financial statements do not require significant changes to comply with generally accepted accounting principles (GAAP) is obtained by an accountant during a financial review conducted in accordance with Statements on Standards for Accounting and Review Services (SSARS).

The final result is the CPA's report on the financial statements included in the review. In addition to stating that the CPA is not aware of any major adjustments that need to be made to the financial statements in order for them to comply with GAAP, the CPA's report outlines the extent of the CPA's work (for instance, which financial statements have been examined).

The administration of the NPO is in charge of the financial accounts, as it is with all levels of service. The main distinction between an audit and a review is that during an audit, the auditor validates management's disclosures and amounts using data from outside sources. Unless the CPA considers the numbers and disclosures fundamentally erroneous, the CPA typically does not check management's figures and disclosures with outside evidence during a review.

When doing a review, the CPA conducts queries and analytical techniques intended to find certain items or trends that may require more justification from management. The review's main goal is to establish whether the financial statements make sense without using audit-like techniques.

The CPA is not required to evaluate control risk, test accounting records and responses to inquiries by obtaining supporting Paper works, or carry out certain other procedures typically carried out during an audit to conduct a review of financial statements. A review does consider the overall financial statement presentation, the important estimations made by management, and the accounting standards that were used.

Understanding Financial Statement Reviews

A financial statement review is a service that allows the accountant to receive a limited level of confidence that the financial statements of a business do not require any significant changes in order to comply with the relevant accounting framework (such as GAAP or IFRS). The accountant is not required to analyse fraud risk, have a thorough grasp of internal controls, or do any other kind of audit method during a review. As a result, a review cannot provide the accountant with the peace of mind that he is aware of all the important issues that would typically be found and revealed in an audit.

When conducting a review, management is in charge of creating and presenting the financial statements for the organisation, and the accountant is in charge of conducting a thorough analysis of the financial statements.

The cost of the review is between that of a compilation and an audit. Businesses that can employ this strategy without incurring the cost of a thorough audit prefer it since their creditors and lenders will let them do so.

Scope and Objectives

A review of financial statements is intended to allow a practising professional to state whether, after using procedures, they have concluded that the financial information has been prepared in all material ways by the applicable accounting framework.

Planning is done through management interviews, and after that, based on the independent auditor's or public accountant's professional judgement, it is decided on the best ways to communicate a conclusion about the company's financial statements.

Procedure to Conduct a Financial Statement Review

The accountant conducts the processes required during a financial statement review to give a reasonable basis for getting a limited assurance that no major modifications are required to bring the financial statements into compliance with the relevant financial reporting framework. In sectors where there are higher risks of misstatement, these processes are more extensively concentrated. A review might reasonably involve the following sorts of procedures:

• Perform a ratio study using past, projected, and market data.
• Investigate results that seem incongruous.
• Find out the steps involved in necessary papering accounting transactions.
• Investigate odd or complicated circumstances that might affect reported outcomes.
• Examine major transactions that happened close to the end of the accounting period.
• Answer any inquiries that came up during earlier evaluations.
• Ask about significant occurrences that took place following the date of the financial statements.
• Look at important journal entries.
• Examine correspondence from regulatory organizations
• Check the financial statements to determine if they seem to follow the relevant financial reporting framework by reading them.
• Take a look at any accountants' management reports from previous periods' financial statements reviews or audits.

A report detailing the findings based on the evidence gathered throughout the course of the work is prepared after the processes carried out by the independent auditor or public accountant. In order for the user to understand the nature of the work completed and to make it clear that an audit has not been undertaken and, thus, does not express an audit opinion, the scope of the assignment is described in the report of a review of the financial statements.

What is the correct time to ask for Financial Statement Review?

When a company is not yet ready to conduct a financial audit because it may have a negative judgement about the reasonableness of the financial statements, it may request a review of the financial statements.

The Company will be able to generally enhance its accounting procedures with the help of a study of the financial statements, but it is made clear that accounting errors could occur due to the moderate security.Because there are fewer processes involved, servicing a financial statement audit is less expensive than conducting a financial audit.

What is the difference between Financial Audit and Financial Review?

The standards of a financial audit are not met by a review of financial statements since a review involves the execution of procedures that result in uncertain conclusions. The investigation (gaining knowledge about the nature of the firm and accounting practises) and analytical techniques used on the financial statements are the major steps in a review.

A financial audit comprises knowing the Company's internal control over financial reporting in addition to learning about the business. Based on this knowledge, the auditor carries out substantive and control examinations to determine if the balances in the financial statements are accurately reported in conformity with current accounting principles. The independent auditor offers an opinion about the reasonableness of the financial statements in accordance with the applicable accounting rules after completing the audit processes.

A financial audit requires more involved methods for giving a judgement on the financial situation and performance of the Company, whereas a review of financial statements offers reasonable assurance of the reasonableness of the financial statements.

Why Enterslice?

• We inquire about the company's accounting policies and procedures.
• Enterslice uses different techniques for gathering and necessary papering financial data.
• We look at the decisions made during board meetings for owners or directors
• Our team takes written assurances from management that all information provided to the CPA is accurate.
• We make sure that the CPA has received the necessary information.
• We work while believing that internal control is the responsibility of management and management must stop and identify fraud.
• We also gather information about any noteworthy events that have happened.
• We consider the analytical techniques for comparisons along with the expectations for recorded amounts created by the CPA.
• We take ratios from recorded quantities and reasonably relate the recorded amounts.