There are different levels of assurance engagements that CPAs can perform. A review has a lower level of assurance with less testing performed on the financials, while an audit provides a higher level of assurance with substantially more testing of the financials.
Below we go into further detail on these differences and how to determine which engagement meets your needs.
According to the American Institute of Certified Public Accountants (AICPA), the governing body for certified public accountants, the purpose of a review is to obtain a limited level of assurance the financial statements are in accordance with the applicable financial reporting framework.
Typically, the CPA will obtain limited assurance through a variety of analytical procedures and inquiries. A review report is issued indicating whether the CPA is aware of any material modifications that should be made to financials.
Once the review is complete, the business or organization can provide the review report to lenders and third-party users. The report is commonly requested when seeking large levels of financing or credit approvals. The review service will also help business owners or management gain a better understanding of their financial position in order to make key decisions.
An audit provides the highest level of assurance to outside users of the financial statements. During an audit engagement, the objective is to obtain reasonable assurance about whether the financial statements, as a whole, are free of material misstatement. In addition, CPAs are required to report any significant or material weaknesses in the business’s internal controls.
The scope of an audit is more thorough than a review. They require more time and effort on part of the CPA and business or organization. To obtain reasonable assurance, a significant amount of testing is performed on the financial information by inspecting, observing, confirming with outside parties, and examining source documents.
Businesses or organizations usually engage in audits when they are trying to obtain higher levels of financing, but also when they are seeking outside investors or during mergers and acquisitions. The CPA will issue an audit report intended to provide these outside parties with a high, but not absolute, level of assurance about the financials.
An audit requires more time commitment from the company and CPA in order to provide more assurance to the report users. A review is far less in scope but does express an opinion on the financial statements as a whole. Your CPA will be pleased to discuss these services with you.
Ryan Skuce joined Earney & Company, L.L.P. in 2003, and became a partner in November 2013. He works extensively with physicians, medical practices, and large medical groups. Ryan has experience in accounting and tax services including financial reporting and analysis, technical support, cash flow planning, physician compensation strategies, and medical practice strategic planning. He also has experience in the areas of accounting and tax for a variety of for profit and nonprofit clients. Ryan is currently a member of the American Institute of Certified Public Accountants (AICPA) and the North Carolina Association of Certified Public Accountants (NCACPA). Ryan works with his clients on evaluating operational and technical issues. He provides back-office accounting support, and recommends and assists in the implementation of ideas to cut overhead costs and streamline operations. With an in-depth knowledge of existing and proposed tax laws, Ryan often advises companies on tax deferment or savings through proactive structuring of transactions. He also assists his clients with Internal Revenue Service audits. He received his Masters of Science in Accountancy from UNC-Wilmington and resides in Wilmington, where he enjoys playing hockey with a local team.