An accountant-reviewed financial statement is a powerful tool for businesses seeking to enhance their financial visibility. With the skills of a CPA, these reports provide a clear and authentic picture of your company’s financial health. A CPA’s review offers valuable insights into potential errors, helping you make informed decisions. In this guide, we will examine how accountant-reviewed financial statements can uplift your business.
What is the Accountant-Reviewed Financial Statement?
An Accountant-Reviewed Financial Statement refers to a financial document that a CPA has reviewed, but not as thoroughly as in an audit. The accountant will perform limited processes to determine if the statements appear authentic and stable to applicable accounting standards.
Why Do Businesses Need an Accountant-Reviewed Financial Statement?
A financial review helps confirm that the financial statements are free from critical errors and are presented in line with accounting standards. This is essential for:
- External stakeholders, including investors, lenders, and other third parties, rely on reviewed financial statements to make informed decisions.
- Internal Control: The review helps the company maintain visibility and clarity in its financial reporting.
- Regulatory Compliance: Certain businesses may be required by law to submit reviewed statements, exclusively publicly held companies.
Key Differences between Reviewed and Audited Financial Statements
- Level of Affirmation:
A reviewed financial statement provides limited Certainty. An audit offers a higher level of confidence in the financial information. - CPA Involvement:
In a review, the CPA performs requests and analytical processes. In an audit, they perform detailed testing and verification. - Scope of Work:
Reviews involve less work and no in-depth testing. Audits are more widespread and include examining internal controls. - Time and Cost:
A review is fast and more reasonable. An audit takes longer and is commonly more costly due to the depth of analysis. - Use of Information:
Reviewed reports are often used by small to medium-sized businesses. Regulators, banks, and financiers usually require audited reports.
What is the Process of an Accountant-Reviewed Financial Statement?
The review process typically adds a standard set of key steps, which verify that the financial statements are in line with applicable accounting levels:
- Primary Discussions: The accountant discusses the company’s financial status and objectives.
- Documentation Review: The accountant reviews the company’s financial records, including trial balances and journals.
- Analytical Processes: The accountant performs simple analysis, looking for unusual changes or patterns in the financial data.
- Limited Queries: The accountant may ask for confirmation or explanations about differences.
- Review Report: Once the review is complete, the CPA issues a report stating whether the financial statements appear to comply with generally accepted accounting rules.
How to Review Financial Statements?
If you’re a business owner or accountant, knowing how to review financial statements is essential. While a CPA usually performs this task, understanding the core procedure will help you make more informed financial decisions. Here is how to go about it:
- Collect Financial Data: Collect the company’s financial reports, including the balance sheet, income statement, and cash flow statement.
- Review Accounting Records: Check the company’s accounting records for accuracy and integrity. Confirm that the data supports the figures in the financial statements.
- Perform Analytical Processes: Compare financial data over time to identify any significant changes.
- Examine Internal Controls: Ensure there are no flaws in the company’s internal controls that could lead to errors in the financial statements.
What are the Sample Reviewed Financial Statements?
A sample Accountant-Reviewed Financial Statement gives you an idea of what to expect when you get your review. Typically, the sample includes:
- Balance Sheet: An overview of a company’s assets, liabilities, and equity.
- Income Statement: A summary of a company’s revenues and costs over a while.
- Cash Flow Statement: A division of cash coming in and going out of the business.
- Review Report: The CPA’s findings, stating whether the financial statements appear fairly presented.
By looking at a sample, businesses can understand the format of these statements and verify that they meet official requirements.
What is the Role of a CPA in Financial Statement Review?
A CPA plays a vital role in an Accountant-Reviewed Financial Statement. Their skills certify that financial statements meet the required standards and regulations. But what does it take to be a CPA who conducts reviews?
- Professional Qualifications: A CPA must be licensed and have expertise in accounting and financial reporting.
- Knowledge of Accounting Standards: A CPA must be well-versed in GAAP and other applicable accounting standards.
- Understanding of the Business: The CPA should have a clear understanding of the business’s financial status and any unique considerations.
Who Needs a Financial Statement Review?
An Accountant-Reviewed Financial Statement is helpful for a range of businesses and organisations. Small to medium-sized companies often seek a review to certify that their financial records are accurate and up to date, without the need for a full audit. CPA performs these reviews, offering necessary awareness into financial performance. Business owners, investors, and lenders can count on reviewed financial statements for informed decision-making.
Advantages of a Financial Statement Review
Increased Accuracy:
A CPA review verifies that your financial records are precise, helping to identify potential errors before they become significant issues.
Cost-Effective:
Compared to an audit, a financial statement review is more reasonable while still providing valuable insights into your company’s financial health.
Faster Process:
Reviews are steadier than audits, allowing for timely decision-making without a lengthy examination of every financial transaction.
Credibility Boost:
Having a CPA review your statements adds a layer of trust, which is essential for financiers, lenders, and stakeholders.
When to choose a Review Over an Audit?
Deciding whether to opt for a review or audit depends on several factors:
- Level of Assurance Needed: If your beneficiaries require the highest level of certainty, go for an audit. For general purposes, a review will suffice.
- Budget Considerations: Reviews are less costly than audits, making them a more affordable option for smaller businesses.
- Business Size and Complexity: Larger, more complex businesses often opt for audits, while smaller companies may choose a review.
