Running a profitable business takes more than just good ideas. You need authentic financial records to make wise decisions. These statements are set and checked by a licensed CPA. They give a clear picture of your financial health. Lenders, investors, and partners depend on them to analyse your integrity. In this article, you will learn why accountant-reviewed financial accounts play an essential role in driving business success.
What Are Reviewed Financial Statements?
A reviewed financial statement is a step above compiled financials, but not as detailed as an audit. Think of it like a soft check. A CPA examines your monetary documents to confirm they make sense and are free from clear errors, without looking too deeply into every transaction.
Reviewed vs. Audited Financial Statements
Key Differences in Scope and Assurance
Here is where people become uncertain: a financial audit is often seen as providing high trust. A review, on the other hand, offers limited certainty. The CPA would not test internal controls or certify all data, but they will do some reasoned work and ask questions.
When Is a Review Enough?
If you are applying for average financing or reporting to investors who don’t require full-blown audits, reviewed financials usually suffice. They are more accessible, quicker, and less invasive than audits.
Purpose and Importance of a Financial Statement Review
Purpose of a Financial Statement Review
- Confirm Accuracy: A CPA reviews the financial statements to verify that they are correct and reliable.
- Provide Insights: It helps identify financial trends and potential issues in your business.
- Improve Decision-Making: A review provides a clearer financial picture, allowing you to make informed choices.
- Save Time: Compared to audits, reviews are quicker and less costly while still providing valuable information.
Importance of a Financial Statement Review
- Lender Confidence: Lenders often require reviewed financial statements before approving loans.
- Attract Investors: Investors feel more comfortable when they see professional reviews of your financial records.
- Catch Errors Early: A review helps spot minor errors before they become big problems.
- Strengthen Business Strategy: With clear, reviewed statements, you can plan better for the future.
Who Uses Reviewed Financial Statements?
- Banks: for loans or lines of credit
- Investors: to check the financial balance
- Regulators: in industries with compliance requirements
- Board members: for corporate governance
- Private equity firms: before making decisions
How Lenders and Investors View Reviewed Financials
Reviewed financials tell them you’re not just estimating your income and expenses. It signals a degree of work ethic and reliability. While audited vs reviewed financial statements carry different weights, reviewed ones still offer visibility.
The Process of Reviewing Financial Statements
CPA’s Role in Reviewed Financials
Only a licensed CPA can conduct a review. They perform inquiries, analytical processes, and some basic testing to see if the numbers add up. But do not expect them to inspect every invoice.
Statements on Standards for Accounting and Review Services
This is the gold standard CPAs follow when reviewing statements. It certifies regularity, detail, and that everything is done by the book.
Steps Involved in a Financial Statement Review
- Early meeting with your CPA
- Submission of financial data
- Analytical review of trends and figures
- Questions about any exceptions or variations
- Preparation of a review report
- Delivery of approved and reviewed financial statements
Components of a Reviewed Financial Statement
A reviewed financial statement contains a balance sheet, income report, cash flow summary, notes, and a CPA’s check letter. It gives a clear, certified impression of your company’s finances.
What is Included in Reviewed Financials
- Balance sheet
- Income statement
- Statement of cash flows
- Notes to financial statements
- CPA review report validating limited certainty
Example of a Financial Statement Review Report
A typical review report includes a paragraph stating that the CPA reviewed the financial statements by SSARS and found no material misstatements. It doesn’t go as deep as an audit opinion, but it still conveys weight.
Reviewed Financial Statements vs. Compiled Financials
Reviewed financial statements involve a CPA examining and applying a rigorous process to verify that the reports are accurate. Compiled financials are simply prepared without any checks or proof. Reviews offer more reliability and are often ideal for lenders. Compilations are faster but offer less confidence in financial accuracy.
Why Small Businesses Opt for Reviewed Financials
Small businesses often cannot afford complete audits. That’s where CPA-reviewed financial statements come in. They offer just enough guarantee for growth-oriented companies looking to borrow, scale, or attract partners.
Common Mistakes When Reviewing Financial Reports
Alerts to Watch For
- Revenue irregularities
- Large, unexplained expenses
- Gaps in supporting documentation
- Shifting gross margins
Tips for a Clean Financial Review
- Keep detailed records
- Use reliable accounting software
- Communicate openly with your CPA
- Schedule regular financial reviews
When Is an Audit Necessary Instead?
Public companies and some social enterprises are legally required to undergo audits. If your investors demand high certainty or if you are looking to go public, you will need audited financial statements, not just a review.
How to Prepare for a Financial Statement Review
Checklist Before You Start
- Organise bank statements
- Ready income and expense summaries
- Collect previous reviews or audits
- Verify valid bookkeeping
Working with Your CPA Effectively
Be transparent. Provide everything they ask for. Ask questions if you do not understand something. Your support can speed up the financial report review and enhance its worth.
