When asking for a loan or financing for your business, having an accountant review your financial statement can make a vital difference. These reviewed statements provide an extra layer of integrity, confirming that your financial records are authentic and trustworthy. In this guide, we’ll discover how an accountant-reviewed financial statement can play a crucial role in securing loans and financing.
What is an Accountant-Reviewed Financial Statement?
A financial statement review is a formal examination of a company’s financial records by a certified public accountant (CPA). It provides an objective and professional opinion on the integrity and reliability of the company’s financial statements. This review is less detailed than an audit but offers greater certainty than a simple compilation of economic data.
Why Should You Have Your Accountant-Reviewed Financial Statement?
1. Enhance Business Credibility
A CPA-reviewed financial statement adds a layer of authenticity to your financial reporting. Partners, lenders, and potential investors are more likely to trust your financial data when an administrative professional has reviewed it.
2. Meet Regulatory Needs
For publicly traded companies, as well as some private businesses, regulatory authorities may require a review of financial statements to confirm compliance with industry standards.
3. Identify Potential Financial Risks
Through a review, a CPA can highlight areas of risk or financial instability that may not be immediately visible. This can help business owners take corrective action before problems grow.
How Does an Accountant-Reviewed Financial Statement Differ from an Audit?
An Accountant-Reviewed Financial Statement and an audit may seem similar, but they offer different standards of guarantee. In a review, a CPA performs limited tasks, such as queries and comparisons. The goal is to spot anything uncertain or variable in the financial data.
It involves in-depth testing, confirmation of records, and a deep check of within controls. Audits offer the highest level of integrity in the financial sector, which is why they are often needed for public companies.
Reviewed Financial Statements vs. Audited
- Audits: provide a higher level of certainty. Auditors conduct detailed tests and procedures to verify the accuracy and clarity of the financial statements.
- Reviewed financial statements, on the other hand, are less vast and focus first on analytical processes and investigations to detect any apparent errors. It is a more reasonable option, ideal for businesses that need an official review but don’t require a full audit.
The Process of a Financial Statement Review
Step 1: Preliminary Assessment
The process begins with a primary discussion between the CPA and the company’s management to understand the financial outlook and the range of the review. The CPA will ask for core financial documents and other similar information.
Step 2: Analytical Processes
The CPA then applies analytical methods, such as comparing current financial results with those of prior periods, industry averages, or benchmark figures. This helps identify any differences or unusual trends in the economic data.
Step 3: Inquiries
The CPA will ask management specific inquiries about different elements of the financial statements. This adds details about accounting policies, evaluations, and any events that could impact the company’s economic outcome.
Step 4: Conclusion and Report
Based on the findings, the CPA will issue a review report. This report summarises the review methods, the conclusions drawn, and whether any changes or corrections to the financial remarks are recommended.
Benefits of a Financial Statement Review
- Cost-Effective Assurance: Compared to a full audit, an Accountant-Reviewed Financial Statement is more reasonable.
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Faster Process: The review process is quicker than an audit. With fewer procedures and tests involved, businesses can expect a quicker turnaround time.
- Clearer Financial Insights: A CPA-reviewed financial statement helps uncover hidden financial issues or variations that may not be obvious at first glance.
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Examine Trust from Stakeholders: By demonstrating that your financial statements have been reviewed by a qualified professional, you build trust with investors, lenders, and other stakeholders.
What Are the Key Differences Between Reviewed and Audited Financial Statements?
When you receive a financial review for your business, it’s essential to understand the differences between reviewed and audited financial statements.
Audit:
- Detailed testing of financial records
- Higher level of certainty
- More detailed method and broad confirmation
- Typically needed for large companies or publicly held businesses
Review:
- Focuses on investigative and analytical process
- Provides a moderate guarantee
- More affordable and faster
- Suitable for smaller businesses or companies with less complicated financial needs
Who Should Consider a Financial Statement Review?
An Accountant-Reviewed Financial Statement is effective for businesses that want to confirm their financial reports are authentic without the cost of a full audit. Small to mid-sized businesses, startups, and private companies often opt for this service. It’s also a vast option for those asking to evaluate their integrity with lenders, financiers, or regulatory bodies.
