When it comes to managing your business’s finances, clarity and visibility are essential. One beneficial way to obtain both is through a review of financial statements. A financial statement review, conducted by a CPA, offers a high standard of certainty that your financial reports are accurate and in compliance with accounting standards. In this guide, we will explain what a reviewed financial statement is and how it differs from an audit.
What is an Accountant-Reviewed Financial Account?
An Accountant-Reviewed Financial Account is a review of a company’s financial statements by a CPA. Unlike an audit, which offers a more in-depth examination, a review generates a limited level of certainty that the financial statements are free from material mistakes. The accountant will apply analytical methods and set requirements to confirm that the economic data is accurate and verify that it conforms to generally accepted accounting principles.
Key Differences Between Reviewed and Audited Statements
The basic difference between a financial statement review and an audit lies in the level of guarantee provided.
- Audit: Offers a high level of certainty through broad testing and confirmation of financial data. Auditors will examine internal controls, sample transactions, and perform detailed testing to certify integrity.
- Review: Provides limited certainty based on analytical methods and questions. The CPA analyses the overall financial health and certifies that the statements are free from material mistakes, but does not perform the strict testing that an audit involves.
The Importance of Accountant-Reviewed Financial Accounts
Accountant-reviewed financial accounts are essential for businesses that want to enhance their credibility and maintain transparency in their financial reporting. Here is why they matter:
- Builds trust: A reviewed statement shows that a qualified CPA has arranged your financial data, which raises credibility with financiers, lenders, and investors.
- Improves accuracy: While not as detailed as an audit, a review helps identify variations and correct errors that could affect financial reporting.
- Improves business decision-making: Having a CPA review your financial statements provides a clearer understanding of your business’s financial health, helping you make informed decisions.
Benefits of Financial Statement Review
Improved Accuracy: A CPA’s review helps catch any mistakes or changes in the financial reports, confirming they are more authentic.
Raised Credibility: Reviewed statements provide certainty to partners, lenders, and investors that the information is reliable.
Cost-Effective: Compared to an audit, a review is less costly, making it a reasonable option for businesses.
Quicker Method: The review process is faster than an audit, allowing you to get results quickly without compromising quality.
How It Improves Clarity
Reviewed financial statements raise visibility in your business operations. With a deep review by a CPA, you verify that your financial statements reflect an authentic picture of your financial position.
The Process of Accountant-Reviewed Financial Account
An Accountant-Reviewed Financial Account involves several key steps. Here is a brief overview of the process:
- Preparation: The business generates its financial statements, typically including the balance sheet, income statement, and cash flow statement.
- Inquiry: The CPA will ask questions and make queries to gain a better understanding of the company’s financial situation.
- Analytical Methods: The CPA uses analytical processes to identify any potential deviations or issues that may require further attention.
- Conclusion: The CPA creates a report summarising the findings, which offers limited certainty that the financial statements are free from material misstatement.
Common Cases for Financial Statement Review
A financial statement review is particularly beneficial in these scenarios:
- Seeking financing: Lenders often require an Accountant-Reviewed Financial statement to evaluate a business’s solvency before granting loans.
- Investment purposes: Investors trust in reviewed financials to make informed decisions about where to invest.
- Private businesses: Small businesses and startups may opt for a review as a reasonable alternative to a full audit.
1. When Should You Opt for a Review?
If your business is looking to secure a loan, attract investors, or demonstrate financial health, a reviewed financial statement is an excellent option. It offers sufficient conviction for beneficiaries without the expense of a full audit.
Reviewed Financial Statements and Secured Loans
A CPA-reviewed financial statement can play a crucial role in securing business financing. Lenders often require these statements as evidence that a third party has reviewed your financial information. This raises your credibility and lowers the perceived risk, making it quicker to secure the essential capital for growth.
1. How a Reviewed Financial Statement Helps in Financing
When asking for a loan, showing reviewed financial statements helps build your business’s credibility and economic health. It analyses lenders to see if your company has been examined by an expert professional, making it a low-risk investment.
How to Prepare for an Accountant-Reviewed Financial Statement
Preparing for a financial review involves organising your financial records and understanding the basic needs for the review process. Here is a simple checklist to follow:
- Organise all financial statements: Collect your balance sheet, income statement, and cash flow statement.
- Confirm integrity: Double-check your records for any irregularities or errors that may have been identified during the review.
- Provide additional documentation: Be ready to provide any sustaining documents or details the CPA may request.
- Consult your CPA: Work with your CPA to check that all documents are in order before the review starts.