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What is a Review?

A review engagement is conducted to provide limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the financial reporting framework.

A review differs significantly from an audit. Review engagements provide less assurance to the reader of the financial statements because the CPA does not perform as many audit procedures. The broad review procedures required to be performed by the CPA are:

  • Inquiries as to the accounting practices and principles used by the business
  • Procedures for recording and accumulating financial information
  • Actions taken at owners’ or directors’ meetings
  • Written representations from management regarding the accuracy of all information given to the CPA
  • Receipt of all relevant information by the CPA
  • Management’s responsibility for internal control
  • Management’s responsibility to prevent and detect fraud
  • Knowledge of fraud
  • Information related to any significant subsequent events
  • Analytical procedures regarding comparisons
  • Expectations developed by the CPA of recorded amounts
  • Ratios from recorded amounts
  • Plausible relationships of recorded amounts

 

These analytical procedures provide better understanding of key relationships among certain numbers. This understanding gives more assurance about the reasonableness of the financial condition presented in the financial statements.

Based on the inquiries and analytical procedures, the CPA is able to express only limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework. Because a review engagement is substantially less intensive in scope than an audit, the CPA cannot express an opinion on the fairness of the financial statements taken as a whole.