Reviewed Financial Statements

The second level of financial reporting involves the preparation of reviewed financial statements.  Reviewed financial statements are used when the need for audited financial statements is not required.

The purpose of reviewed financial statements is the expression of limited assurance that there are no material modifications that should be made to the statements in order for them to be in conformity with generally accepted accounting principles (GAAP).

The level of assurance provided by reviewed financial statements is significantly less than that of an audit.  In an audit, the auditor’s report provides assurance that there are no material modifications to the financial statements to be in conformance with GAAP.  In a review, the accountants’ report is one of negative assurance where the accountant attests that nothing has come to the attention of the accountant causing such financial statements to be misleading or otherwise incorrectly stated.

Audit vs. Review

There are significant difference between the objectives of an audit vs. a review. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review does not provide a basis for the expression of an opinion because a review does not contemplate an understanding of the internal control structure or assess control risk, tests of accounting records and or responses to inquiries by obtaining co-oberating evidential matter through inspection, observation or confirmation and other audit procedures. However, a review is significantly greater in scope than a compilation — the accountants’ lowest level of reporting.