A financial statement review and an audit are both professional engagements involving financial information, but they are not the same. They can differ in purpose, procedures, level of assurance and the needs of the business or stakeholder requesting the work.
What Is a Financial Statement Audit?
An audit involves obtaining evidence and performing procedures designed to provide the applicable level of assurance within the engagement. The auditor considers financial information, supporting records and relevant matters based on the audit objective and reporting framework.
What Is a Financial Statement Review?
A review is generally more limited than an audit. The procedures can be designed around enquiry, analytical work and other limited procedures rather than the broader testing typically associated with an audit.
Audit vs Review: The Main Differences
Purpose
An audit is designed to provide a higher level of assurance than a review within the relevant framework. A review can be appropriate when the user of the financial information does not require the same level of assurance as an audit.
Extent of Procedures
An audit generally involves more extensive procedures and evidence gathering. A review generally involves more limited work.
Time and Cost
Because an audit can require more procedures and evidence, it may require more time and resources than a review. The exact cost still depends on the business and engagement scope.
Reporting
The wording and form of the final report differ according to the type of engagement and applicable professional requirements.
When Might a Business Need an Audit?
An audit may be appropriate where an applicable requirement, stakeholder or business purpose calls for independent audit assurance. Certain free zone companies, financing arrangements or contractual situations may also have specific needs.
When Might a Review Be Considered?
An audit may be appropriate where an applicable requirement, stakeholder or business purpose calls for independent audit assurance. Certain free zone companies, financing arrangements or contractual situations may also have specific needs.
Can a Review Replace an Audit Requirement?
Not necessarily. If a regulator, free zone, lender or other stakeholder specifically requires audited financial statements, a review would not automatically satisfy that requirement. The applicable requirement should be confirmed before choosing the engagement.
What Should a Business Do Before Choosing an Engagement?
Start by identifying who will use the financial statements and what level of assurance is required. Confirm any regulatory, contractual or financing requirements before appointing a service provider. If the financial statements need to be organized or prepared before the engagement, consider Financial Statement Preparation Services.
Final Takeaway
A review and an audit serve different purposes and provide different levels of assurance. Choosing the right engagement depends on what the business and its stakeholders actually require. For companies that need an independent audit engagement, explore External Audit Services in Dubai and the wider Audit Services in Dubai offering.
