Increase Your Confidence with Reviewed Financial Statements
It’s absolutely essential that every business creates in-depth financial statements once a year, but the quality and accuracy of those statements is important as well. Spending time getting your finances in order isn’t useful unless that financial information is completely accurate. Professionally reviewed financial statements can help make sure that you have accurate reports that will help your business excel during the upcoming year.
Conform with applicable financial reporting frameworks
Not only is it important to ensure the accuracy of financial statements, it’s also important to make sure that those reports conform to applicable financial report frameworks. A few examples include:
- Generally Accepted Accounting Principles (GAAP)
- International Financial Reporting Standards (IFRS)
A professional CPA can make sure that you’re in complete compliance with your company’s rules and regulations, as well as any state or national regulations.
Stretch your financial reach
If you really want to go in-depth in ensuring the accuracy of your financial statements, audited financial statements are the best choice. However, they can be a bit pricey because of the duration and nature of an auditing project. If you want to stretch your dollar, you may want to consider reviewed financial statements instead.
A review is more affordable than an audit, but it is only appropriate when lenders and creditors allow this approach. It is important to consult your business team, as well as a professional CPA when deciding what kind of approach is right for you.
Procedures included in a review
There are a wide variety of procedures that may be appropriate for your reviewed financial statements. A few include:
- Conducting a ratio analysis
- Investigating inconsistent findings
- Investigating unusual or complex situations that may impact results
- Investigating significant transactions
- Following up on questions
- Reviewing communications from regulatory agencies
- Reading financial statements to see if they conform to the applicable framework
- Reviewing management reports of accountants who reviewed or audited financial statements in prior periods
In order to determine whether reviewed financial statements are a good idea for your business, visit with a team of experienced CPAs.
Reviewed financial statements FAQ
What is the difference between a compilation, a review, and an audit?
Dealing with financial reports properly is extremely important, which includes understanding the differences between a compilation, a review, and an audit.
A compilation is the most basic review available, which means it is also the most affordable of the three options. One or more accountants assist management in creating financial statements without an assurance that the reports are completely accurate. However, employing the help of a professional CPA can ensure that the report itself is accurate because they know how to make sure that they comply with Statements on Standards for Accounting and Review Services (SSARSs).
A review goes more in-depth than a compilation, but not as in-depth as an audit. With a review, the CPA designs and performs analytical procedures to ensure compliance, but they operate under the assumption that the statements in the report are accurate.
An audit is the most in-depth approach, and it’s also the most expensive. That’s because the auditor is required to obtain an understanding of the company’s internal control, as well as assess fraud risk, in order to ensure that everything about the financial statements is completely true and accurate.
How do I decide which method is right for my business?
The easiest way to determine which method is right for you is to figure out which one fits into your budget. However, there’s more to your decision than finances.
Lenders, creditors, and other agencies with an interest in the success of your business may require you to obtain an audit, or they may approve a review instead. Meeting with these people is an important step in determining which method to use.
You should also meet with a professional CPA. Even if investors approve of reviewed financial statements, you may have to consider an audit instead, especially if financial statements have never been audited in the past.
What areas are assessed as part of a review?
Cash – Are cash accounts being reconciled, is there a reconciliation of intercompany transfers, and are checks being properly written and mailed?
Receivables – Are doubtful accounts considered, are any receivables pledged, discounted, or factored, and are there any non-current receivables?
Inventory – Are inventory counts performed, were cosigned goods considered, and what costs are associated with that inventory?
Investments – How are fair values determined, how are gains and losses recorded, and how do you calculate investment income?
Fixed assets – How are gains and losses recorded, what is the criteria for capitalizing expenditures, and what depreciation methods are used?
Intangible assets – What is recorded as an intangible asset, is amortization being applied, and have impairment losses been recognized?
Notes payable and accrued expenses – Are there sufficient expense accruals and are loans being properly classified?
Long-term liabilities – Are debt agreements properly disclosed, is the company in compliance with loan covenants, and are they properly classified?
Contingencies and commitments – What guarantees is the company committed to, are there any contractual obligations, and are there any liabilities for environmental remediation?
Equity – What types of stock have been authorized, what is their value, and have options been properly measured and disclosed?
Revenue and expenses – What is the revenue recognition policy, are expenses recorded correctly, and have discontinued operations been properly reported?