In the world of business, financial statements are a beacon, guiding stakeholders through the intricate maze of financial decision-making. Among the different financial statement services, review engagements hold a significant place. But what are they, and why are they crucial for your business? Let’s delve into these intriguing questions and more.
A review engagement is a type of financial statement service where a Chartered Professional Accountant (CPA) performs analytical procedures and inquiries to provide a moderate level of assurance that the financial statements are free of material misstatement. This service is more in-depth than a compilation but less thorough than an audit.
Review engagements serve various purposes. They are often used when businesses need to provide a moderate level of assurance to external stakeholders such as lenders, creditors, potential investors, and tax authorities. They help ensure the financial statements are plausible and consistent with management’s understanding of the business’s financial position. While they do not provide absolute assurance, they offer a higher level of assurance than compilations, increasing stakeholders’ confidence in the company’s financial reporting.
While review engagements are less exhaustive than audits, they must still adhere to specific professional standards. In Canada, these are generally prepared following the Accounting Standards for Private Enterprises (ASPE) or the Accounting Standards for Not-for-Profit Organizations (ASNPO), depending on the nature and needs of the business. The goal is to ensure the financial statements are credible, reliable, and comparable across different periods and companies.
The essential aspect to remember is that a review engagement provides limited assurance that there are no material modifications that should be made to the financial statements for them to conform to the applicable financial reporting framework. This lends a degree of credibility to the financial statements, increasing their usefulness to stakeholders.
The CPA’s role in a review engagement is to perform inquiries and analysis to provide limited assurance that the financial statements are free of material misstatement. This process involves gaining a general understanding of the industry, the entity, and the entity’s internal controls and applying this understanding to assess the plausibility of the financial statements.
While CPAs do not express an opinion on the financial statements in a review engagement as they would in an audit, their expertise in financial reporting can help businesses identify potential issues and opportunities, guiding them towards better financial decision-making.
Review engagements are an invaluable tool for businesses seeking to provide stakeholders with a moderate level of assurance about their financial statements. They offer a balanced approach, being more thorough than a compilation but less intensive than an audit.
Choosing the right financial reporting service depends largely on your business’s specific needs and the requirements of your financial statement users. A CPA is a valuable resource in making this decision, providing the necessary expertise and guidance.
At GBA LLP, our team of experienced Chartered Professional Accountants is ready to help you navigate the complexities of review engagements. We can guide you through the process, ensuring you have the information you need to make informed business decisions. Contact us today to learn more about how we can assist your business in its financial journey.
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30, provides Audits and Reviews of financial statements, and Compilations of financial information, as well as corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.
If you would like to schedule a call to discuss your accounting or tax needs with one of our team members, please complete the free no obligation meeting request on this page.
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