Review Report Vs. Audit Report
Reviews and audits help investors, regulators, governments and trade partners understand a company's financial statements and operating trends. They also help company management ensure that internal controls, operating mechanisms, human resource policies and segment (or departmental) guidelines are adequate and functional. An audit is a more comprehensive examination than a review.
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A public company---listed on a securities exchange---must ensure that its financial statements are accurate, complete and in compliance with regulatory requirements, industry practices and accounting principles. A company also must ensure that its internal controls, policies and guidelines are adequate and fair. Regulators require an organization to hire external auditors to perform audits and reviews. These auditors issue different types of reports to company management, audit committees, regulators, investors and the general public.
What is a Review Report?
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A review report is a "limited assurance" report that a certified public accountant (CPA) issues at the end of a review. In a review process, an auditor ensures that financial statements are fair, complete and in compliance with generally accepted accounting principles (GAAP). However, an external auditor does not test financial statement accounts or internal controls to detect significant errors, control weaknesses or problems in financial reporting mechanisms. "Limited assurance" means that an audit specialist is not aware of any important problem in accounting records but has not conducted any test to confirm that opinion.
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Who Uses a Review Report
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A review is a less detailed examination than an audit. A review helps lenders, senior managers, trade creditors and regulators appraise financial statements of a small---or a medium-sized---company that is not listed on a securities exchange or is exempt from audit requirements.
What is an Audit Report?
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An audit report helps a variety of readers---investors, regulators, company management and the general public---assess an organization's financial statements and confirm that such statements are "fair," complete and in adherence to GAAP, industry practices and regulatory guidelines. An audit is a comprehensive examination of a company's internal controls, policies and procedures around financial reporting mechanisms. "Fair" means accurate and objective in audit parlance. Complete financial statements include four data sets: a balance sheet, a statement of profit and loss, a statement of cash flows and a statement of shareholders' equity. An external auditor also applies generally accepted auditing standards (GAAS) to a company's controls to ensure that they are adequate and functional.
Who Uses an Audit Report?
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An audit is a detailed examination. Readers of audit reports learn about a firm's operating data, internal control problems, management strategic initiatives and industry trends. An auditor issues a report based on testing. There are five types of reports: unqualified, unqualified with explanatory paragraph, qualified, adverse and disclaimer. Regulators require audit reports for companies listed on securities exchanges.
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