Financial Statement Reviews: Independent Assurance for Better Decisions
A pillar guide to financial statement reviews — when limited assurance may be appropriate, what the engagement covers, how the process runs, and how Dohan CPA supports readiness.
Assurance Services
Dohan CPA provides financial statement reviews for privately held businesses, professional practices, real estate entities, nonprofits, lenders, investors, owners, and boards that need limited assurance. Our objective is independent limited assurance at a scope and cost positioned between a compilation and an audit. This guide explains when the service may be needed, what the engagement addresses, how the process works, and how management can prepare.
Who financial statement reviews are for
Dohan CPA's financial statement reviews are designed for privately held businesses, professional practices, real estate entities, nonprofits, lenders, investors, owners, and boards that need limited assurance. The engagement is organized around the reporting needs of the people who will actually use the statements, rather than treating the audit as a generic year-end exercise.
The intended result is independent limited assurance at a scope and cost positioned between a compilation and an audit. Management remains responsible for the financial statements, underlying records, estimates, controls, and representations; the independent CPA is responsible for planning and performing the engagement and reporting in accordance with the applicable professional standards.
When an audit may be needed
A review is often selected when a lender, investor, owner, or governing agreement needs limited assurance but does not require an audit. The user must agree that a review is acceptable; a CPA cannot convert an audit requirement into a review without the appropriate party's approval.
Before accepting a timetable or quote, identify the reporting entity, fiscal period, financial reporting framework, intended users, required report language, delivery date, and any compliance or supplemental schedules. A requirement in a loan, contract, statute, regulatory agreement, or governing document should be read directly rather than summarized from memory.
What makes this engagement different
A review engagement applies inquiry and analytical procedures to financial statements and management's accounting. It does not include the audit-level risk assessment, control testing, substantive testing, confirmations, or inspection ordinarily associated with an audit, although additional procedures may be required when the accountant becomes aware that information may be materially misstated.
A strong engagement therefore combines technical accounting, industry knowledge, disciplined project management, and timely communication. The audit is more efficient when key schedules reconcile before fieldwork and questions are routed to people who understand the underlying transaction.
Areas commonly addressed
The scope is risk-based and tailored to materiality and the applicable standards. Common areas include:
- Selection of GAAP, income-tax basis, cash basis, or another acceptable financial reporting framework
- Complete financial statements, notes, supplementary information, and appropriate management representations
- Expectations and relationships among revenue, margins, payroll, operating expenses, working capital, and debt
- Significant or unusual transactions, estimates, related parties, contingencies, and subsequent events
- Account reconciliations and schedules supporting balances discussed during inquiry and analytics
- Independence, intended use, lender wording, deadlines, and whether the requested service is actually sufficient
Our audit approach
The exact procedures vary with assessed risks, but a well-managed engagement commonly includes the following work:
- Obtain an understanding of the entity, industry, accounting practices, framework, and intended users
- Perform analytical procedures over financial statements, ratios, trends, budgets, and relevant nonfinancial data
- Inquire of management about accounting policies, transactions, estimates, errors, fraud, contingencies, and subsequent events
- Follow up on unexpected relationships, inconsistent responses, or indications of material misstatement
- Read the financial statements and notes for appropriate form, terminology, classification, and disclosure
- Obtain management representations and issue the review report when sufficient appropriate review evidence is obtained
What the audit does and does not provide
A financial statement audit is designed to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud, and to support the auditor's opinion. Reasonable assurance is a high level of assurance, but it is not absolute assurance and an audit is not a guarantee that every error, control deficiency, improper payment, or instance of fraud will be found.
An audit also does not replace management's responsibilities, provide legal advice, determine the value of a business or property unless separately engaged, or predict future results. Findings and recommendations should be evaluated in the context of the engagement's objective and the organization's risk tolerance.
A practical timeline
Planning should begin before year-end. During planning, confirm scope, independence, deadlines, material locations, confirmation contacts, specialists, prior findings, and client-prepared schedules. After year-end, management closes the books and delivers reconciled schedules. The CPA performs fieldwork, communicates open items, evaluates adjustments and disclosures, obtains representations, and issues the report after all required evidence and approvals are complete.
Calendar time depends on readiness and responsiveness as much as auditor hours. Missing reconciliations, changing trial balances, incomplete contracts, slow third-party confirmations, and late legal or governance information are common causes of delay.
Why work with Dohan CPA
Dohan CPA brings the perspective of a full-service CPA firm serving South Florida businesses, organizations, owners, and high-value individuals. The objective is a technically sound engagement with direct communication, practical request lists, visible responsibility, and attention to the decisions the financial statements must support.
A proposed engagement should be finalized only after Dohan CPA confirms that the service is within the firm's current capabilities, independence requirements, licensing, staffing, and quality-management procedures.
Frequently asked questions
What assurance does a review provide?
A review provides limited assurance that the accountant is not aware of material modifications needed for the financial statements to conform to the applicable reporting framework.
How is a review different from an audit?
A review primarily uses inquiry and analytical procedures. An audit provides reasonable assurance and includes a broader risk assessment and procedures such as inspection, observation, confirmation, recalculation, and testing as appropriate.
Must the CPA be independent?
Yes. Independence is required for a review engagement.
Can reviewed statements use the income-tax basis?
Yes, when a special-purpose framework is appropriate and acceptable to users. The statements and report must identify the framework and include suitable disclosures.
Does a review include internal-control testing?
No. A review does not ordinarily include obtaining an understanding of internal control for audit planning or testing controls. The accountant still considers information learned during the engagement.
Can a review be upgraded to an audit later?
Possibly, but the auditor will need additional planning and evidence. If an audit may be required, discuss it early so confirmations, inventory observations, and cutoff evidence are not lost.
Authoritative sources
- AICPA: What is the difference between a compilation, review, and audit? - AICPA & CIMA
- AICPA: Preparation, Compilation, and Review Standards - AICPA & CIMA
- FASB: Accounting Standards Updates Issued - Financial Accounting Standards Board
General educational information only. This page is not accounting, auditing, tax, investment, or legal advice and does not create a CPA-client relationship. Requirements and standards can change and depend on specific facts and agreements.