There may come a time when you need a loan or a grant for your Nashville business. Perhaps you’ll be testing a new product; perhaps you’ll need money to buy equipment; perhaps you’ll simply need the extra funding to keep operations rolling. Whatever the case, there’s one thing an accounting firm can do for you: conduct a review engagement.
What is a review engagement?
A review engagement is one form of attestation service – like an audit – that a CPA performs to assure stakeholders that the financial information you present them is fair and reliable. Essentially, it is a vote of confidence for your business.
If all goes well, a review report will state that nothing has come to the accounting firm’s attention to suggest that your financial statements are not in accordance with generally accepted accounting principles. No “material modifications” should therefore be done to them.
What does it entail?
During a review engagement, an accounting firm will run a series of inquiries and analyses of your company’s procedures. It will check various aspects of your operations, including the following:
- Accounting practices and principles followed
- Methods of recording and gathering financial information
- Safeguards against fraud
- Ratios and reasonable proportions between recorded amounts
- Comparisons between current and previous books and records
While a lot of work goes into a review, an audit is still more comprehensive. That’s why it’s important for you – and the party requesting the review – to remember that a review expresses limited assurance, and therefore does not guarantee that all information in your financial statements is accurately stated.
Who could specifically ask my business for a review engagement?
Lenders, banks, and insurance companies typically ask for reviews. They may also request one at intervals, depending on the nature of your agreement. Currently, there are no laws at either the state or federal level that mandate reviewing financial statements.
You could also ask your accounting firm to conduct a review even if no one requires it of you – especially if you have no financial experts on your team. It may help you understand how you might improve your bookkeeping, or else assure you that you have been doing it right.
How else can an accounting firm help lenders, investors, and other parties trust my business?
As noted, reviews are only one form of attestation service. An audit, which more thoroughly validates your financial information, provides a higher level of assurance. A compilation – through which you receive help in managing and presenting that information – offers less.
Evan Hutcheson, CPA, LLC provides both review and compilation services. Contact the firm to discuss which option better fits your stakeholders’ needs and your company’s goals.
Sources:
Audit vs Review Engagement, AccountingWeekly.com
What Should I Do, Audit or Review?, NJNonProfits.org
Audit, Review, and Compilation: How CPA Reports Differ, GRFCPA.com
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