A financial statement review may be enough when the requesting party accepts limited assurance and no applicable agreement, law, regulation, or transaction requirement calls for an audit. Start with the written requirement. Your company's size or financing amount alone doesn't decide whether reviewed financial statements will satisfy it.
Your bank asks for financial statements before renewing a line of credit. An investor requests a CPA report. Or your board wants an independent review of the annual numbers.
Before scheduling the work, find out exactly what the recipient needs. "Reviewed," "audited," and "CPA prepared" describe different services, even when someone uses the terms loosely in an email. Picking the wrong one can mean paying for more work than you need or submitting a report the recipient won’t accept.
At CMP, our financial statement review services start by clarifying the request before the engagement begins. This guide explains when a review fits, when it falls short, and what to confirm before you move forward.
What a Financial Statement Review Gives You
In a financial statement review, an independent CPA asks management questions about the business and performs analytical procedures. That means comparing balances, ratios, and changes against expectations, then following up on anything that needs explanation. The American Institute of Certified Public Accountants (AICPA) explains how these procedures and assurance levels differ in its overview of compilations, reviews, and audits.
Financial statement reviews for privately held businesses are performed under the AICPA’s Statements on Standards for Accounting and Review Services (SSARS).
The CPA then issues a report stating whether they're aware of any material modifications needed for the statements to follow the applicable financial reporting framework. In plain language, that means changes significant enough to affect decisions someone makes based on the financial statements.
Limited assurance is narrower than the reasonable assurance an audit provides. A review primarily uses management inquiries and analytical procedures rather than the extensive procedures required for an audit. Neither a review nor an audit guarantees the statements are error-free. If information looks incorrect, incomplete, or inconsistent, the CPA performs additional procedures as needed. Those procedures don’t turn the engagement into an audit.
For a broader explanation of the service levels, read our guide to audit vs. review vs. compilation.
When Reviewed Financial Statements May Be Enough
A review fits when the recipient accepts limited assurance for the specific reporting purpose. The hypothetical examples below show what that looks like in practice.
Bank Loans and Lines of Credit
Some lenders accept reviewed financial statements for financing requests or ongoing reporting. Check your loan agreement, including any financial reporting covenant, before assuming a review meets the requirement.
For example, suppose your company renews a line of credit and the agreement expressly requires annual reviewed financial statements. A review meets that engagement requirement, as long as the statements also satisfy the required accounting basis, reporting period, disclosures, supporting schedules, and submission deadline.
No universal loan amount tells you which service your lender accepts. Ask about your specific request.
Investor and Board Reporting
A review can also fit investor, outside owner, or board reporting when those recipients accept limited assurance. Check the governing documents and any separate reporting instructions.
Suppose your ownership agreement requires reviewed annual statements for existing investors. That supports choosing a review for that purpose. Before extending the same approach to a new investor, confirm what they expect.
It also helps to ask what the recipient plans to do with the statements. Routine annual reporting and evaluating a new investment don't always call for the same information.
Bonding and Surety Requirements
Sureties don't all handle this the same way. The National Association of Surety Bond Producers' guide to contract surety bonding explains that sureties prefer, and at certain levels require, audited statements. Some accept reviewed statements, including for smaller bonding programs.
Confirm the requirement with your bond producer and surety rather than relying on what another contractor submitted.
For example, a contractor can proceed with a review after the surety confirms that it accepts reviewed statements for the proposed bonding program. That confirmation should also cover any supporting schedules, such as a work-in-progress schedule.
Our guide to bonding capacity for contractors explains the financial reporting considerations in more detail.
When a Review Won't Meet the Requirement
A review won't satisfy a requirement that specifically calls for audited financial statements. Both engagements involve a CPA, but they provide different levels of assurance and result in different reports.
Check for these situations before choosing a review.
The Agreement or Recipient Specifies an Audit
If your loan covenant, ownership agreement, or written reporting instructions require an audit, don’t substitute a review until you resolve the requirement.
You can ask whether the recipient will consider a review instead and who can authorize that change. Where a contract sets the requirement, follow its process for approving an alternative. That can involve a written waiver or amendment. Don’t rely on a loan officer saying “that should be fine” on a call without confirming the necessary approval.
An Applicable Law or Regulator Requires an Audit
A recipient's willingness to accept a review doesn't settle a separate legal or regulatory audit requirement. Identify every requirement that applies to the submission and confirm it with the appropriate advisor.
Financing or Ownership Changes Bring New Expectations
Don't assume last year's accepted report will satisfy a new lender, investor, or agreement.
A business sale, acquisition, private equity investment, or employee stock ownership plan (ESOP) transaction deserves a fresh look at the reporting and due diligence requirements. Depending on the deal, the other party may ask for an audit or other financial analysis.
Not every transaction requires an audit, so check the transaction documents rather than assuming. An audit or review also doesn’t automatically satisfy separate financial due diligence requirements.
How to Confirm What the Request Requires
Read the request alongside the relevant agreement, since the two don't always say the same thing.
Use the wording below as a starting point.
| Wording in the request | What to confirm |
|---|---|
| Reviewed financial statements | Reporting period, accounting framework, disclosures, additional schedules, and deadline |
| Audited financial statements | Whether an audit is mandatory and who can authorize an alternative |
| CPA prepared financial statements | Whether prepared or compiled financial statements (no assurance) are acceptable, or whether the recipient expects a review or audit |
| Annual financial statements | The acceptable engagement, reporting format, and period covered |
For example, suppose your lender's email asks for a "review," but the signed loan agreement requires "audited financial statements." Don’t assume the email changes the agreement. Resolve the conflict with the lender before the engagement starts, and obtain any required written approval, waiver, or amendment.
Questions to Ask Before You Proceed
- Will you accept reviewed financial statements, or do you require an audit?
- Where does the requirement appear: an agreement, policy, or regulation?
- Which reporting period and prior periods do you need?
- Which financial reporting framework or accounting basis do you accept?
- Do you require specific disclosures, schedules, or additional reports?
- What is the submission deadline?
- Who has authority to approve a different engagement level?
- Does a change require written approval or an amendment?
Adapt the message below to confirm their financial statement requirements.
Keep the written response with the agreement and share both with your CPA.
Frequently Asked Questions
How much does a financial statement review cost?
Fees depend on your business, the reporting period, the accounting framework, the condition of your records, and the scope of the engagement. We review those details, along with the written request, before giving a fee estimate.
Can the same CPA prepare and review my financial statements?
Yes, provided the CPA remains independent and meets the applicable professional requirements. Management must oversee the preparation work and accept responsibility for the financial statements. Your CPA can explain how these requirements apply to your engagement.
Do reviewed financial statements have to follow Generally Accepted Accounting Principles (GAAP)?
Not always. A review can cover statements prepared under another acceptable framework, such as the tax basis of accounting. The framework governs how you prepare the statements, and review standards govern the CPA's engagement. Confirm that the framework also meets your recipient's requirements.
What does a CPA review report look like?
A review report identifies the statements covered, describes management's and the accountant's responsibilities, and states the review conclusion. It explains the limited assurance provided and notes that the accountant doesn't express an audit opinion. The exact wording depends on the engagement and its findings.
Does the review automatically cover every supporting schedule?
No. A schedule that accompanies reviewed statements isn't automatically subject to the same procedures. Tell your CPA which schedules the recipient requires and ask how the engagement will address them. Before you submit the package, read the report's explanation of any supplementary information.
How long does a financial statement review take?
Timing depends on your records, reporting periods, accounting framework, and any unresolved questions. Share the recipient's deadline before the engagement begins so your CPA can confirm a realistic schedule.
Confirm Your Reporting Requirement With CMP
Sometimes the quickest way to pin down a requirement is to ask the person who set it. If the wording isn't clear, our team will check directly with your lender, bonding company, or other requesting party. Our audit and assurance services cover audits, reviews, and compilations for privately held companies in Utah and nationwide.
Free 15-Minute Assessment
Not sure whether you need a review or an audit?
Tell us what's being asked of you and who's asking. A CMP CPA will let you know which level of service meets your needs and what a realistic timeline looks like for your records.
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