What is the Difference Between Audit and Review?

Difference Between Audit and Review

Audit and Review are the most important accounting terms and are usually related to the financial statements. When a financial statement is prepared, the audit and review are done for it; the person who is authorized to prepare the financial statements is known as an accountant or certified public accountant (CPA).

The accountant prepares financial statements according to the need of the client, business size, records, and complexity, and much more. Today I will explain both the accounting terms in this answer, so keep on reading and know the Difference Between Audit and Review.

The audit can be defined as a thorough examination of the financial statement of the records and the firm’s inventory to study whether the financial statement is made correctly.

The auditor is the person who is authorized to perform the audit and examine whether the financial statements prepared by the firm are true or if there are any errors or fraud done by the firm in the financial accounting.

The audits can be performed by two methods – internal audit and external audit; internal audit is performed within the organization by themselves, while the external audit is done by the external auditor.

The review is also done by the auditor, but it is not as strict as an audit, and limited assurance is provided by the auditor. In simple words, the review is the formal assessment of the financial statement and provide suggestions if any changes are required.

The review is well suited for the new growing companies or start-ups, as it requires less costing, and it is narrower in scope as compared to an audit.

The auditor is not involved in the company’s internal control framework and risks of fraud involved. The companies and enterprises who are happy with the limited assurance usually opt for the review.

Audit Vs. Review

• An audit can be defined as the strict and unbiased official examination of the company’s financial statements, operations, physical inventory, and records. At the same time, the review is the formal assessment of the financial statement and offer suggestions if required.
• The audit provides a high level of assurance as compared to review, where limited assurance is provided.
• Audit costs more as compared to the review.

Audit and review are the standard processes that companies undergo in a timely manner; the significant difference is an audit is done when the organization feels there is any fraud is done, or something is not right with the financial statement. The audit also provides a clear view of the company’s standing financially in terms of loss and profit. This is the main difference between a review and an audit.