Understanding the Differences between Review and Audit
When you want to get your financial statement audited by an audit firm in Johor Bahru, you may not be sure about the type of services you will get, and two terms that often cause confusion are review and audit—reviewing and auditing the financial statements are not the same. A review is a formal assessment of those statements, and the auditors will introduce the required changes that the company should make if there is any. Audit refers to a process where the auditors (Also see Techniques and Procedures of Internal Audits) will examine the company’s financial statement and give their opinion on those statements.
When reviewing a company’s financial statements, the auditors need to carry out procedures that play a crucial role in enabling them to obtain moderate assurance. In short, the company does not need to make any changes in its financial statements for it to comply with the applicable financial reporting framework. This means that there are no material misstatements in those statements.
An audit is an objective and unbiased assessment of the company’s financial statements, performances, records, inventories and so on, regardless of its legal structure, size and nature. The objective of an audit is to allow the auditors to express their opinions on the company’s financial statements by issuing an audit report. The audit also aims to see if the financial statements of a company represent a true and fair view and to detect whether any frauds or errors had occurred in the company’s financial accounts.
A review will help you to identify whether you need to implement any changes in your financial statements. As against, after having an audit, the auditors will give their judgement or opinion based on the facts or evidence (Also see Introduction to Audit Evidences) that they have collected. Besides, the review will only provide you with a moderate level of assurance. Contrarily, you can obtain a reasonable level of assurance if you choose to have an audit (Also see Audit Objectives of Different Types of Audit) on your company’s financial statements.
In a review, the auditors will express their opinion as negative assurance assertion. The negative assurance means that the facts presented by the company are believed to be accurate as the auditor did not find any contrary evidence to dispute them. This confirms that the auditors did not find any evidence of fraud or violation of accounting practices. However, this does not mean that illegal activities did not happen. It just states that the auditor did not find any evidence that proves that those activities have taken place.
On the other hand, the auditors will give their opinion as a positive assurance assertion when they conduct an audit, and they will include their opinion in an audit review. A positive assurance refers to a statement as to what an auditor (Also see How Do Auditors Plan for an Audit?) believes. Such a level of assurance is considered stronger. A positive assurance also indicates that the auditors have carried out sufficient work before stating that the financial statements of a company show its financial condition accurately according to the evidence collected.