One of the best ways to streamline not-for-profit reporting requirements is by being clear about the difference between audit services and reviews. Both audit services and reviews serve the same goal of evaluating financial information. Yet, auditing and reviews offer different levels of assurance services. This means they vary significantly in scope, depth, and objectives.
Understanding auditing and assurance services
To be diligent about an organisation’s financial scrutiny, it’s important to understand that audit services and review procedures offer different levels of assurance. Audit services give reasonable assurance. Reasonable assurance is a high but not absolute level of assurance, in which the auditor confirms that the information reported is materially correct. In contrast, reviews offer limited assurance, stating that the auditor is not aware of any material modifications that should be made.
Deciding which financial service is right for your organisation
The table below shows the differences between the scope, objectives, extent of testing, reporting and cost of objectives of audit services versus reviews. This is to help you make an informed decision about what the right audit service is for your organisation.
| Audit | Review | |
| Assurance level | Reasonable assurance | Limited assurance |
| Scope | Audit procedures involve a comprehensive examination of financial statements, transactions, and internal controls. | Review procedures involve inquiry and analytical procedures aimed at providing limited assurance on the financial statements.
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| Objectives | The primary objective is to provide reasonable assurance that the financial statements are free from material misstatement, whether due to error or fraud.
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The primary objective is to assess whether the financial statements are plausible and in accordance with the applicable financial reporting framework. |
| Extent of Testing | Audit procedures involve extensive testing, including substantive procedures and control tests. Substantive procedures focus on the detailed examination of account balances and transactions. Meanwhile tests of controls evaluate the effectiveness of internal controls in preventing or detecting errors or fraud. | Review procedures involve analytical procedures and inquiries directed to management and other relevant personnel. Analytical procedures may include ratio analysis, trend analysis, and comparison of financial information with industry benchmarks. |
| Reporting | Auditors issue an audit report expressing their opinion on whether the financial statements present a true and fair view in accordance with the applicable financial reporting framework. | The assurance practitioners issue a review report. The review report includes a conclusion that the review was performed in accordance with applicable standards and that nothing came to the reviewer’s attention that would indicate the financial statements are not fairly presented.
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| Cost | Higher | In average, 10-15% lower compared to audit services |
Maintaining the integrity of financial statements
In summary, while audits provide a higher level of assurance through comprehensive testing and examination, reviews offer limited assurance through analytical procedures and inquiries. Understanding the differences between these two processes is essential for organisations to select the appropriate level of assurance, based on their specific needs and regulatory requirements. Whether opting for an audit or a review, engaging qualified professionals with expertise in financial reporting and assurance is crucial to ensuring the integrity and reliability of financial statements.
Have more questions? Or perhaps, you would you like to book an audit service? Contact BVO Audit today to find out what is the best-fit service for your organisation.
