• Español
  • English
  • Português

Review of Financial Statements

Definition

 

A review of financial statements by an independent auditor or public accountant involves making inquiries of management
and other key personnel of the Company and performing analytical procedures on the financial information to conclude
with limited assurance that the financial statements of a Company are free of material misstatement.

Objective

 

The objective of a review of financial statements is to allow the practicing professional to indicate whether, based on
the use of procedures, he or she has reached a conclusion that leads him or her to believe that the financial
information has been prepared in all material respects in accordance with the accounting framework in force.

Scope

 

The scope of a review of financial statements includes planning through interviews with management and then, based on
the professional judgment of the independent auditor or public accountant, determining the most appropriate procedures
to express a conclusion on the Company’s financial statements.

Procedures in a review of financial statements

 

Financial statement review procedures generally include :

  • Obtaining knowledge of the Company’s business and the sector in which it operates.
  • Inquiry into the accounting principles and practices applied by the Company.
  • Inquiries regarding accounting records procedures, classification and grouping of transactions, collection of
    information for disclosure of financial statements and their preparation.
  • Inquiries regarding all material statements included in the financial statements.
  • Analytical procedures designed to identify unusual relationships and specific items.
  • Inquiries regarding resolutions adopted by the General Shareholders’ Meeting, Board of Directors, Committees,
    among others.
  • Inquiries with accounting personnel regarding accounting and financial matters.

Conclusion of a review of financial statements

 

At the end of the procedures executed by the independent auditor or public accountant, a report is prepared stating the
conclusions based on the evidence obtained during the execution of the work. In the report of a review of the financial
statements, the report describes the scope of the assignment, so that the user can understand the nature of the work
performed and to clarify that an audit has not been performed and, therefore, does not express an audit opinion.

Is a review of financial statements the same as a financial audit?

 

A review of financial statements does not satisfy the requirements of a financial audit, because, in a review,
procedures are executed that end with a conclusion with limited certainty. The main procedures in a review are the
inquiry (understanding of the nature of the business and accounting practices) and analytical procedures applied to the
financial statements.

A financial audit, apart from obtaining an understanding of the business, also includes an understanding of the
Company’s internal control over financial reporting. Based on that understanding, the auditor performs tests of control
and substantive tests to evaluate whether the balances in the financial statements are fairly stated in accordance with
current accounting standards. Upon completion of the audit procedures, the independent auditor issues an opinion on the
reasonableness of the financial statements in conformity with the accounting standards in force.

Finally, a review of financial statements provides reasonable assurance regarding the reasonableness of the financial
statements, whereas a financial audit involves more extensive procedures for expressing an opinion on the Company’s
financial position and performance.

When to request a review of financial statements?

 

A Company may request a review of financial statements when it does not yet feel prepared to undertake a financial audit
because it might have an adverse opinion on the reasonableness of the financial statements.

With a review of the financial statements, the Company will be able to improve its accounting practices in general
terms; however, it is clarified that accounting errors may exist because of the moderate security.

The cost of servicing a financial statement audit is less than the cost of a financial audit because the procedures
performed are limited.

We recommend VAG Global to our allied firm if you have any questions about

REVIEW OF FINANCIAL STATEMENTS

How can we help you?

    To communicate with us you need to fill out the following form