Financial Statement Reviews There are a variety of non-audit services that CPAs

Question

Financial Statement Reviews
There are a variety of non-audit services that CPAs perform for companies. Understanding what these services entail helps to ensure you are in compliance for any type of client engagement.

Melissa O’Neil, CPA, has been engaged by a non-public company, Caldwell, Inc., to review the financial statements of the most recently completed fiscal year.

What sources should O’Neil consult in order to prepare for this review?
What are the required procedures that O’Neil must perform?
What information should the review report contain?
What should O’Neil do if she finds there was a material departure from GAAP?

Explanation / Answer

A financial statement review is a service under which the accountant obtains limited assurance that there are no material modifications that need to be made to an entity's financial statements for them to be in conformity with the applicable financial reporting framework (such as GAAP or IFRS). A review does not require the accountant to obtain an understanding of internal control, or to assess fraud risk, or other types of audit procedures. Consequently, a review does not provide the accountant with assurance that he has become aware of all the significant matters that would normally have been discovered and disclosed in an audit.

The types of procedures that would be reasonable to conduct for a review include:

There would be material departures from GAAP which would mean we would have to issue some kind of qualified or adverse opinion. A good example of something that would probably fall under this would be NIFO inventory valuation. Since inventory usually is such a large account, this would be considered a material departure from GAAP.

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