Businesses often need third-party assurance to meet lender, investor, or regulatory expectations. The two most common options—audits and reviews—offer different levels of scrutiny and credibility. Understanding how they differ will help you choose the right fit for your goals and budget.
What Is an Audit?
An audit provides the highest level of assurance that a company’s financial statements are accurate. It confirms the financials are free from material misstatement, based on generally accepted accounting principles. This service is performed by an independent auditor following strict auditing standards.
Auditors don’t just review numbers. They examine internal controls, verify supporting documentation, and contact third parties to confirm balances. At the end, they issue an audit report with a formal opinion on whether the company’s financial statements are fairly presented.
Audits are often required in complex or high-stakes situations. For example, a construction company bidding on a government infrastructure project may need audited financials to meet eligibility rules. Likewise, a real estate firm securing institutional investment might be asked for audited statements to assure investors of financial stability.
What Is a Review?
A review provides limited assurance that a company’s financial statements don’t require material modifications. It does not involve deep testing or external confirmations. Instead, the CPA performs analytical procedures and makes inquiries to identify unusual trends or red flags.
Unlike audits, reviews do not result in an auditor’s opinion. The CPA issues a review report that states no material misstatements were found based on the limited scope of work performed. It gives users moderate confidence in the financials without guaranteeing accuracy.
Reviews are faster and less intrusive than audits. For example, an advertising agency applying for a working capital loan might use reviewed financials to satisfy a local lender’s requirements. This provides enough assurance without the cost or burden of a full audit.
Audit vs Review: What’s the Difference?
The core difference between a review and an audit is the level of assurance provided. Although an audit and a review both involve a CPA, the scope, depth, and purpose are very different.
Scope and Procedures
Audits involve comprehensive testing of financial records, third-party confirmations, and evaluation of internal controls as relevant to financial reporting. The auditor assesses risk and designs audit procedures to uncover potential misstatements. This includes reviewing accounting policies, examining bank statements, and validating transactions.
Reviews are narrower in scope. The CPA relies on inquiry and analytical procedures to assess whether the financial information makes sense. They do not test internal controls or gather external evidence.
Time, Cost, and Disruption
Audits typically demand significant time and expense due to their thorough nature. They often require multiple weeks of data gathering, analysis, and communication. This level of scrutiny can be disruptive to company workflows, especially for smaller teams.
Many businesses reduce this burden by leveraging outsourced accounting services. These experts help prepare accurate financial records and manage documentation efficiently, easing the audit or review process.
Reviews are quicker and more budget-friendly. The process is less invasive and often completed in a fraction of the time. This makes them appealing to businesses that need some assurance without undergoing a full audit.
Reporting and Output
Audits result in an auditor’s report, which includes an opinion on the fairness of the financial statements. This report carries weight with banks, regulators, and investors. It provides the highest level of assurance available from a CPA firm.
Reviews produce a review engagement report. This outlines the limited procedures performed and confirms that no material misstatements were identified. While it doesn’t include an opinion, it still offers external assurance for stakeholders who don’t need absolute certainty.
When Does Your Business Need an Audit?
Audits are often required by lenders, investors, or regulatory bodies when the stakes are high. These users depend on reliable financial data before approving funding or moving forward with large contracts. In many cases, legal requirements dictate that certain companies undergo annual audits.
Public companies must submit audited financial statements to the U.S. Securities and Exchange Commission. Large private firms in industries like construction or real estate development may also need audits to meet compliance rules or investor expectations. An audit adds credibility to the company’s financial position and helps build trust with external parties.
When Is a Review a Better Fit for Your Company?
Reviews are appropriate for companies that don’t have audit requirements but still want some external validation. Startups and smaller private businesses often choose reviews to satisfy local lenders or stakeholders without the cost of a full audit.
For example, a digital marketing agency applying for a modest working capital loan may not need an audit. Reviewed financials provide moderate financial validation for the bank to make a decision. Reviews help companies demonstrate financial transparency without overextending their resources.
Choosing What’s Right for Your Business
The right service depends on your goals, budget, and compliance needs. Consider who will be using your financial statements—banks, investors, management—and what level of assurance they require. Your company’s size, industry, and growth stage also matter.
If you need high-level assurance for major financing, an audit is likely the better choice. It meets stricter standards and gives stakeholders more confidence. If your needs are internal or lender-driven but less intensive, a review may be enough.
A CPA can help you assess the trade-offs. They’ll look at your reporting requirements and recommend the best fit—whether that’s a full audit, a review, or another type of assurance service like a compilation engagement.
Why Some Companies Transition From Review to Audit
Many companies start with reviews to control costs and reduce disruption. As they scale, however, the demands on their financial reporting increase. Investors, regulators, or acquisition partners may request a higher level of assurance.
At that point, a review may no longer be enough. An audit’s deeper procedures and formal opinion become necessary to satisfy due diligence or legal thresholds. For instance, a growing real estate investment firm may transition to audits when it begins raising funds from institutional investors.
Moving from a review to an audit reflects the company’s evolving needs. It’s a natural next step that signals maturity, transparency, and readiness for more complex opportunities.
Audit or Review? Get Expert Guidance
Audits and reviews serve different purposes, and each offers distinct advantages depending on your business’s stage, size, and reporting needs. Choosing the right option helps ensure you’re providing stakeholders with the level of confidence they expect.
Whether you’re managing investor relationships, applying for financing, or preparing for growth, assurance matters. A qualified CPA can help you navigate your options and select the service that aligns best with your goals.
