Independent financial reviews and audits are essential and required for the purpose of assurance and are both ultimately aimed at establishing the accuracy of financial statements.
Financial reviews and audits both rely on the supply of financial information and account balances. They are both conducted by auditors, and are both based on the account balances, as they both processes are aimed at verifying the accuracy of account balances. However, an audit is not only aimed at providing the highest level of assurance but also helping businesses achieve their best financial outcomes.
An audit is more in-depth than a financial review:
- A financial review requires only the supply and simple testing, through various analytical procedures, of the accounting information and processes that have generated the account balances.
- An audit additionally requires the supply of all related financial and business documentation to back up the entries in the accounting.
- A financial review relies on what on what is presented by management, but an audit may require the hand-over of documentation that may not have been presented initially.
Audits include an in-depth internal audit:
- An audit examines and tests internal controls in a business’s financial management processes. This ‘internal audit’ is not a feature of the simplified processes of a financial review.
- An internal audit is a long, and often involved, process done in progressive steps to allow in depth-examination of every aspect of operations, beyond the accounting. This also involves internal audits by department.
Audits require more time, with longer hours required than for financial reviews. They are therefore considerably more expensive, but audits provide the highest level of assurance for invested parties – or authorities, in cases where this is required. Audits can also be worth the expense for more than just assurance: the audit process also help businesses streamline their operations and improve internal controls to achieve their operational and financial goals.
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