A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. When a company's financial statements are audited, the principal element an auditor reviews is the reliability of the financial statement assertions. In the United States, the Financial Accounting Standards Board (FASB) establishes the accounting standards that companies must follow when preparing their financial statements. As of 2019, the FASB requires publicly traded companies to prepare financial statements following the Generally Accepted Accounting Principles (GAAP). The different financial statement assertions attested to by a company's statement preparer include assertions of existence, completeness, rights and obligations, accuracy and valuation, and presentation and disclosure.
A compilation refers to a company's financial statements that have been prepared or compiled by an outside accountant. ... With compilations, or compiled financial statements, the outside accountant converts the client's data into financial statements without providing any assurances or auditing services.
A review refers to an evaluation of the financial books, conducted by the auditor, to determine if there are any chances of modifications or not. It offers a moderate or limited level of assurance.
Mergers and acquisitions (M&A) is a general term used to describe the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets and management acquisitions.
Recently, the framework of standards on auditing and guidance notes on related services are issued, wherein a difference between audit and related services is clarified. Related services include reviews, agreed upon procedures, compilation. The review is often contrasted with audit, but they are different in the sense that an audit is a thorough examination of the financial information of an organization, to give his/her opinion on the same.
On the other hand, the review can be understood as the formal assessment of the financial statement, to introduce change, if any. This article presents you all the substantial differences between audit and review in a detailed manner.
Content: Audit Vs Review