Independent Reviews
Many companies commission an audit they are not required to have, at several times the cost of the engagement the law actually asks for. An independent review provides limited assurance at materially lower cost, and for a great number of owner managed businesses it is the correct answer. The first thing worth establishing is which category you fall into.
1
Assess
Which engagement applies
2
Plan
Enquiry and analysis
3
Analyse
Compare and interrogate
4
Enquire
Follow the anomalies
5
Report
Conclusion issued
How We Approach It
01
Determining the Right Engagement
Before quoting we establish what the Companies Act and your Memorandum of Incorporation actually require. Public interest score, whether statements are independently compiled and shareholder involvement all affect the answer.
- Public interest score calculated
- Memorandum of Incorporation checked for audit requirements
- Whether statements are internally or independently compiled
- Engagement type confirmed in writing before proceeding
02
Planning
A review is analytical rather than substantive, so planning focuses on understanding the business well enough to know which figures should look different from last year and which should not.
- Business and industry understanding documented
- Prior period comparison and expectation setting
- Areas of heightened risk identified
- Engagement letter setting out the limited assurance scope
03
Analytical Procedures
The core of the work. We compare period on period, calculate ratios, test relationships that should hold, and identify what moved in ways the business cannot readily explain.
- Period on period comparison at account level
- Ratio and trend analysis against expectation
- Relationship testing between related balances
- Unusual or unexpected movements identified for enquiry
04
Enquiry
Where analysis raises a question, we ask. Enquiry of management is a legitimate review procedure, and unlike an audit we are not required to corroborate every answer with external evidence.
- Structured enquiry of management and finance staff
- Explanations obtained for unexpected movements
- Follow up where an explanation does not fit the data
- Additional procedures where a possible misstatement emerges
05
Reporting
A review conclusion expressed in the negative form: nothing came to our attention suggesting the statements are materially misstated. That is genuinely different from an audit opinion and we make sure users understand the distinction.
- Independent review report in the prescribed form
- Limited assurance conclusion clearly expressed
- Matters identified reported to management
- Guidance where a full audit may become necessary
What You Receive
- Public interest score calculation and engagement determination
- Engagement letter setting out the limited assurance scope
- Analytical procedures and enquiry work performed
- Independent review report in the prescribed form
- Matters identified reported to management
- Guidance on whether a full audit will be needed in future
Indicative Timeline
A review is substantially faster than an audit, typically one to two weeks of fieldwork for a small to medium company, provided the accounting records are complete and reconciled when we start.
- Engagement determination: one to two days
- Planning and expectation setting: two to three days
- Analytical procedures and enquiry: one to two weeks
- Reporting: within a week of fieldwork closing
Which Engagement Do You Need
The requirement follows from the entity and its public interest score rather than from preference.
Audit Required
Public companies, state owned entities, and companies whose score or MOI requires it regardless of size.
Audit or Review
Companies in the middle band, where the score determines which applies and how statements were compiled.
Review Only
Smaller companies below the threshold where independent compilation has taken place.
Neither Required
Owner managed companies where all shareholders are directors, though funders may still ask.
Compilation
Preparation of statements with no assurance attached, appropriate where no third party relies on them.
Funder Requirements
Contractual audit obligations imposed by lenders or funders regardless of the statutory position.
Frequently Asked Questions
What is a public interest score?
A calculated score based on employees, third party liability, turnover and the number of individuals with a beneficial interest. It determines whether a company requires an audit, a review or neither, and it is recalculated annually.
How does a review differ from an audit?
A review provides limited assurance through analysis and enquiry. An audit provides reasonable assurance through substantive testing and external verification. A review costs materially less and the conclusion is correspondingly weaker, which matters to whoever relies on it.
Will our bank accept a reviewed set of statements?
Many will, but not all, and it depends on the facility. Lenders and funders frequently impose audit requirements contractually regardless of the statutory position. Check the loan agreement before assuming a review is sufficient.
Can we choose an audit even if only a review is required?
Yes, and some do for credibility with stakeholders or to prepare for a transaction. It is a legitimate choice, but it should be a deliberate one rather than the result of nobody checking what was actually required.
What if you find a problem during the review?
If something suggests possible material misstatement, we perform additional procedures. Where the issue is significant enough, a review may not be an appropriate engagement and we would discuss converting to an audit rather than issuing a conclusion we cannot support.
Who can perform an independent review?
That depends on the public interest score. For lower scores a wider group of accounting professionals may perform it; higher scores require a registered auditor. We confirm the position as part of engagement determination.
Related Services
This sits inside our Audit and Assurance practice. Related work: Statutory and External Audit where reasonable assurance is required, and Financial and Management Accounting for the compilation of the statements themselves.
