Why is my bank requesting a Reviewed Financial Statement in place of the Compiled Financial Statement requested in the past?
Commonly, Reviewed Financial Statements are requested when a business begins to get into larger lines-of-credit and financing loans for things such as business expansions or when purchases are heavily financed.
Business owners are often asked by their financing institution to provide them with reviewed financial statements prepared by an independent CPA, a step above a Compiled Financial Statement but below an Audited Financial Statement.
What is a Review?
A Review is a service offered by a CPA in which the accountant looks to provide greater assurances than a more basic-level compilation. The accountant specifically states “that they are not aware of any material or significant modifications that should be made to the financial statements in order to conform to the proper accounting rules and guidelines”.
A review includes the CPA looking into your books to assure that they have a reasonable basis and understanding of the financials. This is done with analytical procedures, inquiries and other procedures as applicable designed to help the CPA obtain limited assurance that there are no material modifications that need to be made.
This can and often does include looking into the significant balances or transactions. For example, comparing what the company has for their outstanding debt balances to the lenders loan statement balances. The company sold a large portion of their assets in the current year, so a large amount of balance sheet changes would be an area the CPA would look to obtain assurance in as well.
The review is a very helpful service for clients looking to get some assurance that their books are materially correct in order for the client to be able to provide their financials for use by 3rd parties.
CPAs also offer Compilation services. These do not provide any assurance about the financial statements. Alternatively, CPAs may also offer an Audit, which provides the highest level of assurance. Each client’s situation and needs will determine what level of service is appropriate.
At BHT&D CPAs, we are committed to giving each client personal attention and spending the time needed to completely understand your circumstances. Please contact our office to meet with a professional and discuss your specific situations. Request a complimentary accounting consultation or contact us at (616) 642-9467.