Reviews provide limited assurance to outside interests that financial statements are in conformity with Generally Accepted Accounting Principles(GAAP). Reviews can also be utilized to determine if a company’s financial statements are in conformity with Other Comprehensive Basis of Accounting (OCBOA). OCBOA statements in many cases consist of tax based financial statements but may take other formats. Another common format of OCBOA financial statements are cash basis financial statements.
Reviews are less in scope when compared to an audit and primarily consist of inquiries and analytical procedures. A review does not require an accounting firm to evaluate a company’s internal controls or verify data with third parties or physically inspect assets.
Most organizations undertake a review to satisfy bank covenants or bonding requirements. Additionally, MD nonprofits in which solicited contributions are between $200,000 and $500,000 require a financial statement review.