INSIGHT

Do I need an audit or a review?

September 5, 2025

Services: Audit, Reviews & Compilations

Choosing the right level of financial statement assurance for your business isn’t just a compliance checkbox – it’s a strategic decision that affects your budget, timeline, and stakeholder relationships.

Whether you’re preparing for a loan application, satisfying investor requirements, or simply wanting better insight into your company’s financial health, understanding the difference between audits and reviews can save you time, money, and potential headaches down the road.

Understanding the assurance spectrum

What makes an audit different from a review?

The core difference between these two services lies in the level of assurance they provide. Think of it as the difference between a comprehensive physical exam and a routine check-up.

Financial statement audits deliver the highest level of assurance. During an audit, CPAs conduct extensive testing, verification and reasonableness procedures, and detailed examination of your financial records – on a test basis. The result? An independent audit opinion stating whether your financial statements present a fair view of your company’s financial position in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Financial statement reviews, on the other hand, provide limited assurance through a more streamlined process. CPAs primarily perform analytical procedures and make inquiries about your financial data, but they don’t conduct the same level of detailed testing. The outcome is an independent review report indicating whether anything came to their attention suggesting your financial statements require material modifications.

The assurance language that matters

Here’s how the conclusions differ:

Audit conclusion: “In our opinion, the financial statements present fairly, in all material respects…”
Review conclusion: “We are not aware of any material modifications that should be made…”

This distinction in language reflects the depth of work performed and the confidence level provided to financial statement users.

Weighing cost and time factors

Budget considerations that drive decisions

Your choice between an audit and review often comes down to practical considerations. Reviews typically cost 50-60% less than audits and take significantly less time to complete. This cost difference stems from several factors:

Reduced scope of procedures
Less detailed documentation requirements
Shorter fieldwork period
Fewer staff hours required

For businesses operating on tight budgets or those needing financial statements quickly—perhaps for a time-sensitive loan application or investor presentation—a review can provide adequate assurance without straining resources.

Time-to-completion advantages

Reviews generally take 5-6 weeks to complete, while audits often require 6-8 weeks or more, depending on your company’s size and complexity. If you’re working against a deadline, this timeline difference could be the deciding factor.

Matching assurance to your business profile

Company size and complexity considerations

Your business characteristics play a crucial role in determining appropriate assurance levels:

Smaller, less complex businesses often find reviews sufficient when they have:

Straightforward transaction volumes
Limited number of locations or business units
Fewer regulatory requirements
Simple ownership structures

Larger, more complex organizations typically require audits, especially when they feature:

Multiple revenue streams or business segments
Complex financial instruments or transactions
Significant regulatory oversight
Public ownership or substantial debt financing

Industry-specific requirements

Certain industries have established norms around financial statement assurance. For example, manufacturing companies seeking equipment financing might find reviews acceptable for smaller credit facilities, while technology companies pursuing venture capital typically need audited statements to satisfy investor due diligence requirements.

Meeting stakeholder expectations

Lender requirements and relationship factors

Your relationship with financial institutions significantly influences assurance requirements. Consider these scenarios:

Existing banking relationships often allow for more flexibility:

Established credit history may make reviews acceptable
Smaller loan amounts typically require less assurance
Strong collateral positions can offset assurance requirements

New lending relationships usually demand higher assurance levels:

Audits provide comfort for significant credit decisions
Complex financing structures require thorough financial analysis
Multiple lenders often mandate audited statements

Investor and stakeholder demands

Different stakeholder groups have varying assurance expectations:

Private equity investors: Almost always require audited statements
Family investors: May accept reviews for smaller investments
Board members: Often prefer audited statements for governance oversight
Merger and acquisition activity: Typically requires audited financials

Strategic benefits beyond compliance

Using reviews for internal insights

Even when external parties don’t mandate specific assurance levels, reviews can provide valuable strategic benefits:

Risk identification: Reviews can highlight potential problem areas requiring management attention, such as:

Cash flow concerns
Compliance issues
Operational inefficiencies

Decision support: The analytical procedures performed during reviews often reveal trends and patterns that inform business decisions about:

Working capital management
Profitability analysis
Growth planning
Resource allocation

Building stakeholder confidence

Regular financial statement reviews demonstrate your commitment to financial transparency and professional oversight, even when not required. This proactive approach can strengthen relationships with lenders, investors, and other business partners.

Making the right choice for your situation

Key decision factors to evaluate

When determining whether you need an audit or review, consider these critical factors:

Stakeholder requirements: What do your lenders, investors, or board members actually require?
Regulatory mandates: Are you subject to specific audit requirements based on size, industry, or funding sources?
Internal needs: How will you use the financial statements for strategic planning and decision-making?
Cost-benefit analysis: Does the additional assurance justify the increased cost and time investment?
Growth trajectory: Will your future financing or expansion plans require audited statements?

Planning ahead for changing needs

Your assurance requirements may evolve as your business grows. Companies often start with reviews and transition to audits as they:

Increase in size and complexity
Pursue larger financing arrangements
Consider going public
Expand into new markets or business lines

Building relationships with CPAs who understand both review and audit services can provide continuity as your needs change.

Moving forward with confidence

Choosing between an audit and review isn’t just about meeting minimum requirements—it’s about selecting the level of assurance that best supports your business objectives while managing costs effectively. The right choice depends on your unique combination of stakeholder needs, company characteristics, and strategic goals.

Whether you determine that a review meets your current needs or an audit is necessary for your situation, working with experienced accounting professionals can help you navigate this decision and implement the appropriate level of assurance for your business.

Ready to determine the right level of financial statement assurance for your business? Contact BPM today to discuss your specific needs and learn how our audit and review services can support your company’s growth and stakeholder relationships. Our team can help you evaluate your requirements and choose the approach that best fits your timeline, budget, and business objectives.