A financial audit is an independent examination of your financial statements. The auditor gathers evidence, tests your records and gives an opinion on whether the statements fairly present the company’s position. It is the highest level of assurance.
An independent review is a lighter engagement. The reviewer asks questions, analyses figures and checks that the statements make sense, but does less detailed testing. It gives a lower level of assurance at a lower cost.
What decides which one you need
- The public interest score. Every company has one, calculated from its average number of employees, its third-party liabilities, its turnover and the number of people with a beneficial interest in it. Higher scores bring stricter requirements.
- Who prepares your statements. The rules differ depending on whether they are compiled in-house or by an independent accountant.
- Your memorandum of incorporation. It may require an audit even where the law does not.
- Your bank or investors. Lenders, funders and tender processes often ask for audited or reviewed statements regardless of the legal minimum.
Many small owner-managed companies fall below the point where either is compulsory. Even so, a review can make a loan or tender application easier.
Not sure where you stand?
Send us your last set of financial statements and we will calculate your public interest score and tell you what applies.