Audit vs. Review: What’s the Difference and Which Do You Need?
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When you hear the word audit, your first thought might be the IRS. But in the world of financial reporting, an audit isn’t about taxes — it’s about assurance. And for many small business owners, an audit is more than they need. That’s where a financial statement review comes in.
Understanding the difference between an audit and a review can help you save time, money, and frustration — and make sure you choose the service that actually fits your business.
The Basics: What Is an Audit?
An audit is the most comprehensive level of assurance a CPA can provide. It involves:
- Examining underlying records and supporting documents.
- Testing transactions (for example, confirming revenue with customers or cash balances with banks).
- Assessing internal controls.
- Issuing a formal opinion on whether the financial statements are presented fairly in accordance with accounting standards.
Audits are the gold standard, but they’re also the most expensive and time-consuming. They’re often required for large loans, outside investors, or public companies.
The Basics: What Is a Review?
A review sits in the middle. It’s more in-depth than a compilation but not as exhaustive as an audit. In a review, a CPA:
- Performs analytical procedures (like comparing this year’s numbers to last year’s and asking why things changed).
- Inquires of management to understand business performance.
- Provides “limited assurance” that nothing has come to their attention suggesting the financials are misstated.
The key difference: a review doesn’t involve digging into every transaction or confirming balances with third parties. It provides confidence in your numbers at a fraction of the cost of an audit.
What About Compilations?
Just for comparison, there’s also a compilation, which is the lowest level of service. In a compilation, the CPA simply takes your numbers and formats them into financial statements — no assurance is provided.
Think of it this way:
- Compilation = organizing the numbers.
- Review = checking for reasonableness.
- Audit = verifying in detail.
A Real-World Example
Let’s say you run a construction company that’s grown quickly over the past three years. You’re applying for a $2 million line of credit with your bank.
- The bank may not need an audit, but they want more than your internal financials. They ask for reviewed financial statements.
- A review gives them confidence your statements are reliable, without the cost and disruption of a full audit.
- For you, that means faster turnaround, lower fees, and less time your team spends pulling documents.
This is a common scenario for small and mid-sized businesses. Reviews often strike the perfect balance between credibility and efficiency.
Why Small Businesses Often Choose Reviews
- Cost-Effective – Reviews typically cost significantly less than audits.
- Faster – They take less time, meaning you can move forward with financing or other decisions more quickly.
- Less Disruption – Fewer document requests, fewer interruptions to your team.
- Still Credible – Banks, investors, and other stakeholders often accept reviews as sufficient assurance.
Questions to Ask Before Deciding
If you’re not sure whether you need an audit or a review, ask yourself:
- Who’s asking for the financials? If it’s a bank or investor, what exactly do they require?
- What’s the purpose? Are you just building credibility, or do you need a high level of assurance?
- What’s your budget? An audit can be 2–3 times more expensive than a review.
- How quickly do you need it? Reviews can often be completed much faster than audits.
The Bottom Line
Audits and reviews both serve important purposes — but they’re not interchangeable. For many small private companies, a review is the sweet spot: enough assurance to build trust with banks and stakeholders, without the heavy price tag or disruption of an audit.
At Credex Advisors, we specialize in helping small and medium-sized businesses navigate these choices. With over 40 years of combined experience in public accounting, we bring big-firm expertise with a process designed for private companies.
If you’re wondering whether you need an audit or a review, let’s talk. We’ll help you make the right decision for your business — and give you clarity every step of the way.
