| All organizations, whether private, public, or | | | | by the client and makes specific inquiries relating |
| non-profit, need to prepare financial statements | | | | to accounting policies, record keeping and |
| on their performance to provide fiscal | | | | accounting practices, actions of the Board of |
| accountability and accuracy to their stakeholders | | | | Directors, and changes in business activities. The |
| and people with an interest in the company. | | | | specific inquiries required to perform a review |
| Financial statements enable management to make | | | | should address the following areas: related party |
| business decisions, enable creditors to evaluate | | | | transactions; accounting policies, problems, and |
| loan applications, and provide individuals with | | | | areas of greater risk; uncertainties, contingent, |
| information to make investment decisions. | | | | current and long-term liabilities and assets; |
| Financial statements provide information from an | | | | qualifications of accounting personnel and division |
| organization’s accounting documents about | | | | of accounting duties; inventory; any departures |
| their economic resources and obligations on a | | | | from GAAP; revenues, expenses, accounts |
| specific date, as well as their financial activities | | | | receivable, cash and equity accounts, and |
| over a period of time. Financial statements are | | | | investments; and property, plant, and equipment |
| usually prepared in accordance with Generally | | | | assets and liabilities. |
| Accepted Accounting Principles (GAAP), which are | | | | The auditor then applies various analytical |
| the standards issued by the American Institute of | | | | procedures to identify unusual items or trends in |
| Certified Public Accountants (AICPA), but they | | | | the financial statements that may need |
| may also be prepared on other comprehensive | | | | explanation. If any material errors or |
| basis of accounting, such as cash basis or tax | | | | misstatements are noted, the CPA will discuss |
| basis, depending on the needs of the users of the | | | | these items with the organization's management |
| financial statements. | | | | for clarification or adjustments to the financial |
| The middle level of assurance in regards to | | | | statements. |
| financial statements is reviewed financial | | | | Upon completion of a review, the CPA will issue a |
| statements. A Certified Public Accountant (CPA) | | | | report that provides limited assurance that the |
| must obtain a reasonable basis for expressing | | | | financial statements are free of material |
| limited assurance that the financial statements | | | | misstatements or false/missing information and |
| meet the requirements of the US GAAP are free | | | | are found to be accurate, complete and fairly |
| of material misstatements or false/missing | | | | presented to meet the requirements of the US |
| information. | | | | GAAP. Since the financial statements were |
| To perform the review, the CPA must obtain a | | | | reviewed and not audited, no opinion about their |
| general understanding of: the organization’s | | | | nature is expressed. The report also notes that |
| industry as well as information about their | | | | the financial statements are a representation of |
| operations, products, and services, their | | | | management. Reviewed financial statements can |
| accounting records, qualifications of their | | | | also be done on Other Comprehensive Basis of |
| accounting personnel, the accounting basis on | | | | Accounting (OCBOA), such as a tax or cash basis, |
| which the financial statements are presented, and | | | | as long as the basis used is documented in the |
| the form and content of the financial statements. | | | | report. |
| The auditor then reviews the information supplied | | | | |