Certification of Financial Statements: Review Engagement and Audit Engagement

Both the review engagement and the audit engagement are formal procedures used for the certification of financial statements by a Chartered Professional Accountant (CPA). However, they differ significantly in terms of procedures, cost, and the level of assurance provided.

Here’s how they compare:

• Review engagement: In a CPA review engagement, the accountant performs analytical procedures and inquiries to assess whether the financial statements are plausible. It provides limited assurance and does not include a full verification of the underlying data.
• Audit engagement: An audit engagement involves a comprehensive examination of the financial statements. The CPA conducts detailed testing, confirms external data, and evaluates internal controls. This results in a reasonable level of assurance, which is higher than that of a review.

When comparing a review engagement vs audit, the main differences lie in depth, reliability, and cost. Both are valid forms of engagement certification, depending on the needs of your stakeholders.

A review engagement is particularly well suited for small and medium-sized businesses (SMBs) that want to enhance the credibility of their financial statements without undergoing a full audit. It provides limited assurance, often sufficient to meet the expectations of creditors, investors, or business partners. This type of engagement is typically chosen by companies with a well-structured accounting system that are not legally required to produce an audit report.

• Your company has a stable and well-organized accounting system.
• Lenders or government programs require a financial statement review, but not a full audit.
• You want to present coherent and plausible financial information to external stakeholders.

While the CPA does not express an audit opinion, the review demonstrates a level of diligence and care that builds trust with investors and partners—at a more affordable cost and quicker turnaround.

An audit engagement should be considered when your business faces more complex or regulated situations. It is the highest level of certification of financial statements a CPA can provide under Canadian assurance standards.

You may require an audit if:

• You are legally or contractually obligated to provide audited financial statements.
• You are involved in a major financing, acquisition, or business sale.
• Investors or institutional lenders demand an audit opinion.
• You want to reinforce financial governance and internal controls.

In these cases, the CPA performs detailed audit procedures to assess whether the information contained in the financial statements complies with applicable accounting standards. A review engagement vs audit engagement decision should be based on the required level of assurance and the expectations of your stakeholders.

The choice between a review engagement and an audit engagement depends on several factors:

• The level of assurance required by your stakeholders
• The size and complexity of your business operations
• Any legal, contractual, or regulatory obligations
• Your budget and timeline

A CPA review engagement is often sufficient for demonstrating credibility to banks or commercial partners when no formal audit is required. However, if your company must provide a formal audit opinion or comply with external regulations, an audit engagement is necessary.

In both cases, your CPA will guide you in selecting the most appropriate form of engagement certification to ensure your statements are trustworthy, complete, and in full compliance.