A review is a service which falls somewhere in between a compilation and an audit. In reporting on a compilation engagement, a CPA will not provide any level of assurance that the financial statements are presented in accordance with the reporting framework whereas an audit report will express a “high level” of assurance that the financial statements are free from material misstatements. A review engagement will provide “limited” assurance that the financial statements are in conformity with the reporting framework.
The Compilation and Review Standards AR-C Section 90 paragraph .04 states “The objective of the accountant when performing a review of financial statements is to obtain limited assurance as a basis for reporting whether the accountant is aware of any material modifications that should be made to the financial statements for them to be in accordance with the applicable financial reporting framework, primarily through the performance of inquiry and analytical procedures.”
In a review service, a CPA will obtain an understanding of the client and the industry and the CPA will perform analytical procedures and conduct inquiries to assist the CPA in obtaining the requires limited assurance. A review service also required a representation letter from management on their responsibilities concerning the financial statements and related information. However, these procedures are much less comprehensive as compared to the procedures required by an audit.