Financial reviews are an integral component of many financial plans and strategies, providing individuals and businesses alike with insight into their current financial position, monitoring progress towards goals and milestones, and adapting plans as necessary. They can detect fraudulent activities in bank accounts, ensure retirement savings plans are on target to reach targeted goals or identify investment opportunities that match risk tolerance and objectives – serving as an invaluable guide towards stability and success.
Financial reviews allow a business to identify areas for improvement that would increase performance, such as inventory management issues that were driving up storage costs and limiting product sales. By addressing these issues, this small business owner was able to increase profitability and grow by opening new locations and attracting more customers.
Regular financial reviews can assist individuals in meeting their personal finance goals more easily. By looking at spending habits, tracking progress towards retirement savings goals or other milestones and considering how life events might alter financial plans, regular reviews allow individuals to identify any potential issues early on and address them before they become serious issues.
Review is an essential tool for nonprofit organizations looking to build stakeholder confidence that their financial statements are free from material misstatements. Generally less expensive and time-consuming than audit, which involves extensive testing of underlying data sources, depending on the needs of an organization, reviewing or audit may be more suitable depending on individual circumstances.
Review or Compilation: What’s the Difference? A financial review is an examination of an entity’s financial statements performed by a certified public accountant (CPA), typically less expensive and faster to complete than an audit, typically requiring less complex testing procedures and inquisitors of management while not providing as much assurance.
An audit differs from a financial review in that an audit involves more comprehensive examination of an entity’s records, internal controls and compliance with accounting standards. An audit offers stakeholders more assurance that financial statements are free from material misstatements; for this reason many larger or complex nonprofits choose an audit as a means to build trust among donors or grantors who fund organizations.
