A Financial Statement Review is a service under which the accountant obtains limited assurance that there are no material modifications that need to be made to an entity’s financial statements for them to be inconformity with the applicable financial reporting framework (such as GAAP or IFRS).
A review does not require the accountant to obtain an understanding of internal control, or to assess fraud risk, or other types of audit procedures. Consequently, a review does not provide the accountant with assurance that he or she has become aware of all the significant matters that normally would have been discovered and disclosed in an audit.
The review is more expensive than a compilation and less expensive than an audit. It is preferred by those businesses whose lenders and creditors will allow them to use this approach, thereby saving the cost of a full audit. Banks often require compilations or reviewed financial statements from an independent CPA as part of their lending covenants.