What is the difference between an ‘audit’ and a ‘review’ of a financial report?

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Certain Companies limited by guarantee and Incorporated Associations in Victoria can choose whether to have their financial report audited or reviewed. Eligibility for a review is based on turnover of the entity as follows:

Turnover Legislative Audit/Review Requirements
< $250,000 (and is not a deductible gift recipient) No audit or review required
< $1 million Audit or review permitted
$1 million or more Audit required

 

The legislative requirements which permit an entity to have a review rather than an audit do not override the entity’s constitution. For example, if an entity’s constitution stipulates that it’s financial report must be audited then the financial report audited regardless of the entity’s turnover.

What is an Audit?

An audit is a detailed process that provides a high level of assurance to the users of financial reports.

The objective of an audit of a financial report is to enable the auditor to express an opinion whether the financial report is prepared, in all material respects, in accordance with an applicable financial reporting framework. When forming an opinion on the financial report the auditor needs to evaluate whether, based on the audit evidence obtained, there is reasonable assurance about whether the financial report taken as a whole is free from material misstatement.

An auditor is required to conduct audit procedures in accordance with the auditing standards, in order to detect material misstatements and carry out specific procedures to reduce fraud risk.

What is a Review?

review, in contrast to an audit, is not designed to obtain reasonable assurance that the financial report is free from material misstatement.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review may bring significant matters affecting the financial report to the auditor’s attention, but it does not provide all of the evidence that would be required in an audit.

The objective of a review of a financial report differs significantly from that of an audit conducted in accordance with Auditing Standards. A review of a financial report does not provide a basis for expressing an opinion whether the financial report gives a true and fair view, or is presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

The objective of an engagement to review a financial report is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor’s attention that causes the auditor to believe that the financial report is not prepared, in all material respects, in accordance with an applicable financial reporting framework.

Further questions

If you would like to discuss your entity’s audit requirements further please contact any of the following people at our office on 9551 6692, or via email:

 

Ryan Dummett

Director – Audit & Assurance

ryan.dummett@ashfords.com.au

 

Andrew White

Director – Audit & Assurance

andrew.white@ashfords.com.au

 

Liability limited by a scheme approved under Professional Standards Legislation Disclaimer: This publication has been prepared on the basis of information available at the date of preparation. The information is general in nature and is not to be taken as a substitute for specific professional advice. We recommend that our advice be sought on specific issues prior to acting on transactions affected.

 

 

 

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