Audit, review engagement, or neither?
The rules differ by country, and the answer is decided as often by a lending covenant as by statute. A few questions and you will know where you stand.
Get a quote in 48 hoursThree jurisdictions
Where is the entity incorporated?
The tests are different in each, so this decides which rules apply.
General guidance only, based on the criteria in force at the time of writing. Group structures, your articles or constitution, a shareholder request and any funding agreement can all require assurance regardless of the size tests. If it matters, ask a partner.
Common questions
- What is the difference between an audit and a review engagement?
- An audit gives reasonable assurance and a positive opinion that the financial statements present fairly. A review gives limited assurance and a negative conclusion: nothing has come to our attention. An audit involves substantive testing, confirmations and an understanding of internal control; a review is based on inquiry and analytical procedures.
- Can a lender insist on an audit even if the law does not?
- Yes, and this is the most common reason companies are audited when nothing statutory requires it. Banking covenants, grant conditions, investor rights letters and shareholder agreements frequently specify audited financial statements. The wording of the agreement governs, not the size test.
- Is this a formal determination?
- No. It is general guidance based on the criteria in force at the time of writing, and it cannot account for every circumstance. Group structures, your constitution and contractual requirements can all change the answer.
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