External Audit vs Review Engagement

Following the changes made by the Cyprus Parliament in July this year regarding the SMEs, if companies meet certain threshold requirements, they meet the definition of an SME and can file reviewed financial statements as opposed to audited financial statements which was the case to date for all Cyprus incorporated companies.

With this change in mind, the question that arises in most people’s minds is what is the difference between an external audit and a review engagement?

Let’s break it down:

External Audit

  • Report on whether the financial statements are true and fair
  • Report on whether the financial statements have been prepared in accordance with a particular accounting framework (in Cyprus it is IFRS, in other countries it may be GAAP) and in line with the relevant country’s legal and tax framework
  • Report on whether any fraud or error was identified during the audit
  • Considered as providing reasonable assurance
  • Form of opinion is considered as a positive assurance opinion (ie. The financial statements give a true and fair view)
  • Types of procedures used by the auditor during the external audit process are such that they will provide the request assurance as noted above
  • Higher fees to be paid to the external auditor performing the audit

Review Engagement

  • Report under the International Standard on Review Engagements (ISRE) 2400 (Revised) – Engagements to Review Historical Financial Statements
  • Expresses a conclusion as to whether the financial statements are prepared in all material respects in accordance with a particular accounting framework and in line with the relevant country’s legal and tax framework
  • Considered as providing limited assurance
  • Form of opinion is considered as a negative assurance opinion (ie. Nothing has come to our attention that causes us to believe that these financial statements do not present fairly, in all material respects)
  • Procedures performed are substantially less than those performed in an external audit
  • Less costly for the Company

Need an audit or a review?

We can help you with both. Get in touch!

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