Reviewed financial statements are financial statements that have been examined by independent certified public accountants through a formal review engagement. The goal of a review is to provide assurance that the financial statements do not require material modifications to be in conformity with the applicable financial reporting framework, such as GAAP.

A review provides limited assurance. That means the CPA is not expressing an audit opinion and is not certifying that the financial statements are free from all errors. Instead, the CPA concludes that they are not aware of any material misstatement based on the procedures performed.

Reviewed financial statements are produced when a CPA performs a structured review of a company’s financial information using analytical procedures and inquiry. Unlike an audit, the CPA does not test transactions, confirm balances with third parties, or evaluate internal controls in depth.

The review focuses on whether the company’s financial information appears reasonable and consistent with expectations. The CPA analyzes trends, compares financial data across periods, and asks management questions about unusual fluctuations or relationships. If something does not make sense, the CPA follows up until they are satisfied or identifies a potential issue.

At the end of the engagement, the CPA issues a review report stating that they are not aware of any material modifications that should be made to the financial statements. This is known as negative assurance.

To understand reviewed financial statements, it helps to compare them to other levels of financial reporting service.

• Compilation: No assurance. The CPA organizes financial records into statements but does not evaluate accuracy.
• Review: Limited assurance. The CPA performs analytical procedures and inquiry to assess whether the statements appear reasonable.
• Audit: Highest assurance. The CPA tests transactions, evaluates internal controls, gathers evidence, and issues an audit opinion.

Reviewed financial statements sit squarely in the middle. They provide more credibility than internally prepared or compiled financial statements, but at a lower cost and time commitment than an audit.

During a review, CPAs perform procedures designed to identify relationships or trends that appear unusual. Common review procedures include:

• Comparing current-period financial statements to prior periods
• Analyzing margins, growth rates, and expense relationships
• Performing ratio and trend analysis on key accounts
• Making inquiries of management about significant changes or anomalies

These perform analytical procedures help the CPA determine whether the company’s financial records are internally consistent and reasonable. However, because the CPA does not examine source documents or test controls, the assurance level remains limited.

Reviewed financial statements are commonly used by private companies that need independent credibility but do not require a full audit. Typical situations include:

• Meeting lender or bank regulatory requirements
• Satisfying loan covenants or bonding requirements
• Providing financial information to investors or boards
• Preparing for growth, financing, or a future sale

For many businesses, a review strikes the right balance between cost and assurance. It signals that an independent CPA has examined the company’s financial information using professional standards, without the expense of an audit.

It is critical to understand what reviewed financial statements do not provide. A review does not guarantee that the financial statements are free from fraud, error, or misclassification. Because internal controls are not tested and transactions are not verified, errors in the underlying financial records may go undetected.

For this reason, reviewed financial statements should not be described as “certified” or “audited.” The assurance is meaningful, but limited.

To get real value from reviewed financial statements, readers must understand what level of assurance they represent and how to interpret them correctly. This is where financial literacy matters. Knowing how analytical procedures work, what negative assurance means, and how reviews differ from audits allows you to use financial information with confidence.

At Ledgeroo, learners build this understanding step by step. Instead of memorizing definitions, you practice reading financial statements, spotting trends, and understanding how professional accountants evaluate financial information in the real world.

Reviewed financial statements provide limited assurance that a company’s financial statements do not require material modification under the applicable financial reporting framework. Through analytical procedures and inquiry, CPAs help increase credibility without the cost of an audit. For many private companies, reviewed financial statements are the right balance between reliability, efficiency, and professional oversight.