The level of assurance provided by a review engagement depends on the amount of work performed by the reviewer, which may not be clear to those seeking to rely on the review.
And review engagements are less likely to detect material fraud and error than audit engagements.
It is important that practitioners ensure that directors understand the limitations of review engagements, particularly when they are seeking review services, and whereby previously, an audit was conducted.
Q6. Why should smaller companies invest in a voluntary audit?
Audits add value. Smaller companies invest in audits for the same reasons as larger companies, but there are particular issues facing smaller companies that make investment in an audit worthwhile:
The cost of the audit is often marginal for very small companies, particularly where the auditor is involved in the preparation of the statutory accounts.
Small companies who prepare their own accounts often need help in arriving at adjustments, such as those for obsolete stocks, bad debts and other provisions.
Small companies grow, and may find themselves subject to a statutory audit requirement - the first year and the subsequent years of an audit can be very trying if the accounts are not in good order.
