What is a financial statement review?

Financial statement review is the process of examining prepared financial statements for accuracy, completeness, and reasonableness before distribution or use for decision-making. For professional service firms, the review should include balance sheet verification, income statement reasonableness, cash flow reconciliation, and comparison to prior periods and the budget.

Key characteristics

• Examines statements for accuracy

• Verifies completeness and reasonableness

• Compared to prior periods and the budget

• Identifies items requiring investigation

• Should occur before distribution

• Documents review findings and questions

Why it matters for professional service firms

Financial statements containing errors undermine decision-making and trust. Review catches errors before distribution, ensuring accuracy for users. Professional service firms should have defined review processes in which someone other than the preparer reviews statements and investigates unusual items before finalization. Review is the final quality check before statements become decision inputs.

Real-world example

Kevin's firm distributed statements directly from accounting without review. A significant client payment was misapplied, resulting in $35K in overstated revenue over two months before discovery. Implementing statement review: the controller prepares, and the CFO reviews before distribution. Review checklist: balance sheet accounts reconciled, income statement compared to prior period and budget, unusual items investigated, cash position verified. The first review caught three items requiring correction before distribution. Quality improved significantly; partners now trust the numbers.