What is a review?
A financial statement review, like a nonprofit audit, is provided by a CPA that is independent, that is, free of any financial interest in the organization and of any close relationships with its key people.
A review provides limited assurance about the financial statements of the organization. The assurance indicates that the CPA believes that no material modifications are necessary for the financial statements to conform to generally accepted accounting principles.
Review procedures consist primarily of inquiry and analytical procedures to identify unusual items or trends. As there is no internal control consideration in a review, no report on control deficiencies is issued.
A review requires your CPA to understand your organization, its programs, and its major transactions and to verify this understanding with inquiry and analytical procedures.
Why should my nonprofit consider a review?
- External Requirements – There are no state or federal laws requiring reviewed financial statements. Many nonprofits, however, are required to provide reviewed financial statements to a funder, lender, bank, or accreditation organization. A review provides a funder or lender some comfort in knowing that an accountant independent of the organization has reviewed the financial information that the organization is providing.
- Board Fiduciary Duty – A nonprofit audit may be cost prohibitive for an organization, so a review is a less expensive alternative that still provides a level of accountability and transparency. Although a review is less in scope than an audit, a CPA independent of the organization is still providing some level of assurance that the financial statement are free of material misstatements. A review can help the Board exercise its fiduciary duty to the organization.
- Pathway to Being ‘Audit Ready’ – In the State of Washington, charitable organizations that are required to register with the Secretary of State and who report more than three million dollars in annual gross revenue averaged over the three preceding years, must obtain an independent audit of their financial statements. If your organization is on a trajectory toward this or another external audit requirement, a review can be a great stepping stone toward audit readiness.
- Capital Campaigns or Other Future Needs – Organizations planning for capital campaigns or other future growth often consider a review. When going after large gifts or grants with new, sophisticated funders, a set of financial statements reviewed by an independent CPA can give prospective funders comfort in the numbers and that the organization takes its fiduciary duty seriously.
How can Jacobson Jarvis help?
If you are interested in exploring the possibility of a review or any other CPA services, please contact Julleen Snyder, Partner, for more information or to schedule an appointment.
For over 25 years, Jacobson Jarvis has focused on serving the assurance, business advisory and tax needs of the not-for-profit community in the Pacific Northwest. We have worked with thousands of nonprofit organizations in all phases of organizational progression and offer practical, focused services.