What is the difference between a review and an audit for Practice Management?

An Independent Review provides limited assurance, whereas an audit provides reasonable assurance that the financial statements are represented fairly and free from material misstatements. The assurance from an independent is limited by the scope of work performed as it mainly performs analytical procedures and mathematical accuracies of the records, while an audit covers a vast scope to provide a reasonable assurance. None may provide absolute assurance as a way to accommodate reasonable human limitations i.e., audit risk. Neither of the two may assume the role of management or that of a forensic auditor, they can only report any suspicion of any identified possible fraudulent activity, either due to errors or intent.

Audits serve as a system of checks and balances for an organization. These are essential not only for compliance purposes, but also to ensure that processes are carried forth correctly.

audits offer a higher level of assurance and involve in more detailed examination, on the other side, reviews provide limited but valuable assessment of financial statements for Practice Management.

I have seen a review where an opinion was given on financials that were not prepared on a GAAP basis (ie what they "reviewed" was not prepared on a consistent basis, among other issues), and "audits" which included both compilation and review procedures, yet lacked audit procedures being performed on certain "significant" business cycles. I have had an auditor actually tell me that they do not review liability accounts, related to "significant" cycles, as they do not have "material" balances. Some of what I have seen is so grossly negligent that I can't help but believe the auditors are turning a blind eye on bad characters, or assisting the client in obtaining certain tax/other goals/objectives...

Audits are more extensive and detailed as compared to Review. An important difference between an audit and a review is that an audit provides more reasonable assurance, whereas a review does not, and the accountant does not express an opinion.

Review of Practice will focus on comparing the progress against objectives and how effectively and efficiently it's being done. Also it will be judged against specific parameters and possibly will result in RAG status. The audit of practice will focus to verify the outcomes and progress shown by Practice with a focus on genuineness, backed by artifacts etc.

In simple words, audit is a formal procees, where making corrective changes is a mandate. Whereas negative comments are primarily noted in a review and the actions against the comments are dependent on the management enforcement.

In IT, a review typically involves a comprehensive examination of a practice management system to assess its efficiency and effectiveness. An audit, on the other hand, is a more formal and structured process, often involving a detailed examination of processes, controls, and documentation to ensure compliance with established standards or regulations. While reviews are generally more informal, audits are systematic and often have a compliance focus.

Practice reviews assess operational efficiency, highlight improvement areas, and compliance. Yet, they have limitations in assurance, scope, and subjectivity. They offer limited assurance as they rely on management representations, and their scope may be restricted. Practice reviews are more subjective. Organizations should consider these limitations when choosing between practice reviews and audits for management purposes. In summary, while practice reviews assess operational efficiency, they have limitations regarding assurance, scope, subjectivity, and formalized procedures. Organizations must consider their specific needs and stakeholder expectations when choosing between a review and an audit for practice management purposes.

Audit is control driven aka compliance against set control. review is objective and subjective. Both coexist and compliment to ensure organisations run with checks and balances.

Audits and reviews are based on hindsight. If done properly, however, these may serve as an educational tools for management to improve the business and they should be seen as such.

Audits provide assurances to the owners, stockholder, or governing board that the accounting & financial reporting were either done in accordance with GAAP or not. The audit provides safeguards that could prevent costly errors or fraud. The audit can also reveal efficiencies that could be effective in reducing waste. Organizations accounting & financial departments should welcome audits. It’s a report card on how well they did over time recording & reporting the financial results of the organization.