A limited review is an accounting procedure in which financial records are inspected to identify accounting problems. Limited reviews are similar to audits in nature and purpose, but they are not as extensive as audits, and the results of a limited review cannot be substituted for an audit. There are a number of reasons firms can perform a limited review and many accountants can offer this service or assist firms with locating an accountant who will. External reviewers can also be brought in on the order or recommendation of a third party.
In a limited review, financial reports and recordkeeping methods are inspected to confirm that they are reliable. In addition, the reviewer determines whether or not changes would need to be made to bring the records into compliance with general standards of accounting practice. The reliability of financial data and recordkeeping is important, because errors can be compounded over time.
In some regions of the world, financial regulators may order periodic limited reviews to catch financial problems early, before a full scale audit is conducted. The results of these reviews may need to be included in public filings and disclosures so that stockholders and other interested parties can access them if they want to. Companies can also hold periodic internal reviews to maintain compliance with accounting practices. Keeping financial records accurate is important for the company and its shareholders, to ensure that the company is doing business honestly and self-reporting with accuracy.
An accounting limited review is one among many tools to keep an accounting system reliable and in conformity with the law and standards of practice in the accounting community. Review of accounts, however, is only useful when the reviewer is provided with full access. It is also important to pair limited review with other practices such as whistleblower policies so that financial issues can be identified and addressed early, before they balloon into large problems. Part of a limited review can include a review of these policies to determine whether or not they are present and to confirm that they are being applied properly.
The results of a limited review may indicate that a system appears to be in order and no changes need to be made to accounting practices. In other cases, the results may show signs of problems which need to be addressed. If serious problems are identified, it may be cause to turn the limited review into an accounting audit to pinpoint the problems and determine the best way to address them.
