Audit vs. Review Engagement: What’s the Difference and Which One Does Your Business Need?

Audit vs. Review Engagement: What’s the Difference and Which One Does Your Business Need?

Introduction

In Singapore, companies preparing financial statements may face a choice between conducting an audit or a review engagement. While both processes involve the evaluation of financial information by an independent accountant, they differ significantly in scope, cost, assurance level, and regulatory requirement.

Understanding the difference between an audit and a review engagement is crucial—especially for SMEs, startups, and growing businesses that want to remain compliant while managing costs. In this article, we explore what each service entails, who needs which, and how to decide the best option for your business.

1. What Is a Financial Audit?

An audit is the most comprehensive type of financial statement examination. It provides the highest level of assurance that your financial statements are free from material misstatements and are prepared in accordance with Singapore Financial Reporting Standards (SFRS).

Conducted by a public accountant registered with ACRA, an audit involves:

• Verifying financial transactions and balances,

• Examining supporting documents and accounting policies,

• Assessing internal controls,

• Performing substantive testing and analytical procedures.

At the end of the process, the auditor issues an Independent Auditor’s Report, expressing an opinion on whether the financial statements provide a true and fair view.

2. What Is a Review Engagement?

A review engagement is a limited assurance engagement. It provides a moderate level of assurance—less than an audit—but still adds credibility to your financial statements.

In a review engagement, the accountant:

• Performs inquiry and analytical procedures,

• Identifies any items that appear unusual or inconsistent,

• Checks for obvious errors or non-compliance.

The outcome is a Review Report, which states that the accountant is not aware of any material modifications needed for the financial statements to conform to SFRS. It does not offer an opinion like an audit does.

3. Key Differences Between Audit and Review

4. When Is an Audit Required by Law in Singapore?

A financial audit is mandatory for companies that do not qualify for audit exemption. According to ACRA, your company must be audited if:

• It does not qualify as a “small company”, meaning it exceeds two of these thresholds:

  • Total revenue > S$10 million,

  • Total assets > S$10 million,

  • More than 50 employees.

• It is part of a group that also exceeds the small group exemption thresholds.

• It operates in regulated industries (e.g., financial institutions, charities, licensed businesses) that require audited statements for licensing or compliance.

Failure to comply with the statutory audit requirement can result in penalties, legal enforcement, and company strike-off by ACRA.

5. When Is a Review Engagement Suitable?

A review engagement is ideal for companies that:

• Are audit-exempt under Singapore law but still want third-party validation of their financials,

• Need moderate assurance for management, shareholders, or external stakeholders,

• Are preparing for investor funding, internal controls improvement, or due diligence readiness,

• Want to reduce audit costs while still benefiting from an external review,

• Are applying for non-governmental funding that accepts reviewed statements.

For instance, early-stage startups that don’t meet audit thresholds but want to impress venture capitalists may choose a review engagement to boost credibility.

6. Review Engagements and Government Grants

It’s important to note that some government grants and schemes, such as:

• Enterprise Development Grant (EDG),

• Productivity Solutions Grant (PSG),

• Startup SG programs,

…often require audited financial statements. A review engagement may not suffice for these applications unless specifically allowed.

Always check with the grant agency or work with an audit advisory firm like Koh & Lim Audit PAC to ensure your documents meet the eligibility requirements.

7. Benefits of Audit

• Ensures full compliance with ACRA, IRAS, and SFRS.

• Increases trust among banks, investors, and regulatory bodies.

• Enhances internal control and fraud detection.

• Required for company sales, IPOs, or mergers.

8. Benefits of Review Engagement

• More affordable and faster than audits.

• Provides limited assurance for stakeholders.

• Improves financial transparency without full audit burden.

• Ideal for internal use, investor reporting, or non-statutory requirements.

9. How to Choose Between an Audit and a Review Engagement

To decide which option fits your business:

Choose an Audit if:

• You are legally required by ACRA.

• You are applying for government grants or bank loans.

• You’re preparing for M&A or IPO.

• You want full assurance and stronger risk control.

Choose a Review Engagement if:

• You are exempt from audit requirements.

• You want external validation at lower cost.

• You are early-stage or pre-funding.

• You want to enhance credibility without intensive audit procedures.

10. Engage a Trusted Professional

Whether you need an audit or a review, it’s essential to work with a reliable firm that:

• Understands your industry and business goals,

• Is responsive and deadline-driven,

• Provides advisory support beyond the numbers.

At Koh & Lim Audit PAC, we offer both audit and review engagement services tailored to the needs of SMEs in Singapore. We explain our approach clearly, help you prepare your records, and deliver assurance reports that meet your stakeholders’ expectations.

Conclusion

Both audits and review engagements play important roles in a company’s financial reporting journey. While an audit offers the highest level of assurance and is often required by law, a review engagement provides a practical alternative for companies looking for cost-effective credibility.

By understanding the differences and engaging the right professionals, you can choose the path that aligns best with your compliance obligations, business growth stage, and strategic needs.

Still unsure which is right for your business?
Contact Koh & Lim Audit PAC today for a free consultation and we’ll help you decide whether an audit or review engagement is best suited for your situation.

📞 Call us at +65 98638665
📧 Email: Tommyksh@kohlimaudit.sg
🌐 Visit: https://kohlimaudit.sg

Your financial clarity starts with the right partner.