What’s the better description – “Audit” or Limited Review of Financial Statements

A few weeks ago I had the opportunity to interview Sam Antar, previously CFO of crazy Eddie and currently convicted felon. There are several other posts from our discussion.

During our conversation he pointed out that audits are limited in terms of time and are limited in scope. An audit is not a forensic analysis.

He described our current methodology as designed to detect material unintentional errors.

(I would add to that something about looking for material intentional errors that are non collusive or are in the obvious places. Add your own paraphrase of our responsibilities to look for fraud.)

Those limits suggest to him that a better describe of what we do would be:

  • a limited review of financial statements.

The current definition in the mind of the general public is far more involved. He suggested a good analogy for how the public defines an audit would something along the lines of an analogy from the medical world: a colonoscopy.

That illustrates the vast gap between definitions used by the public and the CPA profession.

Mr. Antar suggests the word we are using, “audit”, is an obstacle to closing that expectation gap.

Perhaps we need a new word.  He makes the above suggestion – limited review of financial statements.

He closed with saying that lots of people disagree with him. He thinks a healthy debate would be a good thing.

What do you think?

Is the word we use creating problems just by itself?

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