How are financial statement reviews and audits different? Is this a situation where I need help from an accountant attorney?

Hello. This is the accountant attorney at Daeryun Law Firm (LLC).

Financial statement review is a preliminary inspection procedure, while audit is a follow-up investigation premised on liability for violations.

First, the financial statement review system is a procedure that directly inspects a company's financial statements to confirm whether there are violations of accounting standards, and is a preliminary supervisory system operated in a relatively simplified manner compared to the existing audit.

Through this system, financial authorities preemptively inspect not only companies where specific suspicions have emerged but also the recent financial statements of many companies, managing accounting transparency.

In the financial statement review stage, the company is required to submit explanatory materials regarding specific accounting treatments or figures, and if judged to be a simple difference in interpretation or error, the procedure may be concluded with a recommendation to revise the financial statements.

However, if the violation of accounting standards is serious or intent is suspected during the review process, and if the violation content is specifically confirmed, it may be immediately converted to an audit.

An audit is a procedure that broadly inspects not only financial statements but also the audit reports of external auditors and the operational status of the internal accounting management system. Depending on the results, it can lead to surcharges, executive sanctions, and even criminal liability issues, so it can be a considerable burden from the company's perspective.

Therefore, from the financial statement review stage, it is important to respond while considering both the possibility of expansion into an audit and legal risks.

It is desirable to organize the direction of explanation through consultation with an accountant attorney who understands both accounting standards and supervisory procedures, and to manage in advance the risks of being misunderstood as accounting fraud or leading to unnecessary sanctions.