What is the difference between a statutory audit and a retrospective financial review?

A statutory audit is a regulated examination of an organisation’s annual accounts and administration, carried out by an authorised or approved public accountant under the audit legislation. Its purpose is to give an opinion on whether the accounts give a true and fair view.

A retrospective financial review is something else. It is a targeted analysis of historical financial flows, for example VAT, transactions, supplier payments, contracts and prices, with the aim of identifying, verifying and documenting specific discrepancies. It does not replace the statutory audit and does not give an opinion on the annual accounts as a whole. It goes deep within a limited area, often backwards in time, with a level of detail that an ordinary statutory audit rarely has room for.

Where is the line in practice?

A statutory audit often works with samples and materiality levels, because its task is to give an opinion on the whole within a given time frame. A retrospective financial review can instead go through a complete historical dataset within a limited area, for example all supplier invoices over a five-year period, because its task is to find specific discrepancies, not to give an opinion on the whole.

Refero does not carry out statutory audits. The work is the analysis and verification of historical financial flows, often as a complement to the ordinary finance function and the statutory audit, not as a replacement for either of them.

Why does the distinction matter?

If an organisation already has a working statutory audit, a question often remains: has it covered this area, at this level of detail, in this period? The answer is rarely a plain yes. This is not because the audit falls short, but because it is built for a different purpose. A retrospective financial review fills that space.

See facts about Refero for a full definition of the business.