Limited Review
An overseas parent company may have instructed subsidiaries to get reviewed by an audit firm or a CPA for financial statements.
In Japan, “Review procedures” or “Limited review” generally refers to quarterly reviews conducted for listed entities. And then, the entity subject to quarterly reviews typically means a parent company, which is a listed entity. Therefore, review reports would not be issued for its subsidiaries. However, for subsidiaries under US or European capital, it is common to be instructed to obtain a limited review report from an audit firm at the timing of semi-annual or annual closing.
The reason for conducting review procedures instead of audit lies in the limited assurance nature. Review procedures consist of simplified processes such as questioning the management of subsidiaries and performing analytical procedures on financial statements. This results in fewer workloads required compared to audit engagements. When the significance of the subsidiary is considered relatively low, cost reduction often drives the decision to conduct review procedures.
Our advantageous points
We have track records to issue review reports not only for quarterly periods but also for year-end financial statements under the instructions of the group auditor of parent company. And then, we are well-versed in dealing with overseas companies and communicating quickly and diligently with the group auditor.
Additionally, we really understand why the parent company request to conduct limited review procedures instead of audit. It is naturally because the parent company wants to reduce audit fees. We believe that engaging medium-sized audit firms like us, rather than Big4 audit firms, aligns with the parent company’s preferences for the review engagements.