Businesses in Thailand often require independent assurance over financial information. However, not every situation requires a full financial statement audit. Depending on the purpose, companies may choose between an Audit, Review, or Agreed-Upon Procedures (AUP) engagement.
Understanding the differences between these services is important for management, investors, and stakeholders who rely on reliable financial information. Choosing the appropriate level of assurance can help companies balance compliance requirements, cost efficiency, and risk management.
This article explains the key differences and when each service is most appropriate.
Why Assurance Matters for Businesses in Thailand
Many Thai companies operate in environments where financial transparency and compliance are critical. Banks, investors, regulators, and shareholders often require independent verification of financial information before making decisions.
Under Thai audit standards, different levels of assurance provide different degrees of reliability. Selecting the right service ensures that businesses meet regulatory expectations without performing unnecessary procedures.
For example:
- Companies seeking bank financing may require audited financial statements.
- SMEs may only need a limited review.
- Investors may request specific procedures to verify certain transactions.
Choosing the correct engagement can therefore improve credibility, internal control, and financial reporting quality.
1. Financial Statement Audit
A financial statement audit provides the highest level of assurance. In an audit engagement, auditors examine financial statements and supporting evidence to express an audit opinion on whether the financial statements are presented fairly in accordance with applicable accounting standards.
Key Characteristics
- Provides reasonable assurance
- Includes testing of internal control and transactions
- Requires detailed audit procedures and evidence
- Results in an independent audit opinion
When an Audit is Required
A full audit is typically necessary when:
- Required by Thai regulations or shareholders
- Companies seek bank loans or external financing
- Businesses have multiple investors or stakeholders
- Groups require audited financial statements for consolidation
Example: A manufacturing company applying for a significant bank loan may be required to submit audited financial statements to demonstrate financial reliability.
2. Financial Statement Review
A review engagement provides a moderate level of assurance, which is lower than an audit.
Instead of extensive testing, the auditor performs analytical procedures and inquiries with management to determine whether anything has come to their attention indicating that the financial statements may be materially misstated.
Key Characteristics
- Provides limited assurance
- Less detailed testing than an audit
- Focuses mainly on analytical procedures
- Concludes with a review conclusion, not an audit opinion
When a Review is Appropriate
Reviews are often used when:
- Companies want independent assurance but at a lower cost
- Financial statements are needed for internal or investor reporting
- Businesses are early-stage or SMEs
Example: A startup preparing financial information for potential investors may request a review engagement instead of a full audit to increase credibility while managing costs.
3. Agreed-Upon Procedures (AUP)
An Agreed-Upon Procedures engagement is different from both an audit and a review.
In this type of engagement, the auditor performs specific procedures agreed upon with the client or other stakeholders and reports the factual findings without providing an opinion or assurance.
Key Characteristics
- No assurance is expressed
- Procedures are pre-agreed with stakeholders
- Report provides factual findings only
When AUP is Useful
Agreed-Upon Procedures are commonly used when stakeholders need verification of specific information, such as:
- Verification of revenue figures
- Review of grant or project spending
- Due diligence during a transaction
- Internal control checks
Example: An investor considering acquiring a company may request Agreed-Upon Procedures to verify key revenue transactions before completing the deal.
Key Differences at a Glance
| Engagement Type | Level of Assurance | Main Purpose | Typical Use |
| Audit | Reasonable assurance | Express audit opinion | Regulatory compliance, financing |
| Review | Limited assurance | Provide review conclusion | SMEs, investors, interim reporting |
| Agreed-Upon Procedures | No assurance | Report factual findings | Due diligence, specific verification |
Best Practices When Selecting an Assurance Service
When deciding between an audit, review, or AUP engagement, businesses should consider several factors:
1. Regulatory requirements
Some companies are legally required to have audited financial statements.
2. Stakeholder expectations
Banks, investors, or partners may request specific levels of assurance.
3. Cost and efficiency
Audits involve more procedures and therefore higher costs compared with reviews or AUP engagements.
4. Risk exposure
Businesses facing higher financial or operational risk may benefit from stronger assurance.
Working with experienced auditors can help management determine the most appropriate engagement based on the company’s objectives and risk profile.
Risks of Choosing the Wrong Level of Assurance
Selecting an inappropriate engagement may create challenges such as:
- Insufficient assurance for lenders or investors
- Delays in financing or transactions
- Increased regulatory scrutiny
- Misinterpretation of financial information
Therefore, understanding the differences between assurance services is critical for effective financial governance.
Conclusion
Audit, review, and agreed-upon procedures engagements each serve different purposes. While audits provide the highest level of assurance, reviews offer a more cost-effective alternative for moderate assurance, and agreed-upon procedures focus on verifying specific financial information.
Selecting the right level of assurance allows businesses to meet stakeholder expectations while maintaining efficiency and compliance with Thai audit standards.
Need support? Contact our Audit team today.