Real-world examples of understanding auditor reviews of interim financial statements

Theory is overrated. The best examples of understanding auditor reviews of interim financial statements come from real situations where the review changed behavior, disclosure, or decisions.

Consider a mid-cap tech company that reported a big jump in subscription revenue in Q2. During the interim review, auditors compared revenue trends to customer churn data and renewal terms. They didn’t re-audit every contract, but they asked pointed questions about early-renewal discounts and free trial conversions. The result? Management had to restate the Q2 interim financial statements and adjust revenue recognition, and the auditor’s review report highlighted the restatement in the next quarter’s filing. That’s a classic example of an interim review catching aggressive accounting before year-end.

Another example of the power of interim reviews: a manufacturer facing rising input costs. The interim review focused on inventory valuation and standard cost updates. Auditors performed analytical procedures on gross margin by product line and noticed an unexplained margin spike in one plant. Further inquiry revealed that standard costs had not been updated for months, inflating profits. The company corrected its interim numbers, and the board revised its dividend plan based on the updated results.

These are the kinds of examples of understanding auditor reviews of interim financial statements that show why quarterly reviews matter even though they’re not full audits.

Key elements shown in real examples of interim auditor reviews

When you look across multiple examples of understanding auditor reviews of interim financial statements, a few patterns show up again and again.

Auditors focus heavily on:

• Consistency of accounting policies between year-end and interim periods
• Revenue recognition patterns and any unusual spikes or dips
• Impairment indicators for goodwill, intangibles, and long-lived assets
• Liquidity, going concern indicators, and covenant compliance
• Unusual or nonrecurring transactions (disposals, restructurings, acquisitions)
• Subsequent events that might affect interim results

Unlike an audit, interim reviews are based primarily on inquiries and analytical procedures. The auditor is aiming to determine whether anything has come to their attention that causes them to believe the interim financial statements are materially misstated. That’s negative assurance, not the positive assurance of an audit opinion.

Standards such as the PCAOB’s AS 4105 (for U.S. public companies) and the AICPA’s AR-C 90 (for nonissuers) frame how these reviews are performed. PCAOB and AICPA guidance is publicly available and worth reading if you want primary-source detail:

• PCAOB, AS 4105 – Reviews of Interim Financial Information: https://pcaobus.org/oversight/standards/auditing-standards
• AICPA, Review Engagements (AR-C 90): https://www.aicpa.org

Those standards underpin many of the best examples of understanding auditor reviews of interim financial statements you see in SEC filings and private-company reports.

Concrete examples of understanding auditor reviews of interim financial statements

To make this practical, let’s walk through several distinct scenarios. Each example of an interim review highlights a different risk area and how the auditor’s work influenced outcomes.

Example 1: SaaS company and quarterly revenue spikes

A fast-growing SaaS company reports 35% quarter-over-quarter revenue growth in Q3. The interim review focuses on:

• Comparing recognized revenue to billings and cash collections
• Analyzing churn, upgrades, and downgrades by cohort
• Reviewing a sample of significant new contracts signed late in the quarter

The auditors notice that sales teams are offering extended payment terms and early-renewal discounts. Through inquiry, they discover that some multi-year contracts are being recognized too aggressively up front instead of over the service period.

The interim review does not re-perform all year-end audit tests, but it does trigger:

• Adjustments to defer a portion of Q3 revenue
• Expanded disclosures about revenue policies
• A warning to the audit committee about pressure on sales to “make the quarter”

This is one of the clearest examples of understanding auditor reviews of interim financial statements: the review doesn’t express an audit opinion, but it still leads to material corrections and governance action.

Example 2: Retailer, seasonal inventory, and margin pressure

A national retailer reports interim financial statements for the back-to-school quarter. Gross margin looks surprisingly strong despite heavy discounting. During the review, auditors:

• Compare margins by category to prior years and budgets
• Review markdown policies and test a small sample of large markdowns
• Ask management about inventory aging and obsolescence

The analytics show that older seasonal inventory is building up, but the reserve has not increased. The auditors challenge management’s assumptions about clearance sales and net realizable value.

The outcome:

• Additional inventory write-down in the interim period
• More granular disclosure of inventory risk and markdown strategy
• Board discussion about purchasing controls and forecasting

Again, this example of an interim review shows how relatively limited procedures—analytics plus targeted questions—can still surface material issues.

Example 3: Debt covenants and going concern for a leveraged manufacturer

A heavily leveraged manufacturer faces tightening credit markets in 2024. For its Q2 interim financial statements, the auditors pay close attention to:

• Compliance with debt covenants, including leverage and interest coverage ratios
• Availability under revolving credit facilities
• Management’s cash flow forecasts for the next 12 months

Through the review, auditors note that projected EBITDA barely covers interest payments if sales soften even modestly. They challenge the assumptions, particularly around pricing power and demand.

Resulting actions include:

• Enhanced interim disclosure about liquidity risks and covenant headroom
• A management plan to negotiate covenant relief with lenders
• Audit committee oversight of monthly cash reporting

In this scenario, the review does not necessarily lead to a going concern emphasis paragraph yet, but it sets the stage for year-end. It’s one of the more nuanced examples of understanding auditor reviews of interim financial statements where the impact is forward-looking rather than a current-period adjustment.

Example 4: Impairment indicators for tech goodwill in a volatile market

In 2024 and 2025, tech valuations have been volatile, and impairment risk is back on the radar. A digital advertising platform with significant goodwill from past acquisitions sees its stock price drop 40% between year-end and Q2.

During the interim review, auditors:

• Compare market capitalization to the carrying amount of net assets
• Review management’s latest forecasts used for impairment testing
• Ask about customer churn, pricing pressure, and changes in ad budgets

Even though a full quantitative impairment test may be deferred to year-end, the auditors push for:

• Interim disclosure that there are indicators of potential impairment
• A sensitivity analysis in management’s internal documentation
• A commitment to perform an updated impairment test before Q3 filing

This is a good example of understanding auditor reviews of interim financial statements where the review focuses on indicators and disclosure, not necessarily immediate write-downs.

Example 5: IFRS vs. U.S. GAAP in a cross-listed company

A company listed in both the U.S. and Europe prepares interim financial statements under IFRS, but its U.S. investors are used to U.S. GAAP metrics. In reviewing the half-year interim report, auditors pay attention to:

• Consistency of IFRS accounting policies with prior periods
• Clear reconciliation of non-GAAP measures to IFRS figures
• Disclosure of any changes in estimates or policies

Management introduces a new non-GAAP metric that excludes certain restructuring costs. The auditors raise concerns about prominence and clarity, referencing guidance from regulators such as the SEC. The company revises its interim MD&A to present reconciliations more transparently.

This cross-border example of understanding auditor reviews of interim financial statements shows that reviews are not just about debits and credits; they also touch presentation and communication.

Example 6: Private equity–backed portfolio company and lender reporting

A private equity–owned portfolio company provides quarterly interim financial statements to its lenders, accompanied by a review report from its auditors. In the Q3 review, auditors:

• Analyze EBITDA and add-backs compared with the credit agreement
• Review a sample of large adjustments labeled “one-time” or “nonrecurring”
• Inquire about restructuring initiatives and transaction costs

They discover that some “one-time” adjustments are recurring, quarter after quarter, artificially inflating covenant EBITDA. Following the review:

• The company revises its calculation of adjusted EBITDA
• Lenders renegotiate terms and tighten the definition of allowable add-backs
• The sponsor enhances internal review of covenant reporting

This is one of the best real examples of understanding auditor reviews of interim financial statements where the review has direct consequences for financing terms and sponsor returns.

Example 7: Rapidly growing startup preparing for IPO

A late-stage startup gearing up for a 2025 IPO starts having its interim financial statements reviewed under PCAOB standards. The interim reviews focus on:

• Stock-based compensation and valuation of equity awards
• Capitalization of software development costs
• Classification of preferred stock and complex instruments

The auditors’ interim work surfaces classification issues around redeemable preferred shares that need to be presented outside permanent equity. Addressing this in interim periods avoids a messy pre-IPO restatement.

This example of an interim review highlights why companies planning to go public often start interim reviews early: to clean up structure and disclosure before the spotlight hits.

How these examples map to standard interim review procedures

Across these examples of understanding auditor reviews of interim financial statements, the core procedures are surprisingly consistent:

• Inquiries of management and key finance personnel about unusual trends, new contracts, or changes in estimates
• Analytical procedures comparing interim results to prior periods, budgets, and industry data
• Limited testing of specific high-risk areas, often using targeted samples rather than broad substantive testing
• Reading minutes of board and committee meetings for hints of undisclosed issues
• Considering subsequent events that might affect the interim period

For U.S. public companies, these procedures are framed by PCAOB standards and SEC expectations. For private companies, AICPA review standards and, in some cases, lender requirements drive the scope. Internationally, ISA 2410 covers reviews of interim financial information.

Regulators like the SEC provide additional context on interim reporting expectations, including MD&A and non-GAAP measures, through guidance and enforcement actions. You can track recent developments via:

• U.S. Securities and Exchange Commission (SEC): https://www.sec.gov
• Financial Accounting Standards Board (FASB): https://www.fasb.org

These sources help interpret how standards are applied in practice, which in turn influences future examples of understanding auditor reviews of interim financial statements you’ll see in filings.

2024–2025 trends shaping interim auditor reviews

Recent years have changed what auditors pay attention to in interim periods. Several themes show up repeatedly in current examples of understanding auditor reviews of interim financial statements:

Macroeconomic uncertainty. Inflation, higher interest rates, and uneven consumer demand are pushing auditors to scrutinize:

• Working capital forecasts
• Variable interest debt and hedging
• Pricing strategies and margin resilience

Digital business models. Subscription, platform, and marketplace models raise interim review questions around:

• Principal vs. agent judgments
• Variable consideration and churn
• Classification of contract assets and liabilities

ESG and climate-related risks. While still evolving, auditors increasingly ask how climate-related assumptions affect:

• Impairment tests
• Asset lives and decommissioning obligations
• Provisions and contingent liabilities

Organizations such as the IFRS Foundation and academic institutions like Harvard Business School have been publishing research on climate and financial reporting interactions, which indirectly influence auditor focus areas. For deeper context, see:

• Harvard Business School Working Knowledge: https://hbswk.hbs.edu

These trends mean that future examples of understanding auditor reviews of interim financial statements will likely feature more judgment-heavy areas, especially around estimates and disclosures.

Practical takeaways for management and boards

If you sit in management, on a board, or in an audit committee, the real value of these examples of understanding auditor reviews of interim financial statements is what they imply for your next quarter.

A few practical implications:

• Treat interim reviews as early warning systems, not box-ticking exercises. The best examples show problems being spotted in Q2 or Q3 instead of in a year-end fire drill.
• Prepare narrative explanations for key variances before the auditors arrive. Strong analytics and documentation shorten the review and improve credibility.
• Revisit high-judgment areas each quarter: revenue, impairments, provisions, and non-GAAP measures. Those are where interim reviews most often bite.
• Use the review to stress-test liquidity and covenant assumptions, especially in a high-rate environment.

Understanding how auditors think during interim reviews—and learning from real examples—helps you anticipate questions, avoid surprises, and present more reliable quarterly numbers.

FAQ: examples of auditor reviews of interim financial statements

Q1. Can you give a simple example of an auditor review of interim financial statements for a small business?
Yes. Think of a regional construction firm that provides quarterly financials to its bank. The auditor’s interim review might focus on percentage-of-completion revenue, unbilled receivables, and contract loss provisions. Through analytics and a few targeted inquiries, the auditor notices that one large project is behind schedule and over budget, but no loss provision has been recorded. After discussion, management books a loss on that contract in the interim period, and the bank gets a more realistic picture of risk.

Q2. How is an interim review different from an audit in these examples of understanding auditor reviews of interim financial statements?
In every example above, the auditor performs fewer tests than in a full audit. The review uses mainly inquiries and analytics, with limited detail testing. The conclusion is negative assurance: the auditor states that nothing has come to their attention indicating a material misstatement. An audit, by contrast, involves more extensive procedures and results in a positive opinion that the financial statements are fairly presented.

Q3. Are there examples of interim reviews leading to restatements or SEC scrutiny?
Yes. Public filings often show interim reviews prompting corrections in the next quarter’s Form 10-Q or 10-K. For instance, misapplied revenue recognition, misclassified leases, or missing impairment charges can be identified during interim reviews and then fixed. In some cases, the SEC may comment on interim disclosures or non-GAAP measures, pushing companies to refine their reporting.

Q4. Do private companies really need interim reviews?
Many do, particularly those with bank debt, private equity backing, or plans to go public or sell. Lenders often require reviewed quarterly or semiannual statements. The examples of understanding auditor reviews of interim financial statements for private companies typically involve covenant calculations, EBITDA adjustments, and working capital trends, all of which matter to lenders and investors.

Q5. Where can I find real examples of interim review reports?
You can search public company filings on the SEC’s EDGAR database, especially Form 10-Qs, where interim review reports are often included. These provide real-world examples of understanding auditor reviews of interim financial statements, including the standard wording of review reports and, in some cases, references to restatements or emphasis paragraphs.