What it means
A CPA is a certified public accountant, licensed by a state. In a CPA review as used here, one checks your bookkeeping every quarter. They compare what was booked to the support behind it and tell you in writing what's wrong and what to fix.
It's quality control on the books. Errors get caught while they're small and recent, before an auditor, an investor or your tax preparer finds them.
Reconciliations come first: does each bank, card and processor account agree with its statement, and have old reconciling items cleared. Then the lead schedules for prepaids, accruals, deferred revenue and fixed assets, checked against contracts and invoices. Revenue gets a close look, especially cutoff, which means whether each sale landed in the right month.
Account classifications are tested too, such as whether hosting sits in cost of revenue. So are questions with a compliance deadline attached, like whether a contractor needs a 1099-NEC.
In a typical quarter the findings might be one revenue entry in the wrong month, a prepaid schedule that ties, and one contractor whose status needs confirming before January. Each finding comes back in writing, and the corrections are booked in the open period.
In Acme's Q1 review the CPA finds a $3,000 onboarding fee recognized as revenue in March. It belongs to a one-year subscription starting April 1, and the onboarding is worth nothing to the customer on its own, so under ASC 606 it's earned over the subscription.
March is locked, so Acme books the correction in April: $3,000 out of revenue and into deferred revenue, with a memo pointing to the finding. From April, $250 a month is recognized. The finding is closed once the entry is posted and the CPA has seen it.
It isn't an audit, which ends in an independent firm's opinion on your financial statements. It also isn't a review engagement under the AICPA's SSARS standards, which ends in a signed report with limited assurance. If a lender or investor asks for either of those, this doesn't substitute. It isn't tax preparation either.
Why it matters. A qualified second look at what the agents booked. It checks the bookkeeping. It is not an audit, not a review engagement under AICPA standards, and not tax preparation.
The entry, worked
In the Q1 review the CPA finds a $3,000 onboarding fee recognized as revenue in March, for a one-year subscription starting April 1. The onboarding gives the customer nothing on its own, and March is locked.
| Account | Debit | Credit |
|---|---|---|
| Revenue | $3,000.00 | |
| Deferred revenue | $3,000.00 | |
| Total | $3,000.00 | $3,000.00 |
The fee moves to deferred revenue in the open month and is recognized at $250 a month over the twelve-month subscription it belongs to.
Common questions
Is this the same as reviewed financial statements?
No. A review of financial statements is a formal engagement under the AICPA's SSARS standards. It gives limited assurance and ends in a signed review report you can hand to a lender. A quarterly bookkeeping review checks the work and sends findings, with no report and no assurance on your statements.
Does a CPA review replace an audit?
No. If an investor, lender or acquirer asks for audited statements, only an audit by an independent CPA firm will do.
What's the difference between a compilation, a review and an audit?
They're three AICPA engagements with rising assurance. A compilation presents your statements with no assurance. A review, under SSARS, adds inquiry and analytics for limited assurance. An audit, under auditing standards, tests the evidence for reasonable assurance and ends in an opinion.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
- FindingAn identified control or accounting problemGlossary
- Audit-ready books before your Series AInvestors, lenders and auditors ask for the same things: accrual statements, reconciled accounts and support for every balance. How to be ready first.Guide · 4 min
- Can you vibe code your startup’s accounting?AI coding tools build a finance dashboard in an afternoon, but not a closed, reconciled, GAAP-basis ledger. Where the line is, and how to stay inside it.Guide · 3 min
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.Guide · 7 min
- Payroll journal entries, from gross to netGross wages, employer taxes, withholding and net pay as journal entries: what each payroll run books, how to accrue it at month end, and where benefits go.Guide · 6 min
- Cash vs accrual accounting for startups, and the IRS ruleCash or accrual for a startup: why investors and auditors read accrual, when the IRS lets a C-corp file on cash, and the 2026 gross receipts limit.Guide · 5 min
- Bad debt and write-offs: allowance vs direct methodHow to book a customer who won’t pay: the GAAP allowance under ASC 326, the direct write-off the IRS requires, and what to do if the money comes back.Guide · 7 min
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.