Audits, Reviews and Compilations
Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company. Based on the level of risk tolerance, we provide three levels of assurance to meet your needs.
Audit – Highest Level of Assurance
An audit is the highest level of financial statement service a CPA can provide. An audit report that contains a clean opinion is required by many lenders before they will loan funds to a business.
An audit is conducted in accordance with auditing standards generally accepted in the United States of America which requires planning and performing the audit to obtain a reasonable assurance about whether the financial statements are free of material misstatement. An audit report is a written opinion of an auditor regarding an entity’s financial statement.
All public companies are required to have an annual audit. Local governments, not-for-profit agencies and other organizations receiving government grants are required as well.
Review – Limited Level of Assurance
Less extensive than an audit, but more involved than a compilation, a review engagement consists primarily of inquiries and analytical procedures applied to management prepared financial statements.
A review report expresses limited assurance that there are no material misstatements for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP). Reviewed financial statements must include all required footnotes and other disclosures. Because a review engagement is substantially less intensive in scope than an audit, the CPA cannot express an opinion on the fairness of the financial statements taken as a whole.
Why might a business request a review engagement? It can be a good middle ground, providing the advantages of a CPA’s technical expertise without the work and expense of an audit.
Compilation – Lowest Level of Assurance
Compiled financial statements are often the result of the accountants’ write-up. The compiled financial statements state that the financial statements are the representation of management and have not been reviewed or audited and that the CPA expresses no opinion or assurance on the statements.
Compilations do not require inquiries of management or analytical procedures. Banks often require compilations from an independent CPA as part of their lending covenants.
Outside parties often dictate the type of financial statement report needed.
Ask us how we can customize the appropriate reporting package to fit your needs.