Audit, Review and Compilation
Do your financial records adequately represent the financial condition of your company? An audit, review, or compilation will show where you stand.
Our CPA firm’s role is to provide assurance to our clients of the accuracy of their financial statements. Financial performance reports are of interest to many parties: They help owners and managers make financial and operating decisions, enable lenders to evaluate loan applications, and provide necessary information for individuals and private investors to make investment decisions. They should accurately represent the true financial position of a company.
We offer our clients three distinct services involving their financial statements. Each is designed to meet a different need.
Audit – Highest Level of Assurance
The audit is a very thorough and objective examination of the financial statements. It includes such procedures as communication with outside parties like customers, vendors, banks and other parties, confirmation of account balances, observation of inventories, testing selected transactions by examining supporting documents and review of internal controls. We then issue our report that will include “findings”, which are directions the company should follow to improve its accounting procedures.
How would an audit benefit you?
An audit will help you analyze and understand your company’s financial records.
It identifies weaknesses in the accounting systems and enables us to suggest improvements.
It reduces the scope for fraud and poor accounting
It Reinforces and strengthens internal control
It will enhance the credibility and reliability of the figures being submitted to prospective purchasers which will facilitate the sale and purchase of business.
It adds credibility to published information for employees, customers, suppliers, investors and tax authorities.
It facilitates the payment of different taxes accurately and in a timely manner, therefore avoiding penalties and investigations.
Review – Limited Assurance
A review provides limited assurance on an organization’s financial statements. It is less in scope than an audit, but more involved than a compilation. In a review, inquiries and analytical procedures serve to confirm that no material modifications to the financial statements are necessary for them to be in conformity with the applicable financial reporting framework. It also serves to identify any items requiring further analysis. This “does it make sense” analysis is helpful in providing the users with some comfort about their financial statements, but not the higher level of assurance provided by an audit. A review does not consider obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records; or other procedures ordinarily performed in an audit.
Why might you need a review?
Being less extensive than an audit, a review can provide you with the advantages of a CPA’s expertise without the work and expense of an audit.
Compilation – Lowest Level of Assurance
Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements. Compilations are usually requested for internal purposes and are based on information provided by the entity’s management. A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding of the entity’s internal control; assessing fraud risk; or testing of accounting records; or other procedures ordinarily performed in an audit.
In a compilation, the CPA considers whether the financial statements appear appropriate in form and free from obvious material errors, but expresses no opinion or assurance on the statements. Compilations are often required by lenders from an independent CPA as part of their lending agreements.
Which report should you use?
The difference in the level of service is determined by your needs, your budget and what your creditors and/or investors require. Understanding the unique strengths and weaknesses of each report can help you choose the one most appropriate to you. Please call us if you have questions about which type of report is right for you.