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Audit Review Compilation: Explained
If your business or your organization requires an audited, reviewed, or compiled financial statement, it is very important to understand the requirements of the financial statements so that the proper level of service can be completed. Performing audits, reviews and compilations is an art and not all financial statements are created equal. By working with you to understand you and your unique needs, Carlini CPA, PLLC can tailor our services to your requirements.
Below is a summary of the differences between an Audit, Review, and Compilation. Also please see article from the American Institute of Certified Public Accountants which further explains the difference between the levels of service that a CPA can provide.
Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements. In a compilation the CPA assists management in taking management’s financial data and presenting it in the form of a financial statement. No opinion is provided and no assurance is provided about whether the financial statements are in accordance with the applicable reporting framework.
Reviewed financial statements represent a higher level of service than a compilation and a lower level of service than an audit.
Reviewed financial statements provide the user with comfort that, based on the accountant’s review, the accountant is not aware of any material modifications that should be made to the financial statements for the financial statements to be in conformity with the applicable reporting framework.
In a review the CPA performs procedures (primarily analytical procedures and inquiries of management that will provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework.
An audit of financial statements is the highest level of assurance that a CPA can provide. Audited financial statements provide the user with the auditor’s opinion that the financial statements are presented fairly, in all material respects, in conformity with the applicable reporting framework.
In an audit, the auditor is required to obtain an understanding of the entity’s internal control and assess fraud risk. The auditor also is required to corroborate the amounts and disclosures in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures and other procedures.