What Are the Differences Between an Audit, Review and a Compilation?
Once we’ve determined with our clients if they need an audit to satisfy outside parties, our focus turns to understanding your goals. Before we begin looking at the numbers, our team identifies the level of service that’s right for you and where you want to go. DSB Rock Island creates a tailored, cost-effective solution that gives your business the right blend of assurance and accuracy so you can be confident in your numbers. There are three levels of service that essentially pair the scope of the work with the level of comfort in the accuracy of the financial information. (Source: AICPA website)
Audit
Often prepared for companies because outside third parties (such as banks, creditors, potential purchasers and outside investors) require an auditor’s opinion on the financial statements.
- Objective: To obtain a high level of assurance about whether the financial statements as a whole are free of material misstatement thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects.
- Level of Assurance: To obtain a high, but not absolute, level of assurance about whether the financial statements are free of material misstatement.
Review
Often prepared for privately held companies because of requirements of outside third parties (such as banks, creditors and potential purchasers) that are looking for comfort that the financial statements are not materially misstated.
- Objective: To obtain limited assurance that there are no material modifications that should be made to the financial statements.
- Level of Assurance: The accountant obtains limited assurance that there are no material modifications that should be made to the financial statements.
Compilation
Generally appropriate for privately held companies and are often prepared for simple situations (e.g., a lender needs GAAP financial statements instead of the statements the internal accounting system produces or the lender needs the comfort provided by knowing that an accountant read the financial statements).
- Objective: To assist management in presenting financial information in the form of financial statements without undertaking to provide any assurance that there are no material modifications that should be made to the financial statements
- Level of Assurance: The accountant does not obtain or provide any assurance that there are no material modifications that should be made to the financial statements.
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