Comparing Compilations, Reviews, and Audit Services
Compilation services are the most basic level of service provided by CPAs with respect to
financial statements. Complying with Statements on Standards for Accounting and Review
Services (SSARS), having a clear understanding with the client as to the services to be provided,
and reading the financial statements to determine whether there are any obvious departures from
generally accepted accounting principles or another comprehensive basis of accounting used by the
entity, CPAs properly assembly financial data based on the responsible entity' assumptions.
Upon completion of the compilation procedures, a report on the financial statements is issued.
The report includes a statement a compilation was performed in accordance with AICPA professional
standards and a compilation is limited in scope and does not enable the CPA to express an opinion
or any other form of assurance on the financial statements or the assumption. This is known as the
expression of "no assurance." Compiled financial statements are often prepared for small businesses
or organizations that do not need a higher level of assurance expressed by a CPA.
In addition to the compilation procedures, the CPA performs inquiries and analytical procedures
in review engagements to express "limited assurance" on financial statements that have not been
audited. After completion of review procedures in accordance with SSARS, the CPA issues a report
stating that a review was performed in accordance with AICPA professional standards, that a review
is less in scope than an audit, and that the CPA did not become aware of any material modifications
that is necessary in order for the statements to be in conformity with generally accepted accounting
principles or another comprehensive basis of accounting. Entities may want to have reviewed financial
statements for outside creditors that do not require audited statements or for internal use purposes
and cannot afford or do not want to purchase audit services.
Audit services are the highest level of service provided by CPAs with respect to financial
statements. In addition to procedures performed in review services, the CPA also performs
verification and substantiation procedures in accordance with Generally Accepted Auditing
Standards (GAAS). These standards also require the CPA gain a knowledge and understanding of the
entity's system of internal control. The product of an audit is a report stating an audit was
performed in accordance with GAAS, and expresses "reasonable assurance" that the financial
statements fairly present the entity's financial position and results of operations.
Due to the nature of the procedures involved in each type of service, audits are the most
expensive and compilations are the least expensive services CPAs provide with respect to financial
statements.
Please contact us for more details and let Wegner assist you in evaluating your financial
reporting needs and determining which level of service meets your requirements by further
discussing the pros and cons of each type of services.
For more information, please contact:
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