Arthur Sisco, CPA PC firm prepares reviewed and compiled financial statements. Each type of financial statement may suit specific circumstances, depending on requirements from your bank or other parties. Understanding each report's unique strengths and weaknesses can help you choose the most appropriate one.
Compilation - Lowest Level of Assurance
The objective of a compilation is to assist management in presenting financial information in the form of financial statements without providing any assurance that there are no material modifications that should be made to the financial statements. In compiling financial statements for a client, we present information that is the "representation of management" and expresses no opinion or assurance on the statements. Compilations do not require inquiries of management or analytical procedures. Instead, we rely on our knowledge of accounting principles and a general understanding of your business.
Banks often require compilations from a CPA as part of their lending covenants.
Review - Limited Assurance
Less extensive than an audit, but more involved than a compilation, a review engagement consists primarily of analytical procedures we apply to the financial statements, and various inquiries we make of your company's management team. If the financial statements or supporting information appear inconsistent or otherwise questionable, we may need to perform additional procedures.
A review does not require us to study and evaluate your company's internal controls or verify data with third parties or physically inspect assets. Rather, inquiries and analytical procedures are conducted, providing limited assurance that no material modifications should be made to the financial statements in order for the statements to be in conformity with GAAP or other applicable financial reporting framework. Reviewed financial statements must include all required footnotes and other disclosures.
Why might a business request a review engagement? It can be a good middle ground. Since a compilation does not provide any assurance, a review will provide the advantages of a CPA's technical expertise without the work and expense of an audit.
Please call if you have questions about which type of financial statement is right for you.