Compilations vs Reviews vs Audits: What Do They Mean?
No matter what sort of industry you work in, financial statements are necessary to prove that your business is legitimate. A compilation, a review, and an audit are all types of financial statements, but what do they mean, and which one is best suited for your business needs? This article will review:
Need an auditor or CPA to prepare your financial statements?CONTACT SRG ADVISORS TODAY
What is a compilation?
A basic compilation report involves a CPA’s written cover page, which demonstrates that you work with a CPA but doesn’t actually show an in-depth review of your financials. The CPA will not provide any assurance on the accuracy.
Who is a compilation best for?
A compilation is best for smaller businesses that may need to take out a personal loan. However, compilations probably aren’t enough to allow you to qualify for a business loan.
What is a review?
A review is more in-depth than a compilation and provides a limited amount of assurance. Unlike a compilation, it involves some analytical research and testing of information presented. During a review, an auditor will make inquiries to see whether the information they’re being presented with is correct or not. They will determine from a broad level if the information they’re looking at needs any modifications. Inquiries will be made on the accounting practices, financials, and current and past-balances.
You will be expected to have documents ready in advance for the CPA to look at, such as your trial balance and accrual schedule.
Who is a review best for?
A review is best if you need to take out a small business loan or line of credit.
What is an audit?
An audit is the most thorough form of a financial statement. Your auditor will be taking a close look to see if there are any mistakes or instances of fraud in your statements. It requires extensive testing and the most work from a CPA. They must corroborate a client’s ending balances through protocols like testing internal controls (the procedures a company follows to ensure compliance with financial regulations), doing third party confirmations, and taking a close look at source documents. It also involves physical inspection and speaking with personnel.
Who is an audit best for?
Audits are required quarterly and annually for publicly traded companies, and are needed if you plan to apply for extended credit, raise equity, or are planning to sell your business, among other instances.
How the three types of statements are different
Compilations, reviews, and audits differ in:
- Price: Audits are considerably more expensive than a review due to the amount of work required to perform one. Reviews cost more than compilations (which aren’t very intensive at all).
- Internal controls: Only audits test the internal controls of a client.
- Amount of assurance: Audits provide a great deal of assurance while compilations don’t provide any. Reviews provide a medium amount.
Why you can trust SRG Advisors
Make sure to use a trusted company to help you prepare your statements. For example, you wouldn’t want to be sold a full financial audit if a compilation would be sufficient for your needs. Your business’ accounting or finance teams will be in good hands with SRG Advisors .
We pride ourselves on staff retention. We have minimal to zero staff turnover year-over-year and our audits are managed on a day-to-day basis with experienced personnel. This prevents you from wasting time training new auditors on an annual basis. We send the same team of high-caliber auditors or accountants to ensure that your audits are properly taken care of.