Audit vs Review vs Compilation

The latest view on not-for-profit accounting issues

international taxA CPA can perform a number of services for an organization based on the organization’s needs. Typically, the three financial statement engagements are an audit, review or compilation. In all three instances the result is a set of financial statements, that are the responsibility of the organization’s management, where different assurances are provided by the CPA. All three are different levels of services and the costs can significantly vary based on which service is needed.

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  • Audit – Typically requires an auditor to test a portion of transactions, confirm balances, examine supporting documentation, and perform various analytical procedures to test management’s financial statement amounts and disclosures.
    • Assurance – High, but not absolute
    • Understanding of internal controls – As part of the planning process (but no opinion is given on the internal controls in a financial statement engagement)

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  • Review – CPA does not verify management’s financial statement amounts and disclosures with third party sources or supporting documentation unless the CPA believes the amounts and disclosures are materially inaccurate. The CPA makes inquiries and performs analytical procedures designed to identify trends and unusual variances that require further explanation.
    • Assurance – Limited
    • Understanding of internal controls – No
  • Compilation – CPA presents, in the form of financial statements, the client’s financial data and does not perform any procedures on that data unless the CPA determines or becomes aware that the data is incomplete or there is an error.
    • Assurance – None
    • Understanding of internal controls – No

It’s important to determine which level of service your organization really needs, whether it be an audit, review or compilation. As always, we’re here to help you. Contact us with any questions you may have. For more information on how Henry+Horne can help with your audit, check out our Audit Services page.