The three basic levels of financial statement services are compilation, review, and audit. There are other steps/procedures involved in all levels, but this is a basic summary:
A Compilation provides the lowest level of assurance. We present the financial statements in our format and generally assess (based on our knowledge of accounting principles and your organization) that they are in accordance with generally accepted accounting principles (GAAP). A compilation can be presented either with or without footnotes.
A Review offers “Limited” assurance. A review differs from a compilation in that we perform certain analytical procedures on the numbers along with inquires with management to assess that the financial statements are in accordance with GAAP. A reviewed financial statement is required to present footnotes.
In an Audit we examine documents that support the financial statement amounts, such as cash reconciliations, receivable support, fixed asset additions, payables and other liabilities; basically all back up documents that support the balance sheet, and selected income statement activity. In addition, we are confirming with third parties certain balances and transactions. For instance, we would send confirmations to investors, banks and legal counsel, if applicable. Most of this work is done on a sample basis. An audit also requires internal control documentation and testing.
The costs can vary depending on the amount of activity that the organization will develop.
For more information about compilations, reviews, and audits, please contact Paul Ford.