Audit, Review, or Compilation
Stockholders, creditors, banks, insurance carriers, potential investors and business associates may need assurance that the financial statements accurately represent the true financial position of your company. A CPA can provide varying levels of assurance:
- Audit - Highest Level of Assurance
An audit is intended to result in a report on whether the financial statements are fairly stated and free of material misstatements. Audited financial statements must include full disclosures as required by Generally Accepted Accounting Principles (GAAP). An audit includes a review of internal controls, testing of selected transactions, communication with third parties and verification of specific information as determined by the auditor or as established by professional standards.
- Review - Limited Assurance
A review is less extensive than an audit, and consists primarily of analytical procedures and various inquiries of the company's management team. A review doesn't require an evaluation of the company's internal controls or verification of data. Reviewed financial statements must include the same full disclosures required by audited financial statements.
- Compilation - Lowest Level of Assurance
Compiled financial statements present information as represented by the management of the company, and the CPA's report expresses no opinion or assurance on the statements. Compilations don't require inquiries of management or analytical procedures, and the financial statements may omit the full disclosures required by an audit or review.
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