Who actually requests an audit?
Second of a two-part series on attest services
Last week we discussed audits – what they are, who needs them, and why. This week we’ll focus on the other attest services: reviews and compilations. These services cost less than an audit because they don’t involve the same level of detail—and therefore don’t provide the same level of assurance. But our team at Patrick & Robinson CPAs will quickly tell you reviews and compilations can be useful.
A Review Offers Some Limited Assurance
Less extensive than an audit, but more involved than a compilation, a review consists primarily of analytical procedures that our CPAs apply to the financial statements, and various inquiries made of a company's management team. If our Patrick & Robinson CPAs find that financial statements or supporting information appear inconsistent or otherwise questionable, we’ll suggest performing additional procedures.
A review doesn’t require our team to study and evaluate a company's internal controls, verify data with third parties, or physically inspect assets. Rather, a review report from Patrick & Robinson CPAs, similar to our colleague CPA firms, expresses limited assurance by stating: we’re “not aware of any material modifications" needed for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP). Per standard practices, our reviewed financial statements must include all required footnotes and other disclosures.
Why might you request a review? Quite frankly, it’s an affordable midpoint, providing the advantages of a CPA's technical expertise without the work and expense of an audit.
Compilations Provide a Basic Assessment Level
In compiling financial statements for a client, CPAs, such as Patrick & Robinson CPAs, present information that’s the "representation of management" and expresses no opinion or assurance on the statements.
Compilations don't require inquiries of management or analytical procedures. Instead, our team of tested experts relies on knowledge of accounting principles and a general understanding of the business. Banks often require compilations from an independent CPA as part of their lending covenants. The reporting basis for compiled financial statements can be accrual, cash basis, or even income tax basis.
Patrick & Robinson CPAs offers compilations in two formats: full disclosure or limited disclosure. A full disclosure compilation will contain all the financial statements of a review or audit – balance sheet, income statement, statement of cash flows and footnotes. A limited disclosure compilation can exclude the footnotes and even the statement of cash flows.
Audit, review, full disclosure compilation or limited disclosure compilation, each has its place and function in the safe conduct of your financial interactions. The professionals at Patrick & Robinson CPAs can help you decide which tool is right for you and then apply that tool with the skill necessary to gain the answers you need. Contact us for more information: office@CPAsite.com or 904-396-5400.
