Financial Statements

As a full service CPA firm we prepare complete financial statements with related opinion.

Click Here  for brochure on Difference Between Compilation, Review and Audit. The different levels of services are outlined as follows:

Compilation

  • Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements.
  • In a compilation engagement, the accountant assists management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.
  • In a compilation, the CPA must comply with Statements on Standards for Accounting and Review Services (SSARSs) which requires the accountant to have an understanding of the industry in which the client operates, obtain knowledge about the client, and read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors.
  • A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding of the entity’s internal control; assessing fraud risk; or testing of accounting records; or other procedures ordinarily performed in an audit.
  • The CPA issues a report stating the compilation was performed in accordance with Statements on Standards for Accounting and Review Services; and that the accountant has not audited or reviewed the financial statements and accordingly does not express an opinion or provide any assurance about whether the financial statements are in accordance with the applicable financial reporting framework.

Review

  • Reviewed financial statements provide the user with comfort that based on the accountant’s review, the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with the applicable financial reporting framework.
  • A review engagement involves the CPA performing procedures (primarily analytical procedures and inquires) that will provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with the applicable financial reporting framework.
  • In a review, the CPA designs and performs analytical procedures, inquiries, and other procedures, as appropriate, based on the accountant’s understanding of the industry, his or her knowledge of the client, and his or her awareness of the risk that he or she may unknowingly fail to modify the accountant’s review report on financial statements that are materially misstated.  A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records; or other procedures ordinarily performed in an audit.
  • The CPA issues a report stating the review was performed in accordance with Statements on Standards for Accounting and Review Services; that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements; that a review includes primarily applying analytical procedures to management’s financial data and making inquiries of management; that a review is substantially less in scope than an audit and that the CPA is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with the applicable financial reporting framework.

Audit

  • Audited financial statements provide the user with the auditor’s opinion that the financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework.
  • In an audit, the auditor is required by auditing standards generally accepted in the United States of America (GAAS) to obtain an understanding of the entity’s internal control and assess fraud risk.  The auditor is also required to corroborate the amounts and disclosures included in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third party confirmations, examination, analytical procedures, and other procedures.
  • The auditor issues a report that states the audit was conducted in accordance with GAAS, the financial statements are the responsibility of management, provides an opinion that the financial statements present fairly in all material respects, the financial position of the company and the results of operations in conformity with the applicable financial reporting framework (or issues a qualified opinion if the financial statements are not in conformity with the applicable financial reporting framework.  The auditor may also issue a disclaimer of opinion or an adverse opinion if appropriate).

The level of service is determined by your needs as the client, and what your creditors and/or investors require.  The higher the level of service required, the more time the CPA needs to complete the engagement and therefore the more costly the engagement.  While privately held companies opt for compiled or reviewed statements, credit agreements with lenders often require audited statements.