Audit, Review & Compilation

There are three levels of attestation services a CPA may provide when evaluating the financial statements of your business. An informed understanding of the various levels of service offered by a CPA will assist you in knowing which level is best suited for your particular needs. Generally speaking, you should seek out the reporting standard that meets the needs of management, investors, bankers, SEC, and other regulatory governing agencies. Several examples of the varying degrees will be noted in the descriptions below as we walk you through the specifics.



Auditing services are the highest level of attestation that is available to any business owner . There are more standards written about audits than any of the other level of attestation offered. Rightly so, these standards protect the users of the financial statements from loss. Some of the procedures performed by a CPA in an audit environment include the confirmation of bank balances, review and verification of bank reconciliations, testing payroll, inquiry as to the lines of credit, debt covenants, assessing risk and evaluating internal controls. Perform substantive verification procedures of inventory and review the Board of Director minutes and much more. Most importantly, obtaining a letter of representation from the management. The successful completion will require substantive verification of the balance sheet and analysis of the Profit and loss statement.

In layman's terms, the purpose of an audit is to independently verify by sight, confirmation, discussion with management and analytical procedures, that a company's financial reports are substantively correct. Audited financial statements will also include footnotes detailing the company’s accounting methods, policies and related financial data. This detail is required by the governing regulatory agencies that oversee audited financial statements.

Due to the extent of the work performed, audits are substantially more expensive than any of the other level of service available. However, if you are the investor in the company or the financial institution extending credit, than you are going to want some kind of assurance against loss. That assurance will be written in the form of an opinion once the audit is completed regarding the financial statements as a whole. If you are a Publicly traded SEC company you are required to have an annual audit.


A review is predominantly an assessment of the company's books, records, analytical tests and procedures; such as comparing current year books and records to prior year. Additionally, their is a calculation of certain financial tests, ratios and analysis. These procedures, by their very nature are intended to give reasonable assurance to an outsider, with limited substantive verification and reporting requirements as required by an audit. Reviews are frequently requested by banks who want a high degree of assurance without having to go through the expense of an audit. A review gives you some assurances at half the cost and will give you some detail to rely on as well as footnotes in the financial statements.


The lowest level of attestation services a CPA may provide is a compilation. A compilation is when a CPA simply compiles the books and records of a client without the performance of any substantive procedures or independent verification of any of a client's balances. Thus, a compilation is solely the representation of a company's management and there are no verification procedures of account balances on the balance sheet or the profit and loss statement required. Additionally, management has the option to exclude from compiled statements all related footnotes. The cost of a compilation varies and will be the lowest fee paid in comparison to the audit or review.