Audits, Reviews & Compilations
An Explanation of the Differences
There are many differences between Audits, Reviews and Compilations. Download, save or print this pdf to see the specific differences and an easy to read table showing a comparison of all three financial statement types. We would be happy to talk to you about these types of engagements, the differences and how we might be able to serve you. Call us when the time is right.
Description |
Compilation |
Review |
Audit |
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Level of Assurance Obtained by the Accountant/Auditor that the Financial Statements are Not Materially Mistated. |
Accountant does not obtain or provide any assurance that there are no material modifications that should be made to the financial statements. |
To obtain limited assurance that there are no material modifications that should be made to the financial statements. |
The auditor obtains a high, but not absolute, level of assurance about whether the financial statements are free of material misstatement. |
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Objective |
To assist management in presenting financial information in the form of financial statements without undertaking to provide any assurance that there are no material modifications that should be made to the financial statements. |
Accountant obtains limited assurance that there are no material modifications that should be made to the financial statements. |
To obtain a high level of assurance about whether the financial statements as a whole are free of material misstatements thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly in all material aspects. |
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Assurance Provided to the User of the Financial Statements |
None - the report states that no assurance is provided |
None - the report provides a statement that the accountant is not aware of any material modifications that should be made to the financial statements |
None - the auditor provides an opinion as to whether the financial statements present fairly, in all material respects, the organization's financial position, results of operations and cash flows |
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The accountant is required to obtain an understanding of the entity's internal control and assess fraud risk |
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The accountant is required to perform inquiry and analytical procedures |
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The accountant is required to perform verification and substantiation procedures |
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Situations requiring different levels of service |
Generally appropriate for privately held companies and are often prepared for simple situations (e.g., a lender needs GAAP financial statements the internal accounting system produces or the lender needs the comfort provided by knowing that an accountant read the financial statements |
Often prepared for privately held companies or non-profit organizations because of requirements of outside third parties (such as banks, creditors, potential purchasers and large donors) that are looking for comfort that the financial statements are not materially misstated. |
Often prepared for companies because outside third parties (such as banks, creditors, potential purchasers, outside investors and grantors) require an auditor's opinion on the financial statements |
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Differences in costs for each level of service. |
Involves the lowest amount of work and as a result is far lest costly than a review or audit |
More costly than a compilation but substantially lower in cost than an audit |
Involves the most work and therefore the cost is substantially higher than a review or compilation. |
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