A compilation is a rough equivalent to your doctor's assessment based only on your description of your symptoms. It is the lowest level of service your CPA can use to work with your financial statements.
A compilation involves gaining a general understanding of your business and bookkeeping system and presenting your financial information in the accepted format of proper financial statements. Your CPA expresses no assurance about the accuracy of the numbers presented. The report attached to the financial statement emphasizes that the service is a compilation.
While independence is required at the other levels of service, your CPA does not have to be independent of your organization to perform a compilation.
Further options lie within the compilation level of service. The compilation report may be a full disclosure report with complete footnote explanations of certain amounts and policies contained in the financial statements. Or, you may opt to omit substantially all of these otherwise required disclosures. Omission of this information is not permissible under the other levels of service.
A review is conducted when a lower degree of assurance than an audit is acceptable, yet the user wants to know that a professional has performed some analysis of the statements.
Frequently, clients or users think they need an audit when a review or even a compilation may satisfy their needs. A review is significantly smaller in scope than an audit and thus much less expensive.
During a review, your CPA will inquire about your business, your accounting policies and procedures, your industry, operations and personnel. The CPA will also ask about any changes in these items and request other pertinent information.
In addition, your CPA will conduct a battery of analytical procedures, such as ratio analysis, comparison of your operating statistics to prior periods or perhaps to industry averages, as well as other financial analyses deemed appropriate.
Your CPA's analyses provide a better understanding of key relationships among certain numbers. This understanding gives more assurance about the reasonableness of your financial condition as presented in your financial statements.
We will be glad to discuss your needs with you and the user of the financial statements to decide whether a review will be sufficient.