The financial statements and notes to the financial
statements should look the same no matter what level of service is
provided. The only difference should be the CPA’s report that is attached
to the financial statements. 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. The
following is summarized from the full article
on the AICPA's Web site.
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.
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 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 inquiries) that will provide a reasonable
basis for obtaining limited assurance that there are no material modifications
that should be made to the financial statements 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 also is 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 are 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).
Brian B. Rutledge, CPA
