Audits – Reviews – Compilations

AUDITS – REVIEWS – COMPILATIONS

Stockholders, creditors, and private investors often need assurance that the financial  statements accurately represent the true financial position of a company.

stockholders, creditors, or private investors have different levels of risk  tolerance, so we provide three levels of assurance to meet your needs.

AUDIT – HIGHEST LEVEL OF ASSURANCE

An audit provides the highest level of assurance. An audit is a methodical review and  objective examination of the financial statements, including the verification of  specific information as determined by the auditor or as established by general  practice.

Our work includes a review of internal controls, testing of selected transactions, and  communication with third parties. Based on our findings, we issue a report on whether  the financial statements are fairly stated and free of material misstatements.

AN AUDIT ALLOWS YOU TO…

  • Satisfy stakeholders such as employees, customers, suppliers and pressure  groups, as well as the investing community, as to the credibility of published  information.
  • Facilitate the payment of corporate tax, goods and services tax, and other  taxes on-time and accurately, thereby avoiding interest, penalties, and  investigations.
  • Comply with banking covenants.
  • Help deter and detect material fraud and error.
  • Facilitate the purchase and sale of businesses.

HERE’S WHAT YOU GET…

You get the highest level of assurance because we go outside your company to obtain  more information. Typically, we’ll have written communication with:

  • Your customers, to check outstanding receivable balances,
  • Your banks, to confirm cash or debt balances and terms,
  • Your vendors, to verify outstanding payable balances, and
  • Your attorneys, for information on pending or threatened legal action.

We also perform physical inspections by observing your inventory counting methods  and perform test counts. We document and test each operating cycle, including sales  and cash receipts, expenses and cash disbursements, and payroll. Our audit papers  include a detailed work program to document the examinations and testing  performed, as well as the client’s supporting work papers.

AUDITS NOT JUST FOR PUBLIC ENTITIES

All public companies are required to have an annual audit, but some nonpublic  entities must undergo an annual audit as well. These include local governments,  not-for-profit agencies and other organizations receiving government grants.

Moreover, some financial institutions require audits of nonpublic companies based on  the financing amount and/or the bank’s assessment of the company’s risk. Also,  companies with absentee ownership (such as those owned by investment firms, or  individuals who no longer run the business) may order audits as checks of their  management teams.

REVIEW – LIMITED ASSURANCE

Less extensive than an audit, but more involved than a compilation, a review  engagement consists primarily of analytical procedures we apply to the financial  statements, and various inquiries we make of your company’s management team. If the financial statements or supporting information appear inconsistent or otherwise  questionable, we may need to perform additional procedures.

A review doesn’t require us to study and evaluate your company’s internal controls or  verify data with third parties or physically inspect assets. Rather, a review report  expresses limited assurance in the form of the statement: “We are not aware of any  material modifications” for the financial statements to be in conformity with the  Generally Accepted Accounting Principles (GAAP). Reviewed financial statements must  include all required footnotes and other disclosures.

Why might a business request a review engagement? It can be a good middle ground,  providing the advantages of a CPA’s technical expertise without the work and expense  of an audit.

COMPILATION – LOWEST LEVEL OF ASSURANCE

In compiling financial statements for a client, we present information that is the  “representation of management” and expresses no opinion or assurance on the  statements. Compilations don’t require inquiries of management or analytical  procedures. Instead, we rely on our knowledge of accounting principles and a general  understanding of your business.

Banks often require compilations from an independent CPA as part of their lending  covenants.

WHICH REPORT SHOULD YOU USE?

Each type of financial statement report may suit specific circumstances, depending on  requirements from your client’s bank or other parties, as well as meet budgetary  needs.

Understanding each report’s unique strengths and weaknesses can help you choose the  most appropriate one. Please call if you have questions about which type of report is  right for you.

Understanding each report’s unique strengths and weaknesses can help you choose the  most appropriate one.