Audit vs Review vs Compilation
Lesson:
In the world of financial reporting, audit, review, and compilation refer to three distinct levels of service an independent accountant (like a CPA) can provide regarding a company's financial statements. They differ significantly in their objective, the procedures performed, the level of assurance provided, and the cost.
- Audit - An audit is an engagement in which a CPA performs extensive procedures to obtain reasonable assurance that the financial statements are free of material misstatement and expresses an opinion on their fairness.
- Review - A review is an engagement in which a CPA performs primarily inquiry and analytical procedures to obtain limited assurance and states that nothing came to their attention indicating material misstatements.
- Compilation - A compilation is an engagement in which a CPA assists management in presenting financial information in financial statement form without providing any assurance on the statements.
You're trying to figure out your accounting needs.
You've been provided with the following information:
- The assurance level provided is high (positive).
Which type of offering is the best fit (Audit, Review, or Compilation)?
Answer:
- Audit
Explanation:
-
An audit is an engagement in which a CPA performs extensive procedures to obtain reasonable assurance that the financial statements are free of material misstatement and expresses an opinion on their fairness.