Audits, Reviews, And Compilations

2 min. readlast update: 05.21.2024

What Is An Audit?

An audit is a detailed examination of financial statements by an independent auditor to provide a high level of assurance on their accuracy and compliance with accounting standards.


What Is A Review?

A review provides limited assurance that financial statements are in accordance with accounting standards through analytical procedures and inquiries, without the extensive testing seen in an audit.


What Is A Compilation?

A compilation involves assembling financial data provided by management into financial statements without providing any assurance on the accuracy or compliance of the statements.


How Do The Levels Of Assurance Differ?

Audit: High assurance.

Review: Limited (moderate) assurance.

Compilation: No assurance.


What Procedures Are Involved In An Audit?

Examination of financial records, testing of internal controls, verification of transactions, and confirmation with third parties.


What Procedures Are Involved In A Review?

Performing analytical procedures, inquiries of management, and limited examination of financial data.


What Procedures Are Involved In A Compilation?

Organizing and presenting financial information as provided by management, without any verification or analysis.


When Is An Audit Required?

Often required by regulatory bodies, investors, lenders, and other stakeholders for public companies or when specified by contract.


When Is A Review Appropriate?

Appropriate for businesses needing some level of assurance on their financial statements, but not to the extent of an audit, often for external stakeholders like lenders or investors.


When Is A Compilation Appropriate?

Suitable for small businesses or internal use when stakeholders do not require assurance on financial statements.

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