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Compilation, Review and Audit

Compilation, Review and Audit

At some point in your career, your business is most likely going to need a CPA record of financial statements.  Mitch Heifler, CPA of Miami, Florida provides all three levels of financial reporting that are commonly requested.  These reports are known as a compilation, a review, and an audit.  There are many reasons these will be requested, and each type of report requires varying levels of service.


            There are many reasons that businesses must report their financial performance.  Tax preparation and filing, of course, requires detailed information about your business’s finances, both on a Federal level and in the state of Florida.  Any time a business applies for a loan, or approach an investor, they must also provide financial reports.  When a business has an existing investor, they must provide regular financial reports as well.  Non-profits also need regular financial reports, as do larger companies, in order to make financial decisions, maintain transparency, and plan future spending.


            Creating different types of financial reports require varying levels of involvement and services from your accountant.  If you are a smaller business, and need assistance with putting together your finances for clarification, or a basic report, you would be looking for compilation services.  Compilation is a service from your accountant which organizes and creates reports on financial standing based on information provided by your company.  These are typically monthly, quarterly, or annual reports.  In this instance, with the exception of obvious major errors, management of the organization or company is responsible for the information provided.  The CPA will familiarize themselves with the company’s method of dealing with finances, and merely organizes the information into a readable and clear report.  The CPA does not give recommendations or input on the actual finances of the organization or company. 


            Compilation is a basic service, and therefore the least involved and least expensive.  However, missing information may result in unclear or unusable reports.  Since the accountant is not hired to look deeper into the reasoning behind the information provided, they are unable to detect minor discrepancies or misinformation that may result in misleading reports.  You will receive a note from the CPA stating that an audit was not provided.  Generally, if an accountant suspects that the information provided is inaccurate or needs further looking into, they will recommend that the client upgrade their service to a review or audit.


            A review is a service that provides a limited amount of assurance in the financial report of a business or organization.  As is true in a compilation, the accountant will familiarize themselves with the practices of the company or organization, and obtain an idea of how they handle their finances.  As also true in a compilation, management is responsible for providing the financial information to the CPA.  In addition, however, the CPA will confirm that the accounting practices and results make sense and work for the company/organization in question.  They will identify any issues and practices that may not clearly add up.  In many cases, a review will be sufficient enough for creditors, managers, and many other recipients of similar reports.   However, if more detailed investigation or explanation is needed, the accountant will perform an audit.


            An audit provides extensive and detailed investigation to ensure that a company or organization’s finances are in order, make sense, and work for them.  An audit is a service that an organization uses to obtain the highest level of assurance from the accountant for their own purposes or to report to an outside party.  The accountant will look extensively into the financial operation, which could include inventory reporting, confirmation of balances with banks and outside parties, observation of the business and its inner financial processes, and contact third parties such as customers or banks to confirm activity. 


 Generally, an audit is requested when a company or organization suspects a department of negligence, or if they wish to provide the highest level of assurance to outside parties or within their own management structure.  In short, they wish to prove that the financial statements and information they have is reliable and accurate in every aspect.  Therefore, the accountant is looking for flaws and discrepancies that may cause inconsistencies, and is conducting a thorough and in-depth investigation for the client.  This service is the most involved level of reporting for a CPA, and provides the top assurance level for the client.

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