Review & Compilation

Service description

A review or compilation is a CPA engagement on the business's financial statements that falls short of a full audit. A compilation presents management's financial information in statement form without testing it or offering assurance; a review adds limited assurance through inquiry and analytical procedures, without the detailed testing an audit performs.

Common industries

Any business asked by a lender or investor for CPA-prepared financials short of a full audit.

ROI

Satisfies many loan covenants and investor asks at a fraction of an audit's cost and effort — the right-sized level for many growing companies.

Benefit

A CPA review or compilation of your financials — a middle assurance level for lenders or investors who don't require a full audit.

Why get it

A lender or investor sometimes asks for CPA involvement without requiring the cost and scope of a full audit; a review or compilation is the lighter-touch alternative that still puts a CPA's name on the statements.

When you benefit

Typically annual, timed to the fiscal year-end to match a loan covenant or investor reporting cycle, though a one-time engagement can support a sale or financing round.

What it costs

Usually a fixed fee, lower than an audit of the same company and scaled to the statements' complexity.

When you pay

Commonly billed as one fee once the engagement's scope is set, due at or shortly after delivery of the report; a first-year engagement can cost more while the accountant learns the books.

Other costs

None beyond the engagement fee, unless the business needs added work such as correcting its books before the statements can be presented.

Risks to know

A compilation gives no assurance at all, so a lender relying on one should know it hasn't been tested; a review can still miss a misstatement that only audit-level testing would catch, since its procedures are limited to inquiry and analysis.

When risks arise

Because neither engagement tests transactions as deeply as an audit does, an issue with the underlying numbers is more likely to surface later — when a lender, investor, or later auditor looks closely — than during the engagement.

The process

The accountant plans the engagement's scope, then either compiles the financial statements from the business's records or performs a review's inquiry and analytical procedures. The business reviews the draft statements before the accountant issues its report.

Your commitment

The business gives the accountant its financial records and, for a review, answers questions about significant transactions and balances. Management represents, in writing, that the information provided is complete and accurate before the report is issued.

Documents to gather

• Trial balance and general ledger detail for the period
• Bank statements and reconciliations
• Prior-year financial statements, if any
• Explanations for any significant or unusual transactions during the year

Helpful reading

• The difference between an audit, a review, and a compilation — AccountingTools
• A bright line in SSARSs — Journal of Accountancy