A range of financial statement services
Almost every organization — whether it’s a privately held business, a publicly owned corporation, or a nonprofit organization — must prepare reports on its financial performance. Such reports help owners and managers make operating decisions, enable creditors to evaluate loan applications, and provide individuals with information to make investment decisions.
The accounting profession recognizes that different entities have different accounting needs. Acknowledging these differences, the profession has developed standards that enable us to offer a range of financial statement services prepared using generally accepted accounting principles (GAAP) or other comprehensive basis of accounting such as the Income Tax Basis or Cash Basis of Accounting.
These services include:
Audits of Financial Statements
An audit is the most extensive service and provides the highest level of assurance that the financial statements are free of material misstatement. An audit is appropriate for entities that must offer a higher level of assurance to outside parties. An unqualified opinion from a CPA after an audit provides reasonable assurance to outside parties that the entity’s financial statements fairly present its financial position and results of operation in accordance with certain accounting principles.
An audit includes an in-depth examination of the financial statements and supporting documentation by utilizing confirmation with external sources, physical inspections and observations and obtaining an understanding of the company’s accounting polices, procedures and internal controls.
Reviews of Financial Statements
A review may be adequate for entities that must report their financial positions to third parties, such as creditors or regulatory agencies. Reviewed financial statements may also be useful to business owners who are not actively involved in managing their companies.
A review provides limited assurance that no material changes need to be made to the financial statements by utilizing analytical procedures and inquiries of management and by assessing the accounting principles used in the overall financial presentation.
Compilations of Financial Statements
A compilation is useful to privately held companies that need help in preparing their financial statements. A compilation provides no assurance as to whether material, or significant, changes are necessary to the financial statements in order for them to be in conformity with generally accepted accounting principles, the cash basis or the income tax basis of accounting.
A compilation is based on information provided by management and the data is arranged into conventional financial statement format after becoming familiar with the accounting principles and practices common to the company’s industry and acquiring a general understanding of the company’s transactions and how they are recorded. No analytics, inquiry or in-depth probing is utilized in a compilation.
Financial Statement Preparations
Financial statement preparations in accordance with professional standards express no opinion or any other form of assurance on the underlying information included in them. Unlike an audit, review and compilation a preparation service financial statements does not need to be accompanied by a CPA’s report and opinion. A preparation service can be a useful tool for management for making financial decisions.