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Audits - Reviews - Compilations and Assurance Services
The purpose of the assurance services is submitting the best possible financial or non financial information to clients so that they can make informed decisions. Assurance services can encompass a range of consulting engagements, and assurance services have developed into a critical aspect of the CPA services.
Audit - Highest Level of Assurance
An audit provides the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific information as determined by the auditor or as established by general practice. Our work includes a review of internal controls, testing of selected transactions, and communication with third parties. Based on our finding, we issue a report on whether the financial statements are fairly stated and free of material misstatements.
An Audit allows you to: Satisfy stakeholders, bankers, government, customers, suppliers, employees and pressure groups, as well as the investing community, as to the credibility of published information.
Here's what you get if necessary...
You get the highest level of assurance because we go outside your company, if necessary, to obtain more information. Typically, we'll have written communication with:
- Your banks, to confirm cash or debt balances and terms.
- Your customers, to check outstanding receivable balances.
- Your vendors, to verify outstanding payable balances.
- Your attorneys, for information on pending or threatened legal action.
We also perform physical inspections by observing your inventory counting methods and perform test counts if apply in the circumstances. We document and test each operating cycle, including sales and cash receipts, expenses and cash disbursements, and payroll. Our audit papers include a work program to document the examinations and testing performed, as well as the client's supporting work papers provided to us.
Review - Limited Assurance
Less extensive than an audit, but more involved than a compilation, a review engagement consists primarily of analytical procedures we apply to the financial statements, and various inquiries we make of your entity team. If the financial statements or supporting information appear inconsistent or otherwise questionable, we may need to perform additional procedures. A review doesn't require us to study and evaluate your company's internal controls or verify data with third parties or physically inspect assets. Rather, a review report expresses limited assurance in the form of the statement: "We are not aware of any material modifications" for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP) in United States of America.
Reviewed financial statements must include all required footnotes and other disclosures.
Why might a business request a review engagement?
It can be a good middle ground, providing the advantages of a CPA's technical expertise without the work and expense of an audit.
Compilation - Lowest Level of Assurance
In compiling financial statements for a client, we present information that is the "representation of management" and expresses no opinion or assurance on the financial statements. Compilations don't require inquiries of management or analytical procedures. Instead, we rely on our knowledge of accounting principles and a general understanding of your business. Banks often require compilations from an independent CPA as part of their lending covenants.
Which Report Should You Use?
Each type of financial statements report may suit specific circumstances, depending on requirements from your client's bank, government, suppliers or other parties, as well as meet budgetary needs.
Financial Assurance Services
The other financial assurance services that CPA firms provide most often are on internal financial projections, due diligence for a transaction involving another company, and reports on individual financial components within a company and examination report. Financial assurance services often evaluate existing information, but they also might serve to provide context to the information or to assess how relevant the information ultimately is. In some cases, an examination of financial measurements at a company could indicate that the company is using insufficient data to measure a component of its finances.
Non-Financial Assurance Services
Some services that fall into the category of assurance services are not the financial type. Example of assurance services that we provide is in relation with performance claims, covenant agreements and quality control.
Understanding each report's unique strengths and weaknesses can help you choose the most appropriate one. Please call if you have questions about which type of report is right for you.