Whether you’re a private company, a nonprofit, or a public company, partnering with an accounting firm for financial engagements is often essential. However, depending on your specific business classification, you might need compilation, review, and audit engagements. Although these three services deal with financial statements, they’re all different.
In this post, we’ll discuss the differences between these three financial engagements so you can choose the most appropriate one for your business needs.
What are compilations?
In a compilation engagement, an auditing professional works with a member of your team to present your financial statements. They will request access to your financial documents, including bank statements and other pertinent financial records. Your auditor will spend time organizing or compiling your data into a financial statement.
It’s important to understand that a compilation agreement does not provide assurance or verification, meaning your audit team does not test your numbers or internal controls, nor do they perform an audit on your financials. Instead, they simply help you compile your files into an official document.
Compilations are typically completed when a business is required to do basic reporting or needs financial statements for internal use.
What are reviews?
In a typical review engagement, a business comes to its assurance team prepared with its financial statements. Instead of spending time compiling data, an accounting professional will conduct a cursory review according to generally accepted accounting principles to ensure the statements are free from misstatements. The review is conducted through a series of inquiries and analyses.
Review engagements provide limited assurance, providing stakeholders with peace of mind and more transparency into your business operations. Lenders may also use review engagements to satisfy specific loan documentation requirements.
What are audit engagements?
Audits involve a comprehensive analysis of your business’s financials, providing the highest level of assurance. During an audit, an auditing professional will review your financial data and test your internal controls to provide an official opinion regarding your financial reporting.
Certain situations require an audit, including complying with industry rules and regulations and applying for specific funding from investors or other financing options.
Of the three engagements, an audit is the most time-intensive. Because it is often in-depth, scheduling an audit ahead of time is helpful to ensure you’re properly prepared with your financial statements to meet any looming deadlines.
Compilation, Review, and Audit Engagements: How Assurance Dimensions Can Help
At Assurance Dimensions, we are experts in performing audits and compilation and review engagements. We apply over 75 years of combined accounting and advisory experience to ensure that your engagement will be accurate and actionable.
Contact us today to learn more about our audit and assurance services.
