We provide all levels of financial statements to our clients from our Orlando CPA firm. Stockholders, creditors, and private investors have different levels of risk tolerance and therefore require different levels of assurance. The three general levels of financial statement service are audit, review and compilation.
Depending on your need, our team of experts will be able to assist you with preparing appropriate financial statements.
Audit – Highest Level of Assurance
An audit provides the highest level of assurance. The purpose of having an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are prepared in accordance with the proper financial reporting framework – usually Generally Accepted Accounting Principles or “GAAP” in the United States. 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.
An audit includes a review of internal controls, testing of selected transactions, and communication with third parties. Based on our findings, we issue a report on whether the financial statements are fairly stated and free of material misstatements.
Some of the main audit procedures include:
- Inquiring of management and others to gain an understanding of the organization itself, including operations, financial reporting and known fraud or error
- Evaluating and understanding the internal controls system
- Testing documentation supporting account balances or classes of transactions
- Confirming bank and loan balances, customer receivables and vendor payables with third parties
- Communication with client’s legal counsel in regards to any pending litigations
- Performing analytical procedures as expected or unexpected variances in account balances or classes of transactions appear
- Observing physical inventory count
Review – Limited Assurance
A review engagement is conducted by our Orlando CPA firm to provide limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the financial reporting framework. 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 company’s management team.
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.
Some of the procedures we apply in a review service are as follows:
- Inquiries as to the accounting practices and principles used by the business
- Procedures for recording and accumulating financial information
- Actions taken at owners’ or directors’ meetings
- Written representations from management regarding the accuracy of all information provided to us
- Management’s responsibility for internal control
- Management’s responsibility to prevent and detect fraud
- Knowledge of fraud
- Information related to any significant subsequent events
- Analytical procedures regarding comparisons
- Expectations developed by of recorded amounts
- Ratios from recorded amounts
Compilation – Lowest Level of Assurance
In a compilation engagement, the objective is to assist management in presenting financial information in the form of financial statements without undertaking to provide any assurance that there are no material modifications that should be made to the financial statements so they will conform to the acceptable financial reporting framework. In compiling financial statements for a client, we present information that is the “representation of management” and expresses no opinion or assurance on the 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.
Compilation level of service has further options on what we may or we may not include in the report. The compilation report may be a full disclosure report with complete footnote explanations of certain amounts and policies contained in the financial statements. These disclosures also can be omitted from the compilation. Omission of this information is not permissible under the other levels of service.
Which Report Should You Use?
Each type of financial statement report may suit specific circumstances, depending on requirements from your bank or other parties, as well as meet budgetary needs.
It is important to find the proper balance between the cost of the services and the level of assurance the users of the financial statements require. Majority of our Orlando CPA firm clients are small to medium size businesses and rarely require an audit. Compilation and review services are most common amongst our clientele.