Audit & Assurance
There are different levels of financial statement assurance that a CPA provides to external users like government entities, banks, investors, shareholders, and other lenders. The CPA's stamp of confidence depends on the level of testing performed and review of (invoices, receipts, and other records) underlying financial records supporting the financial statements. While the name audit, review, or compilation speaks to the confidence issued and level of support reviewed by the CPA, all speak to the financial statement's compliance with Generally Accepted Accounting Principles (GAAP). -The differences lie in the level of assurance over the accuracy of the numbers, as further described below.
Audit – An audit is the highest level of financial statement assurance provided by an Independent Certified Public Accountant. Audited financial statements provide the CPA's opinion regarding the material accuracy of the financial statements as a whole. Further, audited financial statements provide confidence to the external user that the reported financial information not only is materially accurate but can be relied upon, depending on the type of opinion issued (unqualified, qualified, disclaimer, or adverse).
Review - A review is different from an audit because the CPA does not perform substantive testing over financial records to ensure material accuracy. When financial statements are reviewed by an Independent CPA, we provide reasonable assurance that the financial statements are accurate based on high level analysis, our understanding of the business, and corroboration of information provided.
Compilation - A compilation means that the financial statements were simply compiled by the CPA and are in accordance with GAAP. The CPA has not performed any substantive testing or analysis regarding the accuracy of the financial information. The users of the financial statements are relying on Management's statement that the reported information is accurate. The only assurance the CPA is providing is compliance or non-compliance with generally accepted accounting principles.