Aicpa Audit Information Essay

1254 Words May 28th, 2012 6 Pages
What Is the Difference Between a
Compilation, a Review and an Audit?

Comparative Overview
The level of service is determined by your needs as the client, and what your creditors and/or investors require. The higher the level of service required, the more time the CPA needs to complete the engagement and therefore the more costly the engagement. While privately held companies opt for compiled or reviewed statements, credit agreements with lenders often require audited statements.

Compilation
• Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements.
• In a compilation engagement, the accountant assists management in presenting financial information in the
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Review
• Reviewed financial statements provide the user with comfort that, based on the accountant’s review, the accountant is not aware of any material modifications that should be made to the financial statements for the statements to be in conformity with the applicable financial reporting framework. • A review engagement involves the
CPA performing procedures (primarily analytical procedures and inquiries) that will provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework.
• In a review, the CPA designs and performs analytical procedures, inquiries and other procedures,

as appropriate, based on the accountant’s understanding of the industry, knowledge of the client, and awareness of the risk that he or she may unknowingly fail to modify the accountant’s review report on financial statements that are materially misstated. A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records; or other procedures ordinarily performed in an audit.
• The CPA issues a report stating the review was performed in accordance with Statements on Standards for
Accounting and Review Services; that management is responsible for the

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