Stockholders, creditors, and private investors often need assurance
that the financial statements accurately represent the true
financial position of a company.
Your stockholders, creditors, or private investors have different
levels of risk tolerance, so we provide three levels of assurance
to meet your needs.
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 findings, we issue a report on whether the financial
statements are fairly stated and free of material misstatements.
An Audit allows you to...
We also perform physical inspections by observing
your inventory counting methods and perform test counts. We
document and test each operating cycle, including sales and
cash receipts, expenses and cash disbursements, and payroll.
Our audit papers include a detailed work program to document
the examinations and testing performed, as well as the client's
supporting work papers.
Audits Not Just for Public Entities
All public companies are required to have an annual audit,
but some nonpublic entities must undergo an annual audit as
well. These include local governments, not-for-profit agencies
and other organizations receiving government grants.
Moreover, some financial institutions require audits of nonpublic
companies based on the financing amount and/or the bank's
assessment of the company's risk. Also, companies with absentee
ownership (such as those owned by investment firms, or individuals
who no longer run the business) may order audits as checks
of their management teams.
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 company's management 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). 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 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 statement report may suit specific
circumstances, depending on requirements from your client's
bank or other parties, as well as meet budgetary needs.
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.
