Audit:

An audit is the most comprehensive type of financial statement service. It involves an in-depth examination of a company’s financial statements, accounting records, internal controls, and supporting documentation.

The primary objective of an audit is to provide reasonable assurance that the financial statements are free from material misstatement and are presented fairly in accordance with the applicable financial reporting framework (such as Generally Accepted Accounting Principles – GAAP).

Audits are typically conducted annually and are often required by lenders, investors, regulatory bodies, and other stakeholders to provide confidence in the financial health and integrity of the audited entity.

Auditors issue an audit report expressing their opinion on whether the financial statements present a true and fair view of the company’s financial position and results of operations.

Review:

A review engagement is less extensive than an audit but provides limited assurance on the financial statements.

In a review, we perform analytical procedures and inquiries to obtain a reasonable basis for expressing limited assurance that there are no material modifications needed to be made to the financial statements for them to be in conformity with the applicable financial reporting framework.

Reviews are often conducted for companies that do not require the level of assurance provided by an audit, but still need some level of assurance on their financial statements for various stakeholders.

Review reports typically state that the accountant is not aware of any material modifications that should be made to the financial statements.

Compilation:

A compilation engagement involves presenting financial information in the form of financial statements based on information provided by management without providing any assurance on the accuracy or completeness of the information.

Unlike audits and reviews, compilations do not involve verification or testing of the financial information provided by management.

Compilations are typically prepared for internal use by management or for providing financial information to third parties, such as banks or potential investors, without the need for assurance on the financial statements.

In the end we can issue a report or a compilation letter stating that we have compiled the financial statements based on information provided by management, but they do not express any assurance on the accuracy or completeness of the information.

Overall, audits, reviews, and compilations serve different purposes and provide varying levels of assurance on the reliability of financial statements, depending on the needs of the entity and its stakeholders.