Types of Financial Statement and REports

Compilation

A “Notice to Reader” report indicates that we have relied on information provided by management in preparing the financial statements. For many clients this type of report is adequate to suit their needs, the disclosure is minimal, and the level of work involved is the least of all three types of report.

Review

A review report requires the accountant to perform limited analysis consisting of discussions with management and analytical review to determine whether the financial statements appear to be plausible. A review report is often requested as a condition of bank financing, if an audit is not required. Certain organizations choose to have a review for their own reasons, for example where shares are held by several unrelated people, and some not-for-profits are able to satisfy their funder’s reporting requirements with a Review engagement.

Audit

An audit provides the highest level of assurance. In addition to the procedures performed in a review there are is also an examination of the accounting records, and the verification of a sample of amounts in the company’s records. Audits are usually only performed if required by an outside party. Public company financial statements are audited, private companies with large amounts of debt may require an audit if requested by their lender, and many Charities have an audit done to comply with requirements from their funders.

Next >> Tax Planning