All businesses need to have reports on its financial performance to help owners and managers make operating decisions. Financial reports also enable creditors to evaluate lending decisions. Every business has different financial reporting needs. A business may have a loan or bonding that requires its financial statements to be audited, reviewed or compiled by an independent certified public accountant. We have helped many business owners avoid the unnecessary expense of an audit when their bank/lender is satisfied with a review or a compilation of the internal financial data of the company and a copy of the corporate income tax returns
A review consists primarily of an assessment of the company's books and records by the performance of analytical procedures (such as the comparison to prior books and records), and calculation of certain financial tests and ratios. There procedures, by their very nature are intended to give reasonable assurance to an outside reviewer, rather than the detailed verification and reporting requirements required by an audit. The accountant obtains limited assurance that there are no material modifications that need to be made to the company's financial statements for them to be in conformity with GAAP.
Essentially, a compilation is when a CPA simply presents information that is supplied by management into conventional financial form and makes sure the financial statements are free from obvious error without the performance of any substantive procedures, independent verification or confirmation of any of a client's balance. Thus, a compilation is solely the representation of a company's management as no verification or procedures of account balances on the account balance sheet or the profit and loss statement are required.