Authored By:  Dustin Wood, CPA.  Dustin has been with the firm 7 years and is the audit manager here at Cook Martin Poulson, PC.  He specializes in financial statement services.

There are three basic service levels that CPAs perform with regard to financial statements.  In order from the lowest level to the highest level of assurance they are:  compilation, review, and audit engagements.

Compilation – No assurance  is provided in the accountant’s report as to whether the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP), however, known departures from GAAP require a modification to the accountant’s report.  Accountants are required to obtain knowledge of the accounting principles and practices of the client’s industry and a general understanding of the client’s business.  Note disclosures to the financial statements may be omitted and the accountant does not have to be independent of the client, but a lack of independence must be disclosed in the accountant’s report.  An engagement letter must be signed by the client as a written communication of the services to be performed.

Review – Limited assurance is provided in the accountant’s report as to whether the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP) and known departures from GAAP require a modification to the accountant’s report.  Accountants are required to obtain the same knowledge of the client’s industry and business as in a compilation, but are also required to obtain an increased understanding of the client’s business.  Performance of inquiries and analytical procedures is required as well as additional procedures if questions arise in performing the review.  Note disclosures to the financial statements are required and accountants must be independent of the client.  An engagement letter and management representation letter must be signed by the client.

Audit – An auditor’s opinion is provided stating that the financial statements are fairly presented in accordance with GAAP and inadequate disclosure and/or departures from GAAP require a modification of the auditor’s opinion.  The auditor must obtain an extensive knowledge of the economy, relevant industry, and the client’s business.  Inquiry, analytical procedures, obtaining an understanding of internal control, and other audit procedures are required.  Accountants must be independent to perform an audit of financial statements.  An engagement letter and management representation letter must be signed by the client.

Costs for the services vary based on the work required to be performed and the time necessary to complete the services, with compilations being the least costly and audits being the most expensive level of service.  Please contact us to obtain more information regarding these services or if you need a price quote for services to be performed.