Proper review can save you both time and money. Many business owners are aware assurance services can be provided by an accountant. Often times, we have found that these business owners do not fully realize the different available levels of assurance. Understanding these differences in assurance services, what they provide, will allow you to accurately select the best service available for your business and what is necessary for your financial statements.
During an audit, the accountant obtains the highest level of assurance regarding the financial statements. The accountant is required by the generally accepted auditing standards (GAAS) to obtain an understanding of the client’s internal control, assess risk, test account balances, and observe documentation. An opinion is expressed regarding the financial statements in its entirety, as being free from material misstatements and in compliance with financial reporting regulations. The auditor must inform management of any material errors, fraud, or illegal acts that are discovered. Audits are most commonly prepared for companies as a requirement of a third party (i.e., bank, investors, or creditors).
An accountant performing a review provides limited assurance, greater than a compilation that no material errors exist on the financial statements. A review includes performing inquiries, analytical procedures and other various procedures, along with all aspects required of a compilation. Reviews are typically prepared for privately held companies due to outside third parties searching for a greater guarantee financial statements are free from material misstatements.
A compilation is the most basic level of assurance service provided. The accountant assists management in financial statement presentations without providing any assurance. The accountant must comply with the Statements on Standards for Accounting and Review Services (SSARS), which requires an in depth understanding of how the clients industry functions, thorough reading of the financial statements to ensure proper forms are used and there are no obvious material errors. Compilations can be a beneficial investment frequently used for privately held companies and simple situations.
If you have any further questions or concerns surrounding assurance services, please do not hesitate to contact us.