Financial Statement Assurance
Users of business information rely on companies to communicate relevant financial and nonfinancial information. Credibility is key.
CPAs perform procedures that influence a user’s confidence in information used for decision-making. From the profession’s 19th century founding, CPAs have been concerned with developing useful financial information, and testing its reliability.
Companies seeking to raise confidence in their information through assurance services should consider the reputations of prospective assurance services providers. CPAs have a solid reputation built through more than a century of service that enhances the trust their reports provide.
There are three levels of financial statement assurance that our firm provide:
An audit is the highest level of financial statement service a CPA can provide. The purpose of having an audit is to provide financial statement users with an opinion by the audit on whether the financial statements are prepared in accordance with the proper financial reporting framework. An audit enhances the degree of confidence that intended users, such as lenders or investors, can place in the financial statements.
The auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, and whether the misstatements are from error or fraud.
To obtain reasonable assurance, items are observed, tested, confirmed, compared or traced based on the auditor’s judgment of their materiality and risk. After gathering appropriate evidence through this process, the auditor issues an opinion about whether the financial statements are free from material misstatement.
A review engagement is conducted to provide limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the financial reporting framework.
A review differs significantly from an audit. Review engagements provide less assurance to the reader of the financial statements because the CPA does not perform many audit procedures.
In a compilation engagement, the objective is to assist management in presenting financial information in the form of financial statements without undertaking to provide any assurance that there are no material modifications that should be made to the financial statements so they will conform to the acceptable financial reporting framework. Because of the even more limited scope of compilation procedures, the CPA’s report will not express an opinion or provide any assurance regarding the financial statements.
A compilation involves (1) gaining a general understanding of your business, accounting principles used and financial reporting system and (2) presenting financial information in the accepted format of proper financial statements. The CPA expresses no assurance about the accuracy of the financial statements presented.
Which Report Should You Use?
Each type of financial statement report may suit specific circumstances, depending on requirements from your client's bank or other parties, as well as meet budgetary needs.