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REVIEWS AND COMPILATIONS
A ‘review’ is somewhat more rigorous than a compilation but less detailed than an audit. A review report states that the CPA has reviewed the financial statements in accordance with Statements on Standards and Review Services (‘SSARS’). It also states that a review consists principally of inquiries of company personnel and analytical procedures; that a review is substantially less in scope than an audit; and that the CPA is not aware of any material modifications that should be made in order to be in conformity with GAAP.
For a review:
- The CPA must be independent
- The report must include notes and cash flows
A compilation report states that the CPA has compiled the financial statements in accordance with SSARS; that a compilation is limited to presenting, in the form of financial statements, information that is the representation of management; and that the CPA does not express an opinion or any other form of assurance on them.
A compilation report:
- Does not have to include footnotes or cash flows, but that limitation must be mentioned in the report
- The CPA does not have to be independent, but that limitation must be mentioned in the report
- The CPA’s responsibility is to see that the financials are free from obvious material misstatement