Why Performed: The objective of a review is to obtain limited assurance that there are no material modifications that should be made to the financial statements. A review is typically performed because outside third parties or investors are looking for some comfort that the financial statements are not materially misstated, but do not require audited statements.
Standards Met: A review is conducted in accordance with Statements on Standards for Accounting and Review Services (SSARS) issued by the AICPA and consists primarily of inquiries of company personnel and analytical procedures applied to financial data.
Work Process: A review is significantly less in scope than an audit in accordance with GAAS and only provides limited assurance that there are no material modifications that should be made to the financial statements. There is no expression of an opinion on the financial statements taken as a whole.
Why Performed: A compilation is typically performed when a higher level of service on the financial statements is not required by outside parties or others.
Standards Met: A compilation must comply with SSARS and requires the accountant to have an understanding of the client’s industry, obtain knowledge about the client, read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors.
Work Process: In a compilation, the accountant assists management in presenting financial information in the form of financial statements without providing any assurance that there are no material modifications that should be made to the financial statements. It does not contemplate any of the procedures ordinarily performed in an audit or a review. A compilation is limited to presenting in the form of financial statements information that is the representation of management. There is no expression of an opinion or any other form of assurance on the financial statements.