Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company. Your stockholders, creditors, or private investors have different levels of risk tolerance. Jones, Savarese, Harrington & Company in St. Charles offers two levels of assurance to meet your needs.
Compilation – Lowest Level of Assurance
In compiling financial statements for a client, we present information that is the “representation of management” and expresses no opinion or assurance on the statements. Compilations don’t require inquiries of management or analytical procedures. Instead, we rely on our CPAs knowledge of accounting principles and a general understanding of your business.
Reviewed Financial Statements
A Financial Statement Review is a service under which the accountant obtains limited assurance that there are no material modifications that need to be made to an entity’s financial statements for them to be in conformity with the applicable financial reporting framework (such as GAAP or IFRS).
A review does not require the accountant to understand internal control, assess fraud risk, or other types of audit procedures. Consequently, a review does not assure the accountant that he or she has become aware of all the significant matters that normally would have been discovered and disclosed in an audit.
The review is more expensive than a compilation and less expensive than an audit. It is preferred by those businesses whose lenders and creditors will allow them to use this approach, thereby saving the cost of a full audit. Banks often require compilations or reviewed financial statements from an independent CPA as part of their lending covenants.
Which Report Should You Use?
Each type of financial statement report may suit specific circumstances, depending on requirements from your bank or other parties, as well as meet budgetary needs. Understanding each report’s unique strengths and weaknesses can help you choose the most appropriate one.
JSH accountants are happy to assist in any way with your report determination and selection. Please contact us with any questions and allow our accounting firm expertise to benefit you.
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