Banks often require businesses to provide them with a compiled financial statement or a reviewed financial statement from a CPA in connection with a lending relationship. Unlike an audit, a compilation and a review does not contemplate obtaining an understanding of the entity's internal control, assessing fraud risk, or testing accounting records. As a result, compilations and reviews are less invasive to your daily activities than an audit.
Krikorian & Company has the expertise to prepare compilations and reviews. The differences between the two are...
A compilation is a financial statement where the information is the "representation of management." A CPA need not be independent of the business to prepare a compilation. Since the CPA is not required to perform inquiries of management or conduct analytical procedures, a compilation provides the lowest level of assurance. As a result, it is usually the most cost-effective.
A review is very similar to a compilation; however, the CPA is required to expand procedures to provide limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with Generally Accepted Accounting Principles (GAAP). A CPA must be independent of the business, must perform analytical procedures, and perform inquiries of management.
Depending on the requirements of your bank and/or other third parties, we can help you decide which report is appropriate. Please call us if you have any questions about which report may be right for you.