Stockholders, creditors, insurers, regulatory agencies, and private investors often need assurance that the financial statements accurately represent the true financial position of a company. In other instances, you may need to provide assurance as to a specific financial element or account(s). In each case, the level of risk tolerance varies and so, we provide three levels of assurance to meet your needs.
Review - Limited Assurance
Less extensive than an audit, a review engagement consists primarily of analytical procedures we apply to the financial statements, and various inquiries we make of your company's management team. If the financial statements or supporting information appear inconsistent or otherwise questionable, we may need to perform additional procedures.
A review doesn't require us to study and evaluate your company's internal controls or verify data with third parties or physically inspect assets. Rather, a review report expresses limited assurance in the form of the statement: "We are not aware of any material modifications" for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP). Reviewed financial statements must include all required footnotes and other disclosures.
Why might a business request a review engagement? It can be a good middle ground, providing the advantages of a CPA's technical expertise without the work and expense of an audit.
Compilation - Lowest Level of Assurance
In compiling financial statements for a client, we present information that is the "representation of management" and express no opinion or assurance on the statements. Compilations don't require inquiries of management or analytical procedures. Instead, we rely on our knowledge of accounting principles and a general understanding of your business.
Agreed-Upon Procedures - Specific Elements or Account(s)
In certain situations, general review or compilation procedures and methodologies cannot be applied with the hopes of providing the level of results and assurance desired. In these situations, an agreed-upon procedures engagement can be used to provide you with clear results you need, in areas you identify, without incurring the costs associated with a more rigorous engagement, such as a review. Agreed-upon procedures are procedures applied to specific elements or account(s) and allow the client to obtain information regarding very specific items as needed. In an agreed-upon procedure engagement, we do not express an opinion or negative assurance. Instead, we issue a report that details the specific procedures performed and the results of such procedures.
Our agreed-upon procedures are performed in accordance with the standards issued by the American Institute of Certified Public Accountants. Examples of situations in which agreed-upon procedures may be used include:
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Licensing, contract and royalty compliance engagements
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Cash balances verification
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Security balances
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Compliance with specified terms of an agreement
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Due diligence related to buying a business
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.
Understanding each report's unique strengths and weaknesses can help you choose the most appropriate one. Please call if you have questions about which type of report is right for you.
