Stockholders, creditors, and private investors may need assurance that your financial statements accurately represent the true financial position of your company. Since these groups all have different levels of risk tolerance, Apel provides two levels of assurance to meet your needs:
Review: limited assurance
A review is less extensive than an audit but more involved than a compilation. For a review, Apel applies a series of analytical procedures to your financial statements. We also make various inquiries to your company’s management team. If the financial statements or supporting information appear inconsistent or questionable, we may need to perform additional procedures.
A review does not require us to study and evaluate your company’s internal controls, 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 expresses no opinion or assurance on the statements. Compilations don’t require analytical procedures or inquiries of management. Instead, we rely on our knowledge of accounting principles and a general understanding of your business. Banks often require compilations from an independent CPA as part of their lending covenants.
Which report should you use?
Each type of financial statement suits specific circumstances, depending on requirements from your bank or other parties, as well as budgetary needs. Understanding each report’s unique strengths and weaknesses can help you choose the most appropriate one. Please contact us if you have questions about which type of report is right for you.