Historical Financial Statements: Audits, Reviews, Compilations and Preparations

Historical financial statements reveal the “GPS” starting point for a business’ direction. When you know where you are and what resources you really have, you can identify which direction you need to go, what decisions must be made and what it will take to get there.

Audits, reviews, compilations and preparations are services designed to help you provide financial statements that show the financial results of your business at a level of reporting that fits your situation.

What’s the Difference?

Audits result in an independent CPA firm’s expression of an opinion on  the company’s financial statements. These are generally required by outside parties, such as investors, creditors, lenders or regulatory agencies seeking significant assurance about the financial position, results of operations and cash flows of your business.

Reviews result in an independent CPA firm’s report which indicates whether the accountants are  aware of any material modifications that should be made to  the financial statements. Reviewed financial statements are often used by businesses to report their financial position, results of operations and cash flows to third parties where audits aren't required.

Compilations result in an accountant’s report stating they have performed a compilation engagement, but do not provide any assurance on  the financial statements. Compilations are favored by businesses that do not require audits or reviews because the users are comfortable with the financial information provided without any assurance from the CPA.

Preparations result in financial statements that exclude an accountant’s report and include a disclaimer on each page of the financial statement that no assurance is provided on the financial statements.  Preparations are used when the company requires professional assistance to prepare financial statements but does not require the accountant to issue a report.