If you’ve ever been asked for “audited financial statements” and felt unsure what that really means, you’re not alone. Many business owners, nonprofit organisations, and startup and tech founders find themselves in this situation, told by a lender, investor, or board that they need financial statements but aren’t sure which type applies. Should you request an audit, a review, or a compilation?
One question we often hear is:
An audit provides the highest level of assurance. A review provides a moderate level of assurance, primarily based on analytical procedures and inquiries. A compilation presents financial information in the form of statements without offering any assurance. The right choice depends on who needs the information, why they need it, and the level of credibility they expect from the financial statements.
At CMP, we help business owners and nonprofit leaders select the level of service that best suits their needs. Whether you’re preparing financial statements in Utah or anywhere else in the country for a bank, a grant application, or your board of directors, our CPAs provide nationwide tax and accounting services and guide you toward the most efficient option that meets all requirements without unnecessary cost.
In this post, you’ll learn what each service involves, when it’s typically required, and how to decide which one is right for your organization.
Not every organization requires the same level of assurance regarding its financial statements. Think of it like a health check for your business. Understanding financial statements is the foundation, because you need to know what the numbers mean before deciding what level of assurance you need.
A compilation is like organizing your paperwork so everything is in one place, giving you a clear picture to start understanding your financial information. A review is a financial checkup to determine if things appear to be in good health based on that understanding. An audit is a full examination that confirms accuracy and reliability. Each service serves a distinct purpose, tailored to your goals, reporting needs, and budget.
A compilation is the simplest level of financial statement service. In a compilation, an accountant uses your company’s financial data to prepare formal statements that comply with GAAP (Generally Accepted Accounting Principles) financial reporting standards. The accountant does not verify the numbers or test for accuracy. Their role is to organize and present the information clearly and professionally.
This service is often helpful for internal planning, small businesses, or startups that do not need outside assurance. It is a good option when you want your financial information presented in a standard format but do not need the accountant to confirm its accuracy.
A review provides a limited level of assurance that the financial statements are free of major errors. The accountant performs analytical procedures and asks questions to determine whether the statements appear reasonable and consistent with what is expected for the business or industry.
The process focuses on identifying anything that appears unusual or inconsistent, without conducting a thorough examination of the records. Mid-sized businesses often use reviews, or when lenders or investors want some assurance, but not the cost or depth of an audit.
An audit provides the highest level of assurance available. It is a detailed and independent examination of a company’s financial statements and records to ensure they are accurate and comply with accounting standards and regulations.
During an audit, the accountant tests transactions, inspects supporting documentation, and evaluates internal controls to confirm that the financial statements are free from material misstatements. As a result, audits provide the most confidence to investors, lenders, regulators, and boards that the financial information is accurate and reliable.
The main difference between these three financial statement services comes down to how much checking the accountant performs and how much confidence others can have in the results. Each level of service, whether a compilation, review, or audit, offers a different degree of scrutiny, assurance, and cost.
Here’s a simple way to see how they compare:
|
Category |
Compilation |
Review |
Audit |
|
Purpose |
To organize financial information based on what the client provides. |
To check that financial statements make sense and are free from obvious errors. |
To test and verify financial data for accuracy and compliance with accounting standards. |
|
Level of Checking |
None. The accountant does not verify the numbers. |
Basic checks and inquiries to ensure the statements appear reasonable. |
Detailed testing, confirmation, and verification through audit procedures. |
|
Assurance Provided |
No assurance. |
Limited assurance. |
High (reasonable) assurance. |
|
Cost Level |
Lowest. |
Moderate. |
Highest. |
|
Time Required |
Fastest, usually completed in a few days. |
Moderate, typically a few weeks. |
Longest, often several weeks to a few months. |
|
When It’s Needed |
For internal use or management planning. |
When lenders, boards, or investors request some level of assurance. |
When required by law, regulation, or contract, or for larger financing and compliance purposes. |
|
Typical Users |
Small businesses, startups, or organizations that don’t need external assurance. |
Growing businesses and non-profits are seeking credibility with stakeholders. |
Larger companies, non-profits with grant requirements, or regulated entities. |
The right choice depends on what your stakeholders need and the level of assurance they expect. Each level of CPA assurance service balances credibility, time, and cost differently, so selecting the right one helps you meet requirements efficiently while maintaining financial transparency.
If you want to understand when a deeper examination is worthwhile, exploring the benefits of financial statement audit services can help you see how a full audit supports accuracy, trust, and long-term decision-making.
Choosing between an audit, review, or compilation depends on the purpose of the financial statements, the intended users, and the level of assurance they require. Use the guide below to decide.
Choose the option that balances credibility, budget, and time.
Because lending, investor, and compliance requirements vary by state and industry, working with a CPA firm that provides nationwide tax and accounting services can simplify the process. CMP works with organizations across the United States, helping them meet financial reporting and assurance requirements regardless of location.
Below are answers to some of the most common questions business owners and non-profit leaders ask when deciding which CPA assurance service they need.
The difference comes down to how much checking the accountant performs and how much assurance you receive. A compilation organizes your financial data but does not verify it. A review includes basic analysis and questions to confirm that your financial statements appear reasonable. An audit involves detailed testing and verification, offering the highest level of confidence in your financial information.
Audits are often required when a lender, investor, or government agency demands full assurance that financial statements are accurate. For example, a bank may require audited statements for loans above a certain amount, or a non-profit may need one to comply with grant or regulatory requirements. In these cases, an audit ensures your financial statements meet GAAP financial reporting standards.
Only a Certified Public Accountant (CPA) can perform a review or compilation under professional standards set by the AICPA. A qualified CPA understands how to prepare, organize, and evaluate financial statements in compliance with GAAP and CPA assurance services guidelines. Choosing a licensed CPA ensures credibility and adherence to compliance standards.
A compilation provides no assurance, meaning the CPA does not verify the numbers. A review provides limited assurance, based on analytical procedures and inquiries. An audit provides reasonable assurance, which is the highest level available, and confirms that the statements are accurate and reliable for external users.
Costs depend on the size and complexity of your organization. Generally, a compilation is the most affordable, a review costs more due to limited testing, and an audit is the most expensive because it involves detailed verification. It's helpful to compare your budget, reporting needs, and deadlines before selecting the right option.
Yes, most small businesses do not typically require an audit unless mandated by a lender, investor, or regulatory agency. Many rely on a compilation or review instead, which still provides accurate and organized financial information without the cost or complexity of a full audit.
An audit provides the highest credibility because it involves independent verification of financial records and internal controls. It provides reasonable assurance that your financial statements are free from material misstatements, which fosters confidence among lenders, investors, and regulators.
Companies choose an audit when they need to demonstrate transparency and financial integrity to outside stakeholders. An audit may be required for larger loans, regulatory filings, or investor reporting. It also strengthens trust and provides valuable insights into internal financial processes, enabling businesses to make more informed long-term decisions.
Choosing between an audit, review, and compilation does not have to be stressful. The right choice depends on what you need your financial statements for, the level of assurance others expect, and what fits your budget.
At CMP, our experienced CPAs help businesses and non-profits find the service that fits their goals, timeline, and budget. Whether you require clear, well-prepared financial statements or comprehensive audit assurance for investors, grants, or compliance, we will guide you toward the right solution.
Ready to make the right choice? Click the link below to contact us today for a consultation and discover which financial statement service best suits your goals.