Audit - Highest Level of Assurance
An audit provides the highest level of assurance. An audit is a
methodical review and objective examination of the financial statements,
including the verification of specific information as determined by the
auditor or as established by general practice.
Our work includes a review of internal controls, testing of selected
transactions, and communication with third parties. Based on our
findings, we issue a report on whether the financial statements are
fairly stated and free of material misstatements.
An Audit allows you to...
- Satisfy stakeholders such as employees, customers, suppliers and
funding sources, as well as the investing community, as to the
credibility of published information.
- Facilitate the payment of corporate tax, goods and services tax, and
other taxes on-time and accurately, thereby avoiding interest,
penalties, and investigations.
- Comply with banking covenants.
- Help deter and detect material fraud and error.
- Facilitate the purchase and sale of businesses.
Here's what you get...
You get the highest level of assurance because we go outside your
company to obtain more information. Typically, we'll have written
- Your customers, to check outstanding receivable balances,
- Your banks, to confirm cash or debt balances and terms, and
- Your attorneys, for information on pending or threatened legal action.
We also perform physical inspections by observing your inventory
counting methods and performing test counts. We document
and develop an understanding of each operating cycle,
including sales and cash receipts, expenses and cash disbursements, and
payroll. Our audit evidence includes a detailed work program to
document the examinations and testing performed, as well as the
supporting work papers.
Audits Not Just for Public Entities
All public companies are required to have an annual audit, but some
nonpublic entities must undergo an annual audit as well. These include
local governments, not-for-profit agencies and other organizations
receiving government grants.
Moreover, some financial institutions require audits of nonpublic
companies based on the financing amount and/or the bank's assessment of
the company's risk. Also, companies with absentee ownership (such as
those owned by investment firms, or individuals who no longer run the
business) may order audits as checks of their management teams.
Review - Limited Assurance
Less extensive than an audit, but more involved than a compilation, 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 expresses 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
Banks often require compilations from an independent CPA as part of their lending covenants.
Which Report Should You Use?
Each type of financial statement report may suit specific
circumstances, depending on requirements from your bank or other
parties, as well as meet budgetary needs.