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Financial statement

Financial Statements Preparation

Review and Compilation Services

In the course of doing business, lenders, suppliers and others may request a financial statement from you. This seemingly simple request can be expensive and time consuming if you are not aware of the various services available.

Just as your physician has many options when examining your physical health, your CPA has a number of options for determining your fiscal health.

Your CPA can audit your organization and issue a professional opinion on your financial statements. Other levels of financial statement services are available, depending on your needs.

What are the levels of service?

The three general levels of financial statement service your CPA can provide are compilation, review and audit.

A separate, distinct service, known as agreed-upon procedures, illustrates the range of options. In this service, the client and the user agree with the CPA on the specific procedures that will be employed.

Your CPA will present the results of those procedures instead of supplying a full set of financial statements. This service may satisfy a creditor needing assurance that the inventory and accounts receivable are accurately stated but not requiring assurance as to the rest of the financial information.

This solution satisfies the one making the request for certain financial information, while saving you much effort and expense.

Which service do I need?

To determine the right level of service, you must precisely ascertain the user’s real need for the financial statement. A clear understanding can enable you to meet that need appropriately without wasting resources.

BARR CPA can help you determine the appropriate level of service needed when someone requests a financial statement from you.

What is a compilation?

A compilation is the lowest level of service your CPA can use to work with your financial statements.

A compilation involves gaining a general understanding of your business and bookkeeping system and presenting your financial information in the accepted format of proper financial statements. Your CPA expresses no assurance about the accuracy of the numbers presented. The report attached to the financial statement emphasizes that the service is a compilation.

While independence is required at the other levels of service, your CPA does not have to be independent of your organization to perform a compilation.

Further options lie within the compilation level of service. The compilation report may be a full disclosure report with complete footnote explanations of certain amounts and policies contained in the financial statements. Or, you may opt to omit substantially all of these otherwise required disclosures. Omission of this information is not permissible under the other levels of service.

What is a review?

A review is conducted when a lower degree of assurance than an audit is acceptable, yet the user wants to know that a professional has performed some analysis of the statements.

Frequently, clients or users think they need an audit when a review or even a compilation may satisfy their needs. A review is significantly smaller in scope than an audit and less expensive.

During a review, your CPA will inquire about your business, accounting policies and procedures, industry, operations and personnel. The CPA will also ask about any changes in these items and request other pertinent information.

In addition, your CPA will conduct a battery of analytical procedures, such as ratio analysis, comparison of your operating statistics to prior periods or perhaps to industry averages, as well as other financial analyses deemed appropriate.

Your CPA’s analyses provide a better understanding of key relationships among certain numbers. This understanding gives more assurance about the reasonableness of your financial condition as presented in your financial statements.

We will be glad to discuss your needs with you and the user of the financial statements to decide whether a review will be sufficient.

How Barr CPA LLC Can Help You

Business knowledge and experience – Preparing financial statements is much more than a typing service for us. Through years of working with hundreds of organizations in diverse industries, we have gained extensive experience helping clients deal with commerce today.

For more information, please call 201-445-8711 to make an appointment.