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Your Business Scorecard
..............Your Financial Statements

   Audits, Reviews and Compilations of Financial Statements

YOUR only real scorecard as to how well your company is doing are your financial statements. Understanding them is well worth your while. Your financial statements can help management make operating decisions, investors decide how to invest, or creditors weigh loan applications. The three types of financial statements CPA's can provide are Audits, Reviews and Compilations.

The staff at Halcolm Bard CPA and Consultants understands that its important to know what the numbers mean as well as how the numbers got there. The focus of our practice has been on closely-held companies, and on high-net worth individuals and families.


An Audit adds credibility to management's representations in financial statements.

Audits are often complex.

In an audit, your CPA firm takes a lot more responsibility for your figures. You also get an opinion that your books have been audited "in accordance with generally accepted auditing standards." An audit is the highest level of assurance from your CPA. It includes confirmation with outside parties, physical inspections and observation, tracing transactions to supporting documents, etc.

Most board of directors would want an audit. So will many banks (especially as your credit line and banking needs grow). So will anyone considering either buying your company or taking it public. None of these will be happy with just one audit, they will want audits for several consecutive years.

The expense of an audit over other types of financial statements lies in a number of areas. An audit evaluates your inventory. It assess your company's internal controls. A management letter is prepared based on a detail study of your entire operation. It may contain specific recommendations for improving your internal accounting systems and procedures.


A Review providing a degree of assurance about the financial statements.



A review gives limited assurance that no material changes are needed. It is useful to management and others who want statements to be given a "does it make sense?" analysis. It consists of inquiry and analytical procedures applied to consider reasonableness of financial statements.

In a review, remember that balances are not confirmed with banks, or creditors; inventories are not counted; transactions are not traced to invoices and evidence of payments. However, in some instances, the review may be adequate for a client or its creditors.


A compilation is putting financial data obtained from the company into financial statement format.


A compilation offers no assurance as to whether material changes would be necessary for the statements to conform with generally accepted accounting principles because a CPA has simply put data into conventional form. The CPA does not probe beneath the surface unless he becomes aware that data given him is in error or incomplete.

However, before the CPA agrees to compile financial statements, the CPA will take a "common sense" look at the accounting system to decide whether the client needs other accounting services, like help in adjusting the books.

Once the CPA has compiled the financial statements, the CPA is obliged to give them a professional "second look" without performing any audit procedures. That done, the CPA issues a standard report, a two paragraph report that in effect says: Financial statements were compiled, but because they were not audited or reviewed, no opinion is expressed.