Preparing Your Company’s Financial Statements
Saklas & Co., CPAs can recommend either a review, or compilation engagement to you after discussing with you the purpose of your financial statements, and your company’s goals. A review or compilation describes an external accountant’s involvement with your company’s financial information.
The engagements described below rely on accounting records provided by you. If you also require assistance with the completion of those records, we would be happy to offer our bookkeeping services to you.
A compilation engagement provides no assurance from the accountant on the financial information. The objective of a compilation engagement is to compile unaudited financial information into financial statement format based on information provided by the client.
Unlike audited or reviewed financial statements, compiled financial statements may not include all disclosure required by some users, and may not include a statement of cash flows or explanatory notes.
In a compilation engagement, the accountant will report that he has “not audited, reviewed, or otherwise attempted to verify the accuracy or completeness” of the information and will caution users of the information that it may not be appropriate for their purposes.
Generally, a compilation engagement is only appropriate for internal use by management.
Although no assurance is provided by the accountant to the user of the financial information, a CGA will not be associated with financial information he or she knows, or has reason to believe, is misleading or incorrect.
We may recommend a compilation if:
- You require interim financial statements to supplement your annual review or audit.
- There are no lenders, insurers, or funding agencies who will rely on the financial statements.
- Your needs for accounting system advice are very limited.
- You require the financial statements primarily for management use.
The objective of a review engagement is to prepare and review financial statements to determine whether they are plausible, or worthy of belief. If, after reviewing the statements the accountants are satisfied that the statements are not misleading, the accountants’ standard report will preface the financial statements.
Where an audit is not required or the shareholders have waived the appointment of an auditor, financial statements may be prepared on a review basis. Reviews provide limited assurance that the financial information confirms to generally accepted accounting principles.
In performing a review the accountants would must be independent from the clients and have sufficient knowledge of the industry which the business operates. They would acquire sufficient knowledge of the client’s business to make intelligent enquiry and assessment of the information obtained, with the limited objective of determining the plausibility of the information reported on. The review should entail enquiries, analytical procedures and discussion with responsible client officials.
This degree of assurance is less than that resulting from an audit and is expressed as either:
- The negative assurance that nothing has come to the accountants’ attention that would indicate the financial information is not presented in accordance with generally accepted accounting principals, or
- A reservation together with appropriate disclosure and explanation of the reservation.
We may recommend a review if there are no requirements for an audit and:
- You rely on banks or other lenders for financing
- A review would enhance our ability to provide you with advice regarding your accounting system
- You need to report your financial information to an external organization that requires your financial statements to be reviewed.