| Level of assurance that the financial statements are not materially misstated |
CPA does not obtain or provide any assurance that there are no material modifications that should be made to the financial statements |
CPA does not obtain or provide any assurance that there are no material modifications that should be made to the financial statements. |
CPA obtains limited assurance that there are no material modifications that should be made to the financial statements |
The CPA obtains reasonable (defined as high, but not absolute) assurance about whether the financial statements are free of material misstatement. |
| Objective |
To prepare financial statements pursuant to a specified financial reporting framework. |
To apply accounting and financial reporting expertise to assist management in the presentation of financial statements. |
To obtain limited assurance as a basis for reporting whether the CPA is aware of any material modifications that should be made to the financial statements for them to be in accordance with the applicable financial reporting framework, primarily through the performance of inquiry and analytical procedures. |
To obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement thereby enabling the CPA to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework and to report on the financial statements in accordance with the auditor’s findings. |
| The CPA is required to be independent |
No |
No — but if the CPA is not independent, the CPA is required to indicate lack of independence in the CPA’s compilation report. |
|
|
| The CPA is
required to obtain
an understanding of
the entity’s internal
control and assess
fraud risk |
|
|
|
|
| The CPA is required
to perform inquiry
and analytical
procedures |
|
|
|
|
| The CPA is required
to perform
verification and
substantiation
procedures |
|
|
|
|
| The CPA issues a
formal report on the
financial statements |
|
|
|
|
| Situations requiring
different levels of
service |
Intended for the
business owner’s
own use to have the
current information
needed to know the
financial standing
of the business
and to make
business decisions
accordingly. Similar
to what an in-house
controller or CFO
would provide for
management in a
larger company. The
financial statements
may be shared with
third parties. |
Typically appropriate
when initial or lower
amounts of financing
or credit are sought
or there is significant
collateral in place.
Outside parties
may appreciate
the business’s
association with a
CPA, which is readily
apparent in the formal
compilation report. |
Typically appropriate
as a business grows
and is seeking larger
and more complex
levels of financing
and credit. It is also
useful when business
owners themselves
are seeking greater
confidence in their
financial statements
to evaluate results
and make key
business decisions.
|
An audit is typically
appropriate and often
required when seeking
complex or high levels
of financing and credit.
Also appropriate
when seeking outside
investors, seeking to
sell the business or
considering a merger. |
| Differences in cost for
each level of service |
Varies based on the
financial records
provided.
|
Least time consuming
of the services in
which the CPA issues
a formal report. |
More time consuming
than a compilation
but substantially less
than an audit. |
Involves the most work
and, therefore, the most
CPA time. |
