Difference Between Compilation, Review, and Audit Engagements
Understand the differences between the three types of certification engagements offered by CPAs.
Financial statement evaluation is a necessary accounting task for directors, shareholders, and creditors seeking to optimize business decisions. Professional accountants prepare three distinct report types: compilation engagement, review engagement, and audit engagement.
Compilation engagement
A compilation engagement is a basic report that accompanies your financial statements. These statements remain unverified, and the CPA provides no assurance or opinion regarding the accuracy of client-provided information. This approach is simpler, faster, and less expensive.
When to use: For small and medium enterprises without significant financial commitments and when no assurance level is required.
Review engagement
Only CPAs with public accounting licenses may perform review engagements, which verify financial data plausibility. The process involves analytical procedures and interviews with management. The accountant issues an opinion on financial statement reasonableness, providing limited assurance.
When to use: Requested by creditors, investors, passive shareholders, or companies preparing for sale.
Audit engagement
An audit represents the highest level of assurance on financial statements that a CPA can provide. The objective ensures statements are free from material anomalies and comply with applicable accounting standards. Auditors observe, test, and examine company accounts.
When to use: Required for business sales or when requested by lenders, shareholders, regulatory bodies, or creditors.