COMPILATION – FINANCIAL STATEMENTS TO MANAGE YOUR BUSINESS
What is a Compilation and what does it produce?
A compilation is usually the result of the accountant converting financial data provided by the client into financial statements (This work is often referred to as "Write up"). A compilation involves the CPA gaining a general understanding of your business, applying the appropriate accounting principles, and presenting financial information in the form of proper financial statements. The financial statements compiled in this process are typically monthly, quarterly or annual.
What does the Compilation Report State?
When completed, the accountant provides a written report that accompanies the compiled financial statements. The compilation report has required language to indicate the following:
• The Financial Statements are those of the Company's management
• The CPA has prepared the financial statements in accordance with the appropriate accounting Standard
• The accountant has not audited or reviewed the financial statements, and therefore does not express an opinion or provide any assurance.
Note - The absence of the opinion or assurance on the financial statements by the CPA is a key difference between a Compilation and a Review or an Audit. Rarely required for small businesses, a Review or Audit is significantly more costly and entails analytical procedures, testing, inquiries and other forms of confirmation.
How is a Compilation typically used?
The primary use of the financial statements by most small business owners is to assist in the management of their business. However, a Compilation is common when initial or lower levels of financing or credit are sought from a Bank or other Lender. Though no assurance (i.e., opinion) is provided with a Compilation, outside parties may appreciate your association with a CPA, which is noted in the formal compilation report.
If you would like to better organize and manage your business, good financial statements are the key. Please complete the form below to get a Low-Cost Consultation with our Tax Attorney or one or our Certified Public Accountants.