Compilations

What is a compilation and why do so many clients request Tulsa CPA Terry Mosley to prepare these financial statements for them? Banks, regulatory and accountability boards sometimes requires certain entities to have a Compilation or Review of their financial statements. Both Compilations and Reviews are the process of an “outsider” CPA gathering the financial information and producing financial statements.

With a compilation, the outside accountant does not perform an audit or conduct detailed review processes to provide assurances or an opinion on the financial statements; (omit-that the numbers can be relied upon) however, having an experienced, independent accountant such as Tulsa CPA Terry Mosley to compile the financial statements with footnotes (omit-provides) lets the banks and accountability groups know that the financial statements were prepared by a professional who is independent of the organization. A compilation requires less time to complete and is less costly than having a CPA perform an audit of financial statements.

Having a review performed is a step further than a compilation although it does not require the time or expense of an audit. It is the process where an independent accountant such as Tulsa CPA Terry Mosley provides a limited assurance that the financial statements conform to the applicable financial statement reporting guidelines (omit “such as GAAP or IFRS”) since most people don’t know what this means) and that no significant changes need to be made to the entity’s financials. Although many tests and analytical procedures are conducted in a review, it does not include all of procedures performed in an audit where an understanding of internal controls and an assessment of fraud risk are conducted.

Being that a review involves a more detailed review of the financial statements and related testing than a compilation, there is a higher fee to conduct a review but it is also less costly than an audit. The testing and review procedures are focused on the areas of the organization’s greatest risks of misstatement and could include the following:

• A review of the most active general ledger accounts which could be Cash, Accounts Receivables, Inventory, Fixed Assets, Investments, Liabilities, Commitments and potential contingencies, and Profit and Loss accounts
• A ratio analysis that could compare historical and industry numbers
• Review material journal entries
• Review complex or unusual transactions that could have a significant effect on the financials
• Investigate transactions or amounts that seem to be inconsistent
• Review amounts, ratios and other compliant requirements issued from