A Certified Public Accountant reports on financial statements at various levels of assurance.
Closely-held business may be required by banks, stakeholders, or governmental departments to have certified financial statements for capital acquisition, bonding requirements, or to satisfy loan terms with financial institutions or state laws.
Audits provided the highest level of assurance on financial statements and are generally required for capital acquisition or to satisfy grant requirements or requisitions. An audit includes collecting and examining competent evidence of financial statement data so that the CPA can opine on the financials.
Reviews provide limited levels of assurance on financial statements and are generally used when a third party need some level of assurance on the financial statements but the company doesn’t want to incur large costs for completing an audit. Verification procedures are limited in scope but provide limited assurance on the financial statements.
Compilations provide no levels of assurance and as such, the procedures are light in scope. Compilation services are commonly used for closely held businesses as they provide enough financial information for management and the company’s stakeholders to gauge the financial performance of the company.