How Are Reviews Different From Audits?

Reviews offer less assurance than audits. During a review, your certified public accountant will not examine internal controls, nor will he or she perform the in-depth testing required during an audit. Individual transactions are not analyzed and validated as is done during an audit. The CPA handling your review does not need to obtain independent confirmation of your financial records. Reviews also do not focus on fraud risk or the internal controls of your business.

What Are The Three Types Of Assurance Services?

“Assurance” refers to the level of confidence shareholders have that your business’ financial records will be reliable and conform to the United States Generally Accepted Accounting Principles (GAAP). There are three types of assurance services offered by our certified public accountants: audits, reviews, and compilations. Audits An audit provides the highest level of assurance that your financial statements are accurate, free of misstatements, and conform to the United States GAAP. Reviews A review offers limited assurance that your statements are accurate. Reviews involve less measures and are subject to less examination than audits. Compilations A compilation offers no assurance that your records are accurate. Compilations are typically for internal use and require less analysis than audits or reviews.

Audit Accountants Stroudsburg | Audits, Reviews, & Compilations Poconos

Audits

Audits are in-depth examinations of your personal or business’ financial records and systems. The purpose of an audit is to provide the highest possible level of assurance that your personal or company’s financial statements are accurate and free of misstatements. Audits also ensure your records are compliant with GAAP.

What Are The Main Types Of Audits?

There are three main types of audits: Internal Revenue Service (IRS) audits, external audits, and internal audits.

IRS Audits

The Internal Revenue Service may perform routine audits to verify the accuracy of your tax return. The IRS compares all tax returns with statistical norms. If any part of your tax return seems inconsistent or incorrect, then this may trigger an audit. An IRS audit is considered a formal investigation and will lead to one of three outcomes: no change in your return, a change that the taxpayer accepts, or a change that the taxpayer disagrees with. A change in your tax return can lead to more taxes owed or tax penalties. Taxpayers can file for an appeal or mediation if they disagree with the IRS’ decision.

External Audits

External audits are examinations of your financial records by a certified public accountant outside of your business. External audits may be requested by the company’s shareholders, investors, or lenders. Your audit accountant will organize and examine your financial data and submit a report on your company’s financial situation. External audits are critical to maintaining the financial integrity of your business.

Internal Audits

Internal audits are managerial tools that businesses can use to evaluate their internal processes and operations. An internal audit can help companies identify financial weak points, as well as workflow issues or errors in reporting. Unlike external audits, which are set by outside standards, an internal audit adheres to standards set by the business itself.

Compilations

Compilations are collections of financial data organized and prepared by a certified public accountant. These compilations are then put into a financial statement format that adheres to GAAP. Individuals and company owners can request the help of a CPA to assist with the compilation of their annual financial statements.

How Do Compilations Differ From Audits And Reviews?

Unlike audits and reviews, compilations express no assurance. Instead, they are based solely on the client information provided and are typically meant for internal use. Compilations are also less in-depth than audits and reviews. During a compilation, your CPA will not analyze internal controls or focus on fraud risk. Compilations also do not examine the accuracy of individual transactions.

How Do I Learn More About Your Services For Audits, Reviews, & Compilations?

Our audit accountants at Weseloh Carney & Company LLC would be happy to speak with you in more detail regarding audits, reviews, and compilations. Please give us a call at 570-424-1040 or request a free consultation online.