There is always a confusion among business owners about the difference between audit, review and compilation of financial statements. There are many factors to select which type of service suits your business. You might consider the complexity and the size of your company as well as the needs of creditors (account payables) and investors.
Financial statements help us in assessing a business’s performance and identify its capability to pay financial obligations. A professional accountant would compile, review and audit the financial statements to provide a clear picture of the company’s performance.
Financial Statement Compilation
The main goal of compiling the financial statements is to enable the management to present the financial information without further modification. The Chartered Accountant (CA) does not audit or review the accounts and does not confirm that the financial statement agrees with the basis of accounting (Also see Three Simple Ways to Manage Your Bookkeeping). The CA only prepares the financial statement without verifying the information.
Financial Statement Review
The main goal of reviewing financial statements is to acquire the guarantee that these statements do not need further modifications and adhere to the correct accounting structure. When reviewing the financial statements, the CA needs to prepare inquiries and evaluate the financial statements. Some users of financial statements could accept financial statement review, although financial statement review does not offer the exact same degree of guarantee as audit. A review is a little expensive as compared to compilation but more affordable than an audit.
Financial Statement Audit
An audit provides the highest guarantee degree to the business critics. Auditing is carried out by an independent audit firm. The CA uses different techniques, such as the bank reconciliation test, to inspect the precision of the information given on the financial statements and provide a viewpoint about the fairness of the financial statements. In addition, the CA offers a guarantee that the information in the financial statements has been evaluated for precision.
Financial statements audit, review and compilation has different levels of guarantee and expenses. Hence, depending on the complexity and the size of your company as well as the users of the financial statements, you can pick the best service. Every company will need accounting services in Johor Bahru for assistance in preparing financial statements.