Compilation vs Audit vs Review: Know the difference

What’s the distinction between a review, a compilation, and an audit?

When it comes to reviewing financial statements, business owners look for ways to save time and money. But how do you know which method will provide the best assurance and which is required for your specific needs?

Learn the differences between the three methods of analyzing your company’s financial records and make a more confident decision.


A compilation is a basic summary of your company’s financial statements written by a CPA using information given by your company.

This method, unlike a review or an audit, provides no assurance. There are no tests performed, and no internal controls are examined by the auditor.

An accountant will review and inquire about your company’s financial statements during a compilation, but will not compare them to any of their expectations. This means they cannot offer any advice or assurance.

Because compilations are informal, the CPA performing them is not required to be independent of your company. This means that your current CPA can also handle your compilation.

When is a compilation performed?

A compilation should only be used in simple, very straightforward, and uncomplicated situations.

If you only need to present the company’s financial information from its financial statements on a surface level, or if your company simply needs a second set of expert eyes to review the financial records, a compilation may be sufficient.

However, it is always advisable to first consult with a CPA to ensure that you select the correct method that will cover the amount of assurance required for your unique situation.


A financial review is a limited examination conducted by a CPA that reports on the credibility of your financial statements.

A review provides limited assurance, whereas an audit provides adequate assurance.

This method is more limited in scope than an audit, providing an evaluation of your company’s books while limiting the auditor’s analysis to analytical procedures and management evaluation.

Only the outcome can determine the credibility of your business’s financial statements. The auditor can only certify that your financial statements are free of material misstatements and that they comply with generally accepted accounting principles.

Who needs a financial review?

Many business owners who are not legally required to have an audit but still want an analysis of their financial records opt for a review instead to save time and money.

Am I required to get a financial review?

While no laws currently require reviewed financial statements, some grantors or lenders may include a requirement for annual reviewed financial statements in your loan or grant agreement.

Many business owners find that even if a financial review is not required, it is beneficial to their business because the insights and moderate assurance provided offer a level of confidence that is reassuring to them, their board, lenders, and investors.

Benefits of a financial review

Having your financial statements reviewed allows you to have another, independent set of eyes look over your company’s financial statements, which can provide additional security, guidance, and more.

Can a review turn into an audit?

A review is commonly thought to be a simple first step toward transitioning into an audit the following year, but this is not always the case.

You should always consult with a CPA to ensure that you are using the correct financial assessment method for your company and that there is value in performing a review rather than moving straight to an audit.


An audit is a thorough examination of your company’s financial records to determine whether the information accurately reflects the financial position at the time.

An audit is a much more critical, systematic process that necessitates detailed testing such as reviewing your company’s accounting records and financial statements. The auditor may even conduct interviews with employees at your company to assess internal controls.

As a result, audit results provide the highest level of assurance that can be provided.

Who needs an audit instead of a review?

In some cases, your business will be required to conduct an audit. Certain states require audits for businesses with more than a certain amount of revenue, and your grantor or lender may also require one.

A financial review will not suffice in this case. Your company will require the assistance of a qualified auditor to assess your needs and situation, as well as perform the full audit process.

Cost of an audit, review, and compilation

The processes and procedures necessary for an audit, review, and compilation all varied greatly, implying that the prices will also vary significantly.

A compilation takes the least amount of time, making it the most cost-effective alternative for your business. It is, however, the least thorough of the approaches.

A review takes fewer hours than an audit but more hours and processes than a compilation, making it the second most affordable alternative for your business.

While an audit is typically the most expensive choice, it also provides the most comprehensive examination and overview of your financial statements.

Deciding between an audit, review, or compilation

Deciding between an audit, review, or compilation will come down to your requirements and the needs of your business. While cost should always be considered, it should not always be the deciding factor. Making a solid, well-thought-out plan with the help of an experienced CPA firm can lead you to the best conclusion for your business. IDM CPA offers the experience and know-how to steer your company in the correct way and assist you in selecting the best solution for you.