1. GUIDE TO Financial Statement Services: Compilation, Review and Audit

2. CONTENTS INTRODUCTION BASIC FINANCIAL STATEMENT PREPARATION UNDERSTANDING “ASSURANCE” COMPILATION REVIEW AUDIT SERVICE COMPARISON 2

3. INTRODUCTION Financial statements are the foundation of sound business decisions. Prepared in house or by a CPA Often lenders require additional services such as a compilation, review or audit 3

4. BASIC FINANCIAL STATEMENT PREPARATION 4 For business owner’s use to manage the business May fulfill some lenders’ documentation requirements for small loans No formal report issued on the financial statements

5. UNDERSTANDING “ASSURANCE” 5

6. COMPILATION For lenders and other outside parties who may appreciate the business’s association with a CPA without requiring a level of assurance Typically appropriate when initial or lower amounts of financing or credit are sought or significant collateral is in place CPA issues compilation report 6

7. REVIEW For lenders and other outside parties that request a basic level of assurance Typically appropriate as a business grows and is seeking larger and more complex levels of financing and credit CPA issues review report 7

8. AUDIT For creditors, investors and other outside parties seeking a high level of comfort on the accuracy of financial statements Typically appropriate and often required when seeking high levels of financing or outside investors, or when selling a business CPA issues auditor’s report 8

9. SERVICE COMPARISON 9 Financial Statement Preparation CompilationReviewAudit CPA issues a formal report on the financial statements ✓✓✓ Level of assuranceNone Limited (basic) Reasonable (high, but not absolute) CPA required to be independent NoNo* ✓✓ CPA required to perform inquiry and analytical procedures ✓✓ CPA required to perform verification and substantiation procedures ✓ CPA required to obtain understanding of entity’s internal control and assess fraud risk ✓ * If the CPA is not independent, the CPA is required to indicate lack of independence in the CPA’s compilation report.

10. QUESTIONS?

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