Financial Statement Services

Financial Statement Services provided by CPAs

(Professional standards established by the Accounting and Review Services Committee of the American Institute of CPAs)

"Prepared" Financial Statements

The "preparation" standard permits a CPA to prepare financial statements for a client without attaching an accountant's report. In this case a disclaimer is required on each page of the financial statements, stating that no assurance is provided.

This service is provided when a client has engaged the CPA to prepare financial statements, but has not engaged the CPA to report on the financial statements. Financial statements are prepared from data provided by management, and arranged into conventional financial statement format. For this service, independence is not required, and no level of assurance is given by the CPA.

"Compiled" Financial Statements

The "compilation" standard requires the CPA to attach a report to the financial statements. This report must clearly state that the financial statements were not reviewed or audited, and that no procedures were performed to verify the accurateness or completeness of information provided by management. If a basis of accounting, other than generally accepted accounting principles, is used to compile the financial statements, then the report must state the basis of accounting that was used.

This service is provided when a client has engaged the CPA to prepare financial statements and to attach a report. Financial statements are prepared from data provided by management, and arranged into conventional financial statement format. For this service, independence is not required, but any lack of independence must be stated. No level of assurance is given by the CPA.

"Reviewed" Financial Statements

The "review" standard requires the CPA to attach a report to the financial statements. This report must clearly state that a review is substantially less in scope than an audit, that no evaluation of internal control was performed, and that no opinion is given regarding the financial statements taken as a whole.

This service is provided when a client has engaged the CPA to review its financial statements and to attach a report. This service requires that the CPA be independent. The objective of the review is for the CPA to obtain limited assurance that there are no material modifications that need to be made to the client's financial statements for them to be in conformity with generally accepted accounting principles (or other financial reporting framework used by the client). The CPA must perform procedures, primarily analysis of financial data and inquiries of client personnel, to reach a conclusion.

"Audited" Financial Statements

Auditing standards are established by the Auditing Standards Board of The American Institute of CPAs. The "audit" standards require the CPA to attach a report to the financial statements. This report must include the CPA's opinion attesting to the fairness of presentation of the client's financial statements.

This service is provided when a client has engaged the CPA to audit its financial statements and to attach a report. This service requires that the CPA be independent. The objective of an audit is to enable the CPA to render an opinion on the fairness of the client's financial statements. The CPA must evaluate the client's internal control system and perform auditing procedures, including analysis of financial data, inspection of documents, observation of assets, making inquiries of client personnel and third parties, etc. The purpose of these procedures is to allow the CPA to obtain reasonable assurance that the financial statements are free of material misstatement and provide basis for the CPA's opinion.