Understanding Financial Statement Services 0

Posted On March 28, 2024, by Trevor Buttle

Ever find yourself asking these questions?:

Curious about how Compilation Financial Statements can enhance professionalism in your interactions with lenders, creditors, or potential investors?”

My bank is asking for a review engagement. What does that mean?

I’m being asked to provide an Audit of our financial statements. What exactly does this entail, and how can we ensure compliance and readiness for the audit process?

If so, you’re not alone. Many individuals and businesses encounter these queries when navigating the realm of financial reporting. Chartered Professional Accountants (CPAs) offer a suite of financial statement services designed to cater to the unique requirements of stakeholders. These documents provide a snapshot of a company’s financial health, offering invaluable insights into its performance, liquidity, and overall viability. However, not all financial statements are created equal, and the level of assurance they provide vary significantly. This article aims to offers clarity on the distinctions between Compilation Financial Information Statements, Review Engagements, and Audit Engagements to ensure you have the tools for reliable and credible financial information.

Compilation of Financial Information Statements

Compilation of financial information statements represent the most fundamental form of financial statement services offered by CPAs. Unlike reviewed or audited statements, compilations involve the gathering, organizing, and presentation of financial data without providing assurance or validation of its accuracy. These statements are often used for internal purposes by management for strategic decision-making or for external purposes by third parties such as lenders, creditors, potential investors, and tax authorities.

While compilation statements may not adhere as strictly to accounting standards as Audit or Review Engagement level statements, they still follow certain guidelines to ensure credibility and reliability. CPAs play a crucial role in preparing compilation statements, presenting the financial information provided by management in an understandable and organized format. While CPAs do not express an opinion on the financial statements in compilation engagements, their expertise in financial reporting can guide businesses in making sound financial decisions and enhance their professionalism in dealings with third parties.

Who Are These Statements Suitable for:
Compilation statements are suitable for internal use by management for decision-making purposes where formal assurance is not necessary. They are also used in situations where external stakeholders require basic financial information but are willing to accept the lack of assurance.

Review Engagements

Review engagements occupy a middle ground between compilation and audit engagements, offering a moderate level of assurance to stakeholders. In a review engagement, CPAs conduct analytical procedures and inquiries of management to provide assurance that the financial statements are (statistically) free of material misstatement. These engagements are often used when businesses need to provide a higher level of assurance to external stakeholders such as lenders, creditors, and potential investors.

Review engagements must adhere to specific professional standards and may follow accounting standards such as ASPE or ASNPO. CPAs express a limited assurance opinion on the financial statements in review engagements. Their thorough analysis and assessment of the financial information can provide valuable insights to businesses and stakeholders, enhancing confidence in the financial reporting process.

Who Are These Statements Suitable for:

Review engagements are appropriate when stakeholders require a higher, but limited level of assurance than compilation statements but do not necessitate the rigor and cost associated with audits. They are commonly used by lenders, creditors, and potential investors, seeking limited assurance about a company’s financial position.

Audit Engagements

Audit engagements represent the highest level of assurance among financial statement services. In an audit, CPAs conduct a comprehensive examination of a company’s financial statements and underlying records to provide an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with applicable financial reporting frameworks.

Audit engagements are often required when businesses need to provide the highest level of assurance to external stakeholders. CPAs play a critical role in audit engagements, examining the company’s operations, industry, internal controls, and performing detailed testing of transactions and balances reported in the financial statements. The expression of an opinion by the Licensed Public Accountant (CPA) at the conclusion of the audit significantly enhances the credibility of the financial statements and provides stakeholders with the highest level of assurance.

Who Are These Statements Suitable for:

Audit engagements are typically required by external stakeholders such as regulators, investors, and creditors who demand the highest level of confidence in a company’s financial statements. They are essential for publicly traded companies, organizations receiving significant public funding, or those operating in highly regulated industries.

Considerations for Businesses

  • Cost: The cost of each type of financial statement service varies significantly. Compilations are typically the least expensive, followed by review engagements, and audits being the most costly due to their comprehensive nature.
  • Complexity: Audits involve the most extensive procedures and documentation, followed by review engagements and compilations. Businesses must consider the complexity of their operations and the level of detail required in financial reporting.
  • Stakeholder Expectations: Understanding the expectations of stakeholders is crucial in determining the appropriate level of assurance. Businesses should assess the needs of lenders, investors, regulators, and other stakeholders to ensure their financial reporting meets expectations.


Financial statement services are indispensable tools for businesses seeking to provide stakeholders with reliable and credible financial information. Whether through compilation, review, or audit engagements, CPAs play a vital role in ensuring the integrity and accuracy of financial reporting. By understanding the differences and purposes of each type of financial statement service, businesses can make informed decisions that instill confidence in stakeholders and support long-term success.

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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.

GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30, provides Audits and Reviews of financial statements, and Compilations of financial information, as well as corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.

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