Hi Everybody, I am Jonathan Sears from Sears Chartered Accountants.
Today we are going to talk about the difference between a compilation, a review and an audit. Very often, I get the question, which one do I need. Or briefly explain the three of them and discuss in general which one most people go with. We will start with a audit. An audit is the more thorough look an accountant can give at the books. Basically we are not just replying on what you are saying or looking at third party confirmations on the numbers. So we are basically looking for other people to tells us whether the numbers are correct. How do we do this? We send things like bank confirmations, we also send things like accounts receivables confirmations, basically we are looking to confirm if the numbers are indeed correct.
Item number 2 that we look at are reviews. Reviews are less assurance in a audit. They take less time to do, they cost less money than an audit and they are not as much assurance. Very often, reviews are acceptable for banks these days, in order to get loans,in order to make sure your covenants are correct so you can maintain your loan or line of credit with the bank.
The third possibility is notice to readers or commonly called compilations. Basically we take your word for what are numbers are supposed to be, often trial balance is given to us, and from there we calculate the taxes and produce your balance sheet and income statement without verifying any of the numbers whatsoever. Naturally, this is the cheapest of the 3 options and very often the option of choice for small businesses. Thank you for listening today. Remember, I am an accountant you can count on. Call this CA today.