Can a compilation make more sense than an audit or review? (cont.)
Consequently, before deciding to engage an auditor to perform an audit or review, you should determine whether you really need one, or whether a compilation will do just as well. Here are some factors to consider:
Your need for financing; do you need a substantial amount or can you make do with a smaller amount?
Are your books in good order, or does your accounting system deliver reliable financial information?
Have you looked into alternative sources of funding that don't require an audit or review, or perhaps even a compilation, but may cost more in terms of higher fees or interest charges? These additional costs may turn out
to be lower than the cost of an audit or review. Going this route may even enable you to obtain the funding quicker than with traditional financing as with a bank.
Your relationship with the funding source. They may be willing to grant you more leeway in meeting financial reporting requirements depending upon your credit history with them or commitment to achieving your
organization's mission. The IRS is an example of the latter case, as I learned when I applied for tax-exempt status for a non-profit organization. A well-documented mission statement on IRS form 1023, followed by
examples of activities consistent with my client's mission went a long way towards obtaining the tax exemption.
If you must have an audit or review, you may not need one every year. It may be enough to alternate between having audits and compilations performed. How often you have an audit as opposed to a compilation would depend upon a few factors described above,
such as the state of your accounting system i.e. its reliability, your relationship with the funding source, how much funding you need, and their determination of the overall risk associated with the financing.
A compilation engagement can be combined with other professional services to strengthen your accounting system, making an audit or review less necessary to improve your system's reliability and "keep your fiscal house in order":
These services can impair the CPA's independence when performing the compilation, unless the CPA doesn't assume management responsibility or doesn't make management decisions for your organization.
A qualified CPA can also help you prepare for an audit by reconciling accounts timely e.g. bank reconciliations, preparing schedules and work papers that the auditor would prepare, e.g. investment and loan schedules. Doing this would reduce the amount of work
your auditor needs to do, and therefore, reduce the cost of the audit. This is a service we can provide, having helped companies prepare for audits for many years. We also assisted auditors with their audit work.
As indicated above, a compilation engagement is separate from a preparation of financial statements engagement which would be performed under SSARS* 21, AR-C section 70. This wasn't the case prior to SSARS 21; financial statements then were routinely prepared by a CPA as part
of the compilation.
See below for our rates for financial statement preparation services.
Fees for our compilation and financial statement services:
compilation, without financial statement preparation
Statement preparation without applicable disclosures
as required by the applicable reporting
framework, e.g. US GAAP
Statement preparation with applicable disclosures
Statement preparation without required applicable
disclosures and without a Statement of Cash
Statement preparation with applicable disclosures and
without a Statement of Cash Flows
Statement preparation prepared in accordance with the
tax basis of accounting
on supplementary information
statement presentation, with or without discussion of financial data
i.e. we'd give the presentation, or we'd prepare the slide show or other
media display for you to give it.
with additional services such as financial statement
preparation, accounting and or bookkeeping,
internal control study
Other finc'l. stmt. services such as budgeting,
SSARS no. 21 - The New Compilation and Review Standards. Professional Publication Services, LP 2015.
* Statements on Standards for Accounting and Review Services, #7285 CPE Course material. SSARS 21 is effective for engagements
performed in accordance with SSARSs for periods ending on or after December 15, 2015.
** The higher fee in the range generally applies if you're engaging us to render these services for the first time, or based on the complexity of