INSIGHT

Audit vs. Review vs. Compilation: What’s the Difference? 

Kristine Malmanis • November 19, 2025

Services: Audit, Reviews & Compilations

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When your business needs financial statements for lenders, investors, or other stakeholders, you’ll likely encounter requests for “audited,” “reviewed,” or “compiled” financial statements. These terms represent different levels of assurance that a CPA provides regarding your financial information’s accuracy and reliability. Understanding these distinctions helps you choose the right service for your specific situation while managing costs effectively.   

Audit vs. Review vs. Compilation 

Each service offers a different level of CPA involvement and assurance, from basic compilation services that focus on proper formatting to comprehensive audits that provide the highest level of confidence in your financial statements. This article will explore the key differences between compilations, reviews, and audits to help you determine which service best meets your business needs. 

Understanding Compilation Services 

A compilation represents the most basic level of financial statement service. During this process, your CPA takes the financial data you provide and formats it into proper financial statements without performing any verification procedures. 

The CPA gains a general understanding of your business and its accounting policies but doesn’t test your records, evaluate internal controls, or assess fraud risk. You might need to provide certain documents like  contracts to help draft financial statement footnotes, but the CPA doesn’t verify this information’s accuracy unless something may stand out as blatantly inaccurate. 

Because compilation work involves limited procedures, these services cost less than reviews or audits. However, the compilation report explicitly states that no assurance is provided regarding the accuracy of your financial statements. The CPA doesn’t need to maintain independence from your company, but must disclose any lack of independence in the report. 

“Compilations work well when you need formatted financial statements for internal use or when external parties require basic financial information without extensive verification.” – Kristine Malmanis – Partner, Assurance 

What Review Services Involve 

Review services provide a middle ground between compilations and audits. Your CPA performs analytical procedures and makes inquiries to provide limited assurance that your financial statements don’t require material modifications. 

During a review, the CPA compares your current year numbers to prior years, analyzes financial ratios against industry benchmarks, and investigates unusual variances. If something appears inconsistent, they’ll ask management questions or request supporting documentation to understand the discrepancy. 

Unlike compilations, review services require CPA independence. Your accountant can’t have financial interests in your company, serve in management roles, or face pressure to promote your business interests. 

“A financial statement review provides growing businesses with limited assurance that their financial statements are accurate, which helps builds credibility with management, lenders, and investors, without the cost of a full audit.” – Kristine Malmanis 

Reviews don’t include testing accounting records, evaluating internal controls, or assessing fraud risk like audits do. The review report states whether the CPA is aware of any material modifications needed for your financial statements to conform to specified accounting standards. 

This service level often satisfies lenders and investors who want more assurance than a compilation provides but don’t require the comprehensive verification that audits deliver. 

Comprehensive Audit Procedures 

Audits provide the highest level of assurance available from a CPA firm. The objective involves obtaining reasonable assurance that your financial statements present a fair view of your company’s financial position and conform to applicable accounting standards like GAAP. 

Auditors perform extensive procedures to achieve this assurance level. They obtain an understanding of your internal controls, assess fraud risk, and conduct detailed testing of account balances and transactions. This includes confirming balances with third parties, observing physical inventory counts, and examining supporting documentation for significant transactions.  

“Audit-level assurance is required in situations where owners, lenders, or other stakeholders need a higher level of confidence that the financial statements are free of material misstatement. Examples include public companies or companies seeking significant financing.” – Kristine Malmanis 

The term “reasonable assurance” is important here. Auditors can’t provide absolute assurance because they typically test samples rather than every transaction, and accounting standards require professional judgment in their application. 

Independence requirements for audits match those for reviews. The CPA must maintain objectivity and avoid conflicts of interest that could compromise their professional judgment. 

Because of their comprehensive nature, audits require the most time and resources, making them the most expensive assurance service. However, they provide stakeholders with the highest confidence level in your financial information. 

Learn more about our Audit Services

Choosing the Right Service for Your Business 

Your choice between compilation, review, or audit services depends on several factors. Consider who will use your financial statements and what level of assurance they require. Banks seeking larger loan amounts typically want reviews or audits, while smaller financing might accept compilations. 

Think about your business’s complexity and risk profile. Companies with sophisticated operations, significant transactions with related parties, or complex accounting issues often benefit from higher assurance levels. 

Budget considerations also play a role. While audits provide maximum assurance, they’re not always necessary or cost-effective for every situation. 

The stage of your business development matters too. Startups might need only compilations, while established companies seeking investors or planning acquisitions typically require audits. 

Working with BPM for Your Assurance Needs 

BPM provides comprehensive audit, review, and compilation services tailored to your specific business requirements. Our team works closely with you to understand your stakeholder needs, industry requirements, and budget considerations to recommend the most appropriate service level. We recognize that choosing the right assurance service involves balancing cost considerations with the credibility your financial statements need to support your business objectives. 

Whether you need basic compilation services for internal management reporting or comprehensive audit procedures to support major financing transactions, BPM delivers quality services that meet professional standards while serving your business interests. To discuss which financial statement service best supports your current business goals and stakeholder requirements, contact us.