Through our audit services area, we work with clients on multiple levels. These areas include:
- Audit: An intensive level of service that yields an opinion on all financial statements
- Reviews: The next level of service which provides limited assurance that no material modifications need to be made to financial statements
- Compilations: The lowest level of service that does not include an opinion or assurance of financial statements
- Agreed-Upon Procedures: This is provided when an audit, review or compilation is not necessary
Below is a more detailed description of each level of service we provide:
Why Performed: Most often, an audit is performed because outside third parties (such as banks, creditors and outside investors) require an auditor’s opinion on financial statements. The objective of an audit is to express an opinion about whether the financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles (GAAP) or some other financial reporting framework.
Standards Met: An audit is conducted in accordance with Generally Accepted Auditing Standards (GAAS) and includes tests of accounting records and other procedures considered necessary to express such an opinion. In accordance with these standards, BlumShapiro plans and performs the audit to obtain reasonable, but not absolute, assurance about whether the financial statements are free of material misstatement.
Work Process: An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. This evidence is obtained through inquiry, physical inspection, observation, third party confirmation, examination, analytical procedures and other steps. An audit also includes assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation.
Our audit includes obtaining an understanding of the entity and its environment, including internal control. This is used to assess the risk of misstatement of the financial statements and to design the nature, timing and extent of audit procedures. An audit is not designed to provide assurance on internal control or to identify deficiencies in internal control. However, our efforts during the audit process and related services often help us to identify and address issues related to:
- Internal Controls
- Business processes and inefficiencies
- Areas for cash flow improvement
- Company and industry trends
- General business advice and concerns
Why Performed: The objective of a review is to obtain limited assurance that there are no material modifications that should be made to the financial statements. A review is typically performed because outside third parties or investors are looking for some comfort that the financial statements are not materially misstated, but do not require audited statements.
Standards Met: A review is conducted in accordance with Statements on Standards for Accounting and Review Services (SSARS) issued by the AICPA and consists primarily of inquiries of company personnel and analytical procedures applied to financial data.
Work Process: A review is significantly less in scope than an audit in accordance with GAAS and only provides limited assurance that there are no material modifications that should be made to the financial statements. There is no expression of an opinion on the financial statements taken as a whole.
Why Performed: A compilation is typically performed when a higher level of service on the financial statements is not required by outside parties or others.
Standards Met: A compilation must comply with SSARS and requires the accountant to have an understanding of the client’s industry, obtain knowledge about the client, read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors.
Work Process: In a compilation, the accountant assists management in presenting financial information in the form of financial statements without providing any assurance that there are no material modifications that should be made to the financial statements. It does not contemplate any of the procedures ordinarily performed in an audit or a review. A compilation is limited to presenting in the form of financial statements information that is the representation of management. There is no expression of an opinion or any other form of assurance on the financial statements.
If your organization has a reporting need outside the scope of an audit, review or compilation, an agreed-upon procedures (AUP) engagement may be an effective alternative.
Why Performed: An AUP engagement is typically performed when the specified parties can agree upon the procedures needed to meet their needs, and those parties do not require the expression of an opinion or any other form of assurance on the subject matter or financial statements. Examples might include procedures to test the existence or quality of loan collateral, due diligence procedures for a potential acquisition or calculation of return statistics on an investment.
Standards Met: An AUP engagement is performed in accordance with attestation standards (SSAE) established by the AICPA.
Work Process: In an AUP engagement, the parties agree upon the specific procedures to be performed by the accountant, and the accountant reports back on the results of those procedures. The sufficiency of the procedures is solely the responsibility of the parties specified in the report, and the accountant makes no representation regarding the sufficiency of the procedures for purpose of the report or for any other purpose. Agreed-upon procedures do not constitute an examination under SSAE and no opinion is expressed on the subject matter.