Compilation financial statements are prepared using accounting information supplied by the entity’s management. In a compilation engagement, the practitioner organizes this information into financial statement format but does not perform procedures to verify its accuracy or completeness.

These statements typically include a compilation engagement report, a balance sheet, and a statement of earnings and retained earnings. They often do not include a statement of cash flows or detailed notes to the financial statements.

The compilation report provides no assurance to the reader. As a result, these financial statements are best suited for internal use and are commonly used as a basis for preparing corporate tax returns. In certain client-specific situations, they may also satisfy the reporting needs of lenders or investors.

Review financial statements are prepared using accounting information supplied by the entity’s management. In a review engagement, the practitioner performs procedures primarily consisting of inquiries of management, applying analytical procedures, and evaluating the evidence obtained.

Compared to compilation financial statements, review financial statements generally provide a higher level of detail. They typically include a statement of cash flows and more comprehensive notes to the financial statements.

The review report provides limited assurance to the reader, indicating that nothing has come to the practitioner’s attention that suggests the financial statements are materially misstated. As a result, these financial statements are commonly requested by lenders and investors who require a moderate level of assurance.

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