Your financial statements play a critical role in your business decisions, and for most business entities, financial reporting is also a legal requirement. While some businesses may require the in-depth analysis of an audit, many smaller, privately held companies can benefit from a less comprehensive compilation.
Unlike an audit which requires the auditor to perform, produce and provide an opinion on your financial statement, a compilation uses information provided by the business’ management to prepare financial statements on an annual, semi-annual or monthly basis. Because the information is provided by the company itself, your accountant cannot verify certain aspects of the report and cannot confirm whether or not the statement’s contents will be in compliance with tax accounting or other accounting principles. Instead, the financial information is arranged according to standard financial statement format with no in-depth analysis unless the accountant finds the data to be incomplete or otherwise in error.
For most companies, the primary function of a compilation is to gain an overview of operating costs in order to facilitate more informed financial decisions. Before beginning a compilation for your business, your Hogg, Shain & Scheck accountant will advise you if additional or more intensive accounting services are needed or if a compilation based on the data you provide will be sufficient for your business’ needs.
As an internal document, a compilation may be just what your company needs to help it gain a better perspective and stay on track with its goals. But in situations where the company must prove its financial merits, an audit or review may be a better choice. To learn if a compilation is right for your company, call Hogg, Shain & Scheck today at 416.499.3100.