Compilation, Review and Audit: Key Differences and Timelines

Compilation, Review, and Audit: What’s the Difference and How Long Do They Take?

October 8, 2025

Businesses are usually required to present financial statements to obtain loans for construction or growth purposes, attract new investors, satisfy regulatory requirements, or to comply with internal needs. Depending on the nature and extent of those needs, businesses may be asked to obtain a CPA report on their financial statements for these purposes. The American Institute of Certified Public Accountants (AICPA) has provided guidance on three types of financial statement reports that CPAs can issue with varying degrees of assurance: compilation, review, and audit. These three services represent varying levels of assurance and effort, and choosing the right one depends on your organization’s needs, stakeholders, and regulatory requirements. The following is a summary of each of these services.

Compilation: Organizing Financial Data Without Assurance

A compilation is the most basic level of financial statement services. In this engagement, a CPA takes financial data provided by management and presents it in the form of financial statements. There is no verification of the data and no assurance provided about its accuracy. These are most appropriate for initial or lower amounts of financing. The business obtains some comfort that the financial statements are presented in appropriate format.

Review: Limited Assurance Through Inquiry and Analysis

A review provides limited assurance that the financial statements are free from material misstatement. The CPA performs analytical procedures and inquiries of management but does not test internal controls or verify balances through substantive procedures such as verifying balances with third-parties or examining supporting documents. The report the CPA issues states whether the CPA is aware of any material modifications in accordance with a specified framework. Applicable notes to the financial statements are also usually prepared.

Audit: High Level of Assurance and Rigor

An audit is the most comprehensive and rigorous assurance service performed by CPAs. It provides reasonable assurance that the financial statements, including its related footnotes, are free from material misstatement, whether due to error or fraud. Auditors perform extensive testing, including confirmation of balances, inspection of documents, analytical procedures, and evaluation of internal controls. The testing includes sampling of transactions and verification of their accuracy and completeness through review of supporting evidence and third-party verifications. The CPA opines on whether they have obtained reasonable assurance, but not absolute assurance, regarding whether the financial statements are presented in accordance with the applicable financial reporting framework.

Independence: A Key Differentiator

One of the most important distinctions among these services is the level of independence required of the CPA:

• Compilation: Independence is not required, but the CPA must disclose any lack of independence in the report. This allows firms to assist clients with bookkeeping and still issue compiled financials.
• Review: Independence is required. The CPA must be free from any relationship that could impair objectivity. This ensures that the limited assurance provided is unbiased.
• Audit: Independence is strictly required. Auditors must maintain complete objectivity and avoid any conflicts of interest. This is essential given the high level of assurance and reliance placed on audited financials by external stakeholders.

Maintaining independence is not just a regulatory requirement, it’s a cornerstone of trust in the financial reporting process.

Below is a table summarizing these differences:

Choosing the Right Service

The decision often depends on:

• Stakeholder expectations (e.g., lenders may require an audit and not accept a review or compilation).
• Regulatory requirements (e.g., nonprofits may need audits for grant compliance).
• Budget and timeline (compilations are faster and cheaper, audits are more thorough).
• Independence considerations (can be a concern if your CPA is involved in other aspects of your business).

Need Help Deciding? Contact a Larson Expert

At Larson & Company, our experienced professionals can help you determine the best fit for your financial reporting needs. Whether you’re preparing for a loan, managing investor expectations, or simply want clarity, we’re here to guide you. Contact a Larson accounting expert today to discuss your situation and get personalized advice.  Larson and Company has developed a suite of services specifically to serve the needs of companies of all sizes in a wide range of industries.