New Jersey Enterpreneur - Small Business, Entrepreneurs and Venture Capital

 The least complicated is called “Compilation” which is a financial statement that is created solely from the information provided by the business owner. Since the accountant makes no inquiries into details, these financial figures are considered to have low assurance for accuracy and validity. For a small business that has good bookkeeping and accounting controls and most importantly does not need to present their financials to outside third parties, this level of financial preparation is quite appropriate.

As a company grows, the accounting and financial needs of the company usually grow as well. Information may need to be seen by third parties such as banks or finance companies and they may insist upon a greater level of assurance from the accounting firm preparing the company?s financial statements. In this instance, the accounting firm conducts a “Review” which is a more thorough evaluation of the company?s numbers and figures that verifies certain information for its acccuracy that is more assuring to the third parties. This level of financial preparation is more time consuming and as a result more costly.

The highest level of financial preparation is the Audit. In this situation, the accounting firm makes extersive inquiries into the accounting controls of the company and makes sure that the financial statements have conformed with Generally Accepted Accounting Principles (GAAP). Audits are mostly associated with large private firms or public firms.