Audits, Reviews, Compilations, and Preparations

Is your business looking for investors? Do you need a loan? Are your shareholders breathing down your neck for detailed financial information?

These are some of the situations where you might want to show that things are going well, business is booming, and investing in your business is a smart idea. But you cannot just shove a heap of paper at an investor and hope for the best. Nor can the investor take your word for it that your business is ready for growth.

Financial Statements Services

The solution is creating financial statements with the help of a CPA to offer the investor, financial institution, shareholder, or other interested party assurance that your business' financial health and operations are presented in an easy to read format and that the information is accurate and free of material errors.

Assurance is created through a three-party relationship between the business, the interested party, and the neutral professional that is offering assurance. At Terranova, we specialize in providing assurance through audited or reviewed financial statements, thus helping companies meet their capitalization goals and fostering confidence in their shareholders. In addition, we offer compilation services to help you present your financial data in a standardized format to interested parties, thereby providing them a clear picture of your business' financial health.


Providing the highest level of assurance to prospective investors and existing shareholders shows them exactly where your company sits financially. Assuring these interested parties that the information in your financial statements is accurate can give them confidence in the way your business runs.

Because it is the highest level of assurance, an audit requires an extensive analysis and review of your company’s information and records, including a review of the company’s internal control in order to provide the most accurate information. At Terranova, we go through a number of steps to complete a thorough audit in order to accurately assure investors or shareholders.

First, we perform an in-depth examination and confirmation of things like account balances, inventories, and selected transactions. Starting with the basics—verifying number and transaction accuracy—sets the groundwork for the analysis that is necessary in order to complete the audit.

We take a sample of some of your business’s transactions and test them to ensure that internal controls are working. In addition, the sample allows us to ensure that transactions are accurately recorded. This requires additional information in the form of confirmations and third party documentation.

Once we have tested the sample transactions, we can analyze the data to compare actual financial results with what was expected. At this stage, assistance from management is necessary to verify the information and make any inquiries.

Finally, after reviewing, analyzing, and testing all the data, the CPA in charge of your audit will compile a detailed report that you can hand off to the investor, financial institution, or shareholder. This report will include the accountant’s opinion—based on the data and analysis—as to whether the financial statements are accurate and free of material misstatement.


Less extensive than an audit, a review still provides assurance to people interested in your company. A review still requires the three-party relationship that gives your interested party confidence in your business.

In a review, our CPAs perform analytical procedures in order to compare the actual results with what was expected. We also require the assistance of management and may make inquiries, just as we would with an audit.

The main difference is that a review does not require that we review your internal control processes or sample transactions. When an individual, group, or company asks for assurance, a review is the minimum that they will expect. Still, an audit includes a report from the CPA, just like in an audit. The final accountant’s report provides limited assurance, stating that no material modifications should be made to the financial statements in order for them to be in accordance with accounting principles generally accepted in the US.

Compilations and Preparations

Best suited for internal reporting—used for management purposes and NOT to provide assurance—compilations and preparations simply show data in an easy to read way. There are some external circumstances in which a compilation or preparation may be useful, such as if a financial institution does not require assurance because sufficient collateral has already been provided.

A compilation or preparation is exactly what it sounds like: data compiled together to create a readable report. These are merely financial statements that can be used to show exactly how the company stands, what has changed, or what has stayed the same.

In a compilation or preparation, the CPA’s final report does not include a statement or opinion on whether or not the information is accurate because no analysis was performed. A compilation or preparation is also unique—as compared to audits and reviews—in that it is not necessary to have a third party accountant complete it. Because no assurance is given, an internal accountant can compile this data.

401(k) Audits

A lesser known accounting audit is the 401(k) audit. A 401(k) is a retirement savings plan offered by employers that qualifies for a variety of tax benefits. In order to enjoy these benefits, a 401(k) plan must meet a strict set of criteria, including filing a form 5500 showing the activity of the plan for that year. In some cases, when reporting your 401(k), you will need to file:

  • Additional supplemental schedules
  • Financial statements
  • Notes
  • Auditor’s report

If you need to file audited financial statements with your form 5500, your 401(k) plan may be eligible for a limited-scope audit. A limited scope audit is when the plan administrator instructs the plan auditor not to apply auditing procedures with respect to investment information prepared and certified by a bank, similar financial institution or insurance company. In order to quality, the bank or other organization must be regulated, supervised and subject to periodic examination by a state or federal agency.

The benefit of a limited scope audit is that it is much less expensive because the scope of the work is much more narrow. To meet the requirements for the limited-scope audit exemption, the custodian/trustee of plan assets must:

  • Be a qualified institution
  • Be able to certify both the completeness and accuracy of the required information
  • Be signed by a person authorized to represent the institution.

Even if your 401(k) plan qualifies for the limited-scope exemption, the exemption is only for those assets held by qualified institutions; therefore, if your 401(k) plan invested in other assets not held by a qualified institution, those assets would be subject to auditing procedures.

At Terranova, our experience in audits, reviews, and compilations is unparalleled. We have decades of experience helping our clients assure their investors and shareholders about the status of their companies. Request more information, and learn more about our financial statements services.