Levels of assurance
Audit
An audit is an independent examination of management’s financial statements for the purpose of forming an opinion on whether the financial statements are free of material misstatement. While audited financial statements are not absolute, they are the highest degree of assurance and will enable management, lenders, investors and other users to make better informed decisions.
Review
A review is conducted by an accountant to provide limited assurance that there are no material modifications that should be made to management’s financial statements. A review provides a higher level of assurance than a compilation, but less than an audit. The purpose of a review is not for an accountant to opine on the financial statements.
Compilation
A compilation is an engagement in which an outside accountant prepares and presents financial statements to management. Compilation procedures are not designed to express an opinion or provide assurance regarding the financial statements.