Question

What is the difference between an audit, a review and a compilation? What type of assurance does the auditor provide for each?

Also, give the resources. The course is auditing

Answer 1

Compilation can be seen as the least service which can be provided to the client’s financial statement. The main things which are included in Compilation are information presentation, consistency with the representation of the management and having the financial statement structure and there will be no assurance provided to these.

While the Compilation engagement, there is no requirement of verifying or corroborate the data presented in the financial statements presented by the client. In case of misleading and incorrect information is found, there must be a revision of the information or more information should be collected.

In comparison to compilation., more procedures will be performed in case of review. While performing the review activity, it will be required to follow all the governing standards to ask the clients and execute analysis pertaining to the amounts and revelation of the financial information. Through inquiry and analysis, a limited assurance is provided and there is no possibility of further modifications in these statements. This does not involve testing of records.

In case of an audit, the highest level of assurance is facilitated and a lot of work has to be done by the auditor than the review or compilation. In an audit, the auditor is required to match the amount and disclosures which are provided in the financial statements with the help of testing the various documents, physically inspecting the documents, utilizing third part confirmations or any other process which is found to be suitable.