A compilation, an independent review and audits?

A compilation, an independent review and an audit are both forms of financial assessment but differ in scope, depth, and purpose.

1. Independent Review:

   • Scope: More limited in scope than an audit.
   • Purpose: To provide a moderate level of assurance that the financial statements are free from material misstatement.
   • Procedures: Relies on analytical procedures and inquiries rather than detailed testing.
   • Report: Provides a review report stating that nothing has come to the reviewer’s attention that causes them to believe the financial statements are not in accordance with the applicable financial reporting framework.
   • Cost: Generally less expensive due to the reduced scope and procedures involved.

2. Audit:

• Scope: Comprehensive and extensive.
• Purpose: To provide a high level of assurance (reasonable assurance) that the financial statements are free from material misstatement.
• Procedures: Involves detailed testing of transactions, internal controls, and verification procedures.
• Report: Provides an audit opinion stating whether the financial statements present a true and fair view in accordance with the applicable financial reporting framework.
• Cost: More expensive due to the extensive nature of the procedures and the higher level of assurance provided.
3. Compilation:
• Purpose: To present financial information in the form of financial statements without providing any assurance on them.
• Scope: The accountant compiles the financial statements based on information provided by management, without performing any verification or analysis.
• Procedures: Involves organizing and presenting financial data but does not require the accountant to make inquiries or perform analytical procedures.
• Report: The compilation report states that the accountant did not audit or review the financial statements and does not express any assurance on them.
• Cost: Typically the least expensive due to the minimal procedures involved.

In summary, a compilation involves organizing financial data without providing any assurance, an independent review provides moderate assurance with a narrower scope of procedures, while an audit provides reasonable assurance with a thorough examination of financial records.