Attestation & Assurance

ATTESTATION & ASSURANCE

Assurance services can include a review of any financial document or even a transaction.

For example, a client may engage the practitioner to assist specified parties in evaluating subject matter or an assertion as a result of a need or needs of the specified parties. This agreed-upon procedures engagement is one in which a practitioner is engaged by a client to issue a report of findings based on specific procedures performed on subject matter and not just financial statements (i.e., attestation).

Specifically regarding assurance and Financial Statement Services, VK provides four different types, and each one provides different levels of assurance with varying objectives and characteristics as shown below:

ASSURANCE FOR FINANCIAL STATEMENT SERVICES

	Financial Statement Preparation (See also Fractional CFO Services)	Compilation	Review	Audit
Assurance	CPA does not obtain or provide any assurance that there are no material modifications that should be made to the financial statements		CPA obtains limited assurance that there are no material modifications that should be made to the financial statements	The CPA obtains reasonable (defined as high, but not absolute) assurance about whether the financial statements are free of material misstatement
Objective	To prepare financial statements pursuant to a specified financial reporting framework	To apply accounting and financial reporting expertise to assist management in the presentation of financial statements	To obtain limited assurance as a basis for reporting whether the CPA is aware of any material modifications that should be made to the financial statements for them to be in accordance with the applicable financial reporting framework, primarily through the performance of inquiry and analytical procedures	To obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement thereby enabling the CPA to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework and to report on the financial statements in accordance with the auditor’s findings
The CPA is required to be independent	No	No — but if the CPA is not independent, the CPA is required to indicate lack of independence in the CPA’s compilation report
The CPA is required to obtain an understanding of the entity’s internal control and assess fraud risk	No	No
The CPA is required to perform verification and substantiation procedures	No	No	No
The CPA issues a formal report on the financial statements	No. Disclaimer that no assurance is provided
Situations requiring different levels of service	Intended for the business owner’s own use to have the current information needed to know the financial standing of the business and to make business decisions accordingly. Similar to what an in-house controller or CFO would provide for management in a larger company. The financial statements may be shared with third parties	Typically appropriate when initial or lower amounts of financing or credit are sought or there is significant collateral in place. Outside parties may appreciate the business’s association with a CPA, which is readily apparent in the formal compilation report	Typically appropriate as a business grows and is seeking larger and more complex levels of financing and credit. It is also useful when business owners themselves are seeking greater confidence in their financial statements to evaluate results and make key business decision	An audit is typically appropriate and often required when seeking complex or high levels of financing and credit. Also appropriate when seeking outside investors, seeking to sell the business or considering a merger
Differences in cost for each level of service	Varies based on the financial records provided and the scope	Least time consuming of the services in which the CPA issues a formal report	More time consuming than a compilation but substantially less than an audit	Involves the most work and, therefore, the most CPA time

ADVISORY & CONSULTING

ACCOUNTING