What is an attestation service?
AUDIT
An audit is performed on an entity’s financial statements and is probably the service that Certified Public Accountants are best known for. The primary objective is to issue an opinion on whether the statements are presented fairly in conformity with established criteria -usually generally accepted accounting principles. We do this by obtaining and evaluating evidence about an entity’s financial statements and records, as well as independent third party confirmation. An audit usually involves multiple days of fieldwork and a significant amount of planning and post fieldwork evaluation. The fees for this type of service typically range from $10,000 to $100,000, depending greatly on the size of the company and condition of the financial records.
REVIEW
A Review’s purpose is to give “negative assurance” on the financial statements as opposed to the positive opinion given in an audit. “Negative assurance” means basically that we are not aware of any material modifications that need to be made in order to be in conformity with generally accepted accounting principles. We do this by inquiries of an entity’s management and comparative analysis of financial information. The amount of work necessary to complete a review is significantly less than that of an Audit or Examination. A review usually involves several days of fieldwork and some planning and post fieldwork evaluation. The fees for this type of service typically range from $5,000 to $50,000, depending greatly on the size of the company and condition of the financial records.
EXAMINATION
An Examination is used to describe a service in which the primary objective is to express an opinion as to whether another party’s assertions conform to certain criteria. Examples of this service are examinations of prospective financial information (forecasts) and examinations to determine whether an entity’s internal controls conform to certain criteria that may or may not be established by governmental or regulatory agency. These fees would typically range from $3,000 to $20,000, depending on the engagement.
AGREED–UPON PROCEDURES
This service is basically as the title states -Agreed Upon Procedures with the client. The end result may be a summary of findings or some form of negative assurance such as in the Review. This type of service is usually done for specific elements or accounts and the report is restricted to only named parties involved. These fees would typically range from $1,000 to $10,000, depending on the engagement.
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In addition to these attestation services, CPA's also prepare financial statements that have no assurance. These are called Compiled Financial Statements. The cost of these financial statements are significantly less. Often these are prepared with year-end procedures.
COMPILED FINANCIAL STATEMENTS
Compiled financial statements, which are often referred to as unaudited statements, are not audited or attested to in any way, and therefore offer no opinion on the quality of the financial statements. Statements and guarantees about the accuracy of the financial statements are the responsibility of management. The CPA is not required to verify or confirm the records and they do not need to analyze the statements for accuracy. However, in the event that an accountant finds erroneous, misleading or incomplete information in the financial statements they must notify management or abandon their involvement in assessing the company’s financial statements.
