Understanding Audits, Reviews, and Compilations

Whether you’re applying for financing, planning for growth, or preparing for tax season, choosing the right level of financial statement service—audit, review, or compilation—can make all the difference.

At Froehling Anderson, our experienced CPAs help business owners like you determine the best fit for their needs.

Here’s what you need to know about each option.

An audit is the most comprehensive and detailed financial statement service. It provides the highest level of assurance that your financial statements are accurate and free from material misstatements. Think of an audit like a full medical check-up: your financials undergo extensive testing and verification.

Froehling Anderson’s CPAs will:

• Confirm balances and disclosures using source documents
• Request third-party confirmations
• Perform physical inspections and tests of controls
• Observe inventory counts
• Conduct inquiries and analytical procedures

An audit is ideal when you need to:

• Apply for large business loans or investor funding
• Prepare for an acquisition or IPO
• Comply with regulatory or legal requirements
• Build trust with stakeholders through verified financial transparency
• Detect fraud or serious errors in financial reporting

Best for: High-growth companies, investor-backed businesses, and those requiring the highest level of financial assurance.

A review provides limited assurance that financial statements are free of material misstatements. It’s less intensive than an audit, yet more thorough than a simple glance.

Imagine a doctor asking a few key questions and running quick tests—your vitals look good, but they’re not running MRIs.

Froehling Anderson’s CPAs will:

• Make analytical comparisons of your financial data
• Ask management about accounting principles and practices
• Review balance sheet and income statement relationships
• Evaluate whether results make sense based on industry norms

A review is appropriate when:

• External parties need some validation of your financials (e.g., lenders or minority investors)
• You want to boost credibility without undergoing an audit
• Your business is scaling up and preparing for more rigorous reporting in the future

Best for: Private companies with moderate reporting requirements or growing firms needing more credibility.

A compilation is the most basic level of financial statement service. It involves putting your financial data into professional financial statement format—no verification, no assurance, no testing.

Think of it like telling the receptionist your symptoms—they jot them down but don’t ask follow-up questions.

Froehling Anderson’s CPAs will:

• Scan for reasonableness and flag anything that seems off
• For some clients, we check whether month-end closes were performed
  • Including bank reconciliations and A/R and A/P aging schedules

However, we do not perform analytics or testing in a compilation.

A compilation is often used for:

• Internal financial planning and management review
• Informal reporting to non-bank lenders or advisors
• Early-stage startups or small businesses not subject to audit requirements
• Preparing clean, professional financials for your tax preparer

Best for: Small businesses, internal planning, or basic financial reporting needs.

*Photo is from Accounting Tools website.

Choosing the right service depends on:

• Your business size and complexity
• External stakeholder expectations
• Financing or legal requirements
• Your growth stage and budget

At Froehling Anderson, we work with businesses to provide right-sized financial statement services that fit your goals—without overextending your resources. Whether you need an audit to secure funding, a review for investor reporting, or a simple compilation to keep your financials organized, our experienced Minneapolis and St. Cloud based CPAs are ready to help.

Not sure which level of assurance is right for your business? Let’s walk through it together. Connect with Froehling Anderson, your trusted accountants and advisors, for a free personalized consultation.