What is the main difference between a compilation, review, and audit?

The main difference is the level of assurance. A compilation provides no assurance, a review provides limited assurance, and an audit provides reasonable assurance. Each step up brings broader procedures, greater cost, and more time.

Does a compilation engagement provide any assurance?

No. A compilation engagement does not provide assurance. It involves organizing information management into a financial statement format, not verifying it.

Is a review engagement the same as a "light audit"?

No. A review uses analytical procedures and inquiry. An audit involves independent verification, third-party confirmation, and extensive evidence gathering. They are fundamentally different engagements.

When is an audit required?

In Canada, publicly listed companies, registered charities above certain revenue thresholds, and entities governed by specific regulatory bodies typically require audited financials. Lenders and investors may also require them as a condition of financing.

Do audits guarantee that fraud will be detected?

No. An audit provides reasonable assurance, not absolute assurance. A well-concealed fraud can still go undetected.

Are engagement letters required for all three services?

Yes. Engagement letters are required for compilation, review, and audit services, and each letter should be tailored to the specific engagement being performed.

Lindsey Denson

Accounting Subject Matter Expert

Lindsey Denson is the accounting subject matter expert at Financial Cents, where she makes sure the content firms rely on reflects how accounting work actually gets done. She has spent 10 years in accounting. Along the way she founded Above Board Accounting LLC, a firm built on doing things the right way, being honest and dependable, and treating clients like people rather than accounts on a spreadsheet. Lindsey enjoys the problem-solving side of accounting, but what she values most is helping people. That might mean getting a client caught up and organized, making sense of their numbers, or giving a business owner one less thing to worry about. She brings that same practical, client-first view to her writing on workflows, month-end close, tax prep, and firm operations.

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