14 Jan 2026 Audit vs. Review vs. Compilation: Which One Do You Need?
Authored by Ty Holman
When a business or organization is asked to provide financial statements, a common follow-up question is whether those statements must be audited. The answer depends largely on who is requesting the financial statements and how much assurance they require. While audits, reviews, and compilations may appear similar on the surface, they differ significantly in scope, cost, and the level of assurance provided.
Who This Is For
This article is intended for business owners, nonprofit leaders, CFOs, controllers, and finance professionals who are responsible for preparing or providing financial statements to lenders, investors, regulators, or other stakeholders.
Why This Matters
Selecting the appropriate type of financial statement engagement impacts credibility, compliance, cost, and the expectations of third-party users. Understanding the differences between audits, reviews, and compilations helps organizations meet requirements without overcommitting resources or underdelivering assurance.
Key Considerations
What’s Changing
While the format of financial statements may look similar, the procedures performed and assurance provided vary greatly among audits, reviews, and compilations.
Audit: The Highest Level of Assurance
An audit provides the highest level of assurance that financial statements are presented fairly in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).
In an audit, accountants typically:
- Perform detailed testing of transactions and account balances
- Evaluate internal controls
- Obtain third-party confirmations such as bank or customer confirmations
- Assess estimates, management judgments, and fraud risk
- Perform analytical procedures
- Make inquiries of management
- Compare current-year results to prior periods and expectations
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- No assurance is provided
- The accountant does not verify or test the information
- Financial statements clearly disclose that no assurance is given
Compilations are often used for internal management purposes, closely held businesses, or situations where third-party assurance is not required. Compiled financial statements may also be prepared on a basis other than GAAP or IFRS, such as the cash or income tax basis, if properly disclosed.
Comparison of Financial Statement Engagements
Feature Audit Review Compilation Level of Assurance High (reasonable assurance) Limited assurance No assurance Testing of Transactions Yes No No Internal Control Evaluation Yes No No Third-Party Confirmations Yes No No Analytical Procedures Yes Yes No Inquiries of Management Yes Yes Limited GAAP/IFRS Compliance Required Yes Yes Not required* Commonly Required By Lenders, investors, regulators Banks, stakeholders Management Relative Cost Highest Moderate Lowest *Financial statements in a compilation may be prepared on a basis other than GAAP or IFRS if properly disclosed.
How to Choose the Right Engagement
Choosing the right level of financial statement engagement depends on several factors, including who will use the financial statements, any lender, regulatory, or contractual requirements, the size and complexity of the entity, and cost considerations. When a third party requires audited or reviewed financial statements, that requirement typically dictates the engagement type. If no such requirements exist, a compilation may be sufficient to meet the organization’s needs.
How Haynie Supports Clients
Haynie works closely with clients to understand their reporting needs and stakeholder requirements. We help organizations select the most appropriate engagement level, balancing compliance, cost, and assurance, whether that means an audit, review, or compilation.
Common Questions
What Is the Most Significant Difference Between an Audit, Review, and Compilation?
The key difference is the level of assurance provided, ranging from high assurance in an audit to no assurance in a compilation.
Who Typically Requires Audited Financial Statements?
Audited statements are commonly required by lenders, investors, regulators, or grant-making organizations.
Is a Compilation Ever Enough?
Yes. When third-party assurance is not required, a compilation can meet internal reporting needs at a lower cost.
Final Thoughts
Understanding the differences between audits, reviews, and compilations allows organizations to make informed decisions that meet stakeholder expectations without unnecessary complexity. If you have questions about which engagement is right for your organization, your Haynie team is available to help you evaluate your options and determine next steps.
Contact Us
Have a question or ready to start a conversation? We’re here to help.
Audits are commonly required by lenders, investors, regulators, or grantor agencies. Because of the depth of procedures involved, audits require more time and are generally the most costly option, but they provide the greatest level of confidence to users of the financial statements.
Review: Limited Assurance at a Lower Cost
A review provides limited assurance that no material modifications are needed for the financial statements to be in conformity with GAAP or IFRS.
In a review, accountants primarily:
Reviews do not include detailed testing of transactions or balances, making them less expensive and faster than audits while still providing some independent assurance.
Compilation: No Assurance, Just Presentation
A compilation involves presenting financial information in financial statement format using data provided by management.
In a compilation: