Choosing between review and compilation services is one of the most common decisions a private company faces when a bank, investor, or surety asks for CPA-prepared financial statements. The short answer is this: a compilation provides no assurance and simply presents management’s numbers in proper financial statement form, while a review provides limited assurance through inquiry and analytical procedures. A review costs more and does more, so the right choice usually comes down to what your lender or stakeholder actually requires. Understanding review and compilation services, and how they differ from a full audit, lets you meet third-party demands without overpaying for assurance you do not need.
This guide walks through the three levels of service under the AICPA’s Statements on Standards for Accounting and Review Services (SSARS), explains how assurance builds from one level to the next, and covers the practical question most owners ask us: which engagement will my bank accept?
The Three Levels of Service Under SSARS
Compilations and reviews are both governed by SSARS, which the AICPA’s Accounting and Review Services Committee issues and codifies in the AR-C sections of the professional standards. SSARS No. 21, the clarified and recodified foundation for these engagements, is effective for financial statements covering periods ending on or after December 15, 2015. A later update, SSARS No. 25, added a formal materiality requirement for reviews and is effective for periods ending on or after December 15, 2021.
SSARS defines three distinct engagements, each offering a different level of assurance. A preparation engagement under AR-C Section 70 is a nonattest service in which the accountant simply prepares the financial statements and provides no assurance. Each page carries a statement that no assurance is provided, and no accountant’s report is attached. Many private companies use preparation engagements for internal or tax purposes, but outside parties rarely accept them as standalone deliverables.
A compilation under AR-C Section 80 is the next step up. The accountant assists management in presenting financial information in the form of financial statements and issues a brief report, but performs no verification and expresses no opinion or conclusion. A review under AR-C Section 90 sits above the compilation and is the only SSARS engagement that provides assurance. It is important to note that audits are not SSARS engagements at all. Audits fall under generally accepted auditing standards (GAAS) and deliver the highest level of assurance. You can read more about how our team approaches these engagements on our audit and assurance services page.
Compilation Engagements: Presentation Without Assurance
In a compilation, the CPA takes financial data supplied by management and assembles it into financial statements that follow an acceptable reporting framework, such as US GAAP or the income tax basis of accounting. The accountant reads the finished statements to confirm they appear appropriate in form and are free from obvious material misstatement, but does not test transactions, confirm balances, or perform analytical procedures.
Because a compilation involves no verification, the accountant’s report expressly states that no opinion or assurance is provided. The report is short, typically a single paragraph, and makes clear that the user should not rely on the statements as audited or reviewed. Independence is not required to perform a compilation, which means a CPA who also handles the company’s bookkeeping can still issue one. When the accountant is not independent, however, that lack of independence must be disclosed in the report.
Compilations also permit flexibility on disclosures. Management can elect to omit substantially all the notes to the financial statements, provided the omission is disclosed in the report and is not undertaken to mislead users. This makes compilations the most economical and fastest CPA-reported engagement, which is why they are common for small businesses, internal management reporting, and lenders who are comfortable with a lighter touch.
Review Engagements: Limited Assurance Through Inquiry and Analytics
A review is a meaningful step up in both scope and credibility. The accountant performs inquiries of management and applies analytical procedures to the financial data, comparing recorded amounts against expectations developed from prior periods, budgets, and industry trends. The goal is to obtain limited assurance that no material modifications need to be made to the financial statements for them to conform with the applicable reporting framework.
That assurance is expressed negatively. Rather than opining that the statements are fairly presented, as an auditor would, the accountant concludes that nothing came to their attention indicating a material misstatement. This is often called negative or limited assurance, and it is the defining feature that separates a review from a compilation. SSARS No. 25 reinforced the rigor of reviews by requiring the accountant to determine materiality for the financial statements as a whole and to design procedures and evaluate results against that materiality, bringing review practice closer to the discipline of an audit.
Several practical requirements follow from this higher standard. Independence is mandatory for a review; a CPA who is not independent cannot perform one. Full disclosure is also required, so management cannot omit the notes the way it can in a compilation. A review does not include the substantive testing, confirmations, or internal control evaluation that define an audit, which keeps it well below an audit in cost while still giving users a reasonable basis for confidence in the numbers.
Review vs Compilation vs Audit: A Side-by-Side Comparison
The clearest way to see where each engagement fits is to line them up by the level of assurance delivered and the work performed to support it.
- Preparation (AR-C 70): No assurance. The CPA prepares the statements, no report is issued, and a legend notes that no assurance is provided. Independence is not required.
- Compilation (AR-C 80): No assurance. The CPA assembles the statements and issues a short report with no opinion or conclusion. Independence is not required, but any lack of independence must be disclosed. Notes may be omitted with disclosure.
- Review (AR-C 90): Limited (negative) assurance. The CPA performs inquiry and analytical procedures and concludes that nothing came to their attention suggesting material misstatement. Independence is required, and full disclosure is required.
- Audit (GAAS): Reasonable (positive) assurance. The auditor tests transactions and balances, evaluates internal control, obtains third-party confirmations, and issues an opinion on whether the statements are fairly presented. Independence is required, and this is the highest and most costly level of service.
Cost and timing track directly with assurance. A compilation is the least expensive and quickest of the three reported engagements, a review sits in the middle, and an audit is the most involved and most expensive. Specific fees vary widely based on company size, recordkeeping quality, and industry complexity, so treat any cost comparison as directional rather than fixed.
Which Engagement Do Lenders and Stakeholders Accept?
The deciding factor for most private companies is not preference but requirement. Lenders, bonding companies, private equity investors, and franchisors frequently specify the level of CPA-prepared financial statements they will accept, and that specification usually lives in a loan covenant or contract.
Smaller community banks and operating lines of credit often accept a compilation, particularly for established borrowers with strong collateral and a long relationship. As loan size, risk, or complexity rises, lenders tend to require a review for the limited assurance it provides. Larger credit facilities, bonding programs for contractors, and investor or regulatory requirements commonly push a company into a full audit. Franchisors, private equity firms, and certain government programs may also dictate the engagement level regardless of company size.
Industry context matters as well. Construction companies pursuing larger bonded projects, manufacturers with asset-based lending, and real estate entities with institutional investors all tend to face higher assurance expectations than a comparably sized business in a lower-risk sector. If your company operates in a specialized field such as construction, the right engagement often depends on the surety and lender norms specific to that market. The most reliable approach is to read the exact wording of your loan or contract requirements before selecting an engagement, since asking for a review when a compilation would satisfy the lender simply adds cost.
How to Choose the Right Engagement for Your Company
Start with the external requirement. Ask every stakeholder who will receive your financial statements what level they require and get that answer in writing, because meeting a covenant with the correct engagement avoids both deficiency letters and wasted fees. If no outside party requires assurance and the statements are purely for internal use, a preparation engagement or a compilation is often sufficient.
Next, weigh cost against credibility. A review costs more than a compilation but provides limited assurance that can strengthen your standing with lenders, support a future financing round, or lay the groundwork for an eventual audit. Companies anticipating growth, a sale, or new institutional capital frequently move up a level ahead of need so the transition is smoother when the requirement arrives.
Finally, consider the trajectory of your business. The three SSARS levels and the audit above them form a natural ladder, and many private companies climb it over time as they scale. Working with a CPA firm that performs all of these engagements lets you match the service to the moment and step up only when your financing, ownership, or regulatory situation genuinely calls for it.
Talk to Pease Bell About Review and Compilation Services
Review and compilation services exist to give private companies a credible, cost-appropriate way to satisfy lenders and stakeholders without defaulting to a full audit. A compilation presents your numbers in proper form with no assurance, a review adds limited assurance through inquiry and analytics, and an audit delivers reasonable assurance at the top of the ladder. The right choice depends almost entirely on what your bank, bonding company, or investors require.
If you are weighing the options or responding to a new lender request, our professionals can help you interpret the requirement and scope the appropriate engagement. Reach out to Pease Bell, CPAs to discuss which level of service fits your company’s current needs and where it is headed.
Sources and Further Reading
- AICPA & CIMA, Preparation, Compilation, and Review Standards (SSARS / AR-C sections 70, 80, 90): https://www.aicpa-cima.com/resources/landing/preparation-compilation-and-review-standards
- Journal of Accountancy, “A bright line in SSARSs,” on SSARS No. 21 compilation and preparation engagements: https://www.journalofaccountancy.com/issues/2014/dec/ssars-21-compilations-engagements/
