# Audit vs Review vs Compilation: Which Level Do You Need?

Canonical: https://finbryn.com/us/guides/audit-vs-review-vs-compilation

Finbryn provides bookkeeping and financial statement preparation for businesses that must hand a lender, surety or investor audited, reviewed or compiled statements, so the CPA practice starts from reconciled books. An audit gives reasonable assurance, a review limited assurance and a compilation none (AICPA standards AU-C 200, AR-C 90 and AR-C 80, read 2026-10-19). Only a licensed CPA practice issues any of the three reports.

## Key takeaways

- An audit gives reasonable assurance (AU-C 200.06), a review gives limited assurance (AR-C 90.07) and a compilation gives none (AR-C 80.02). The AICPA standards were read on 2026-10-19.

- Audits and reviews need an independent CPA practice. A compilation doesn't, but its report must say so when independence is missing (AR-C 80.22).

- Under the Uniform Accountancy Act model (section 14(a)), only a licensed CPA practice or an individual with practice privileges may issue any of the three reports. Finbryn issues none.

- Who asked decides the level. SBA's surety program, 16 CFR 436.5 for franchise disclosure documents, Nevada and Florida association statutes, 2 CFR 200.501 for federal awards and your own loan agreement each set it differently.

- CPA-prepared is not one of the three levels. Get the level, the periods and the accounting basis named in writing before you pay for anything.

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

An audit gives reasonable assurance, a review gives limited assurance and a compilation gives none. The three also differ in the work behind the report, the independence the CPA needs and the weeks each takes.

| | Audit | Review | Compilation |
| --- | --- | --- | --- |
| Assurance | Reasonable: high, but not absolute (AU-C 200.06) | Limited: less than an audit (AR-C 90.07) | None: not an assurance engagement (AR-C 80.02) |
| Work behind it | Risk assessment including fraud risk, a look at internal controls, then verification and substantiation | Mainly inquiries and analytical procedures (AR-C 90.07) | Accounting expertise applied to present management's information, with no verification of it (AR-C 80.04) |
| What the report says | An opinion on whether the statements are presented fairly | Whether the accountant is aware of material modifications the statements need | No opinion, no conclusion, no assurance |
| Independence | Required (AU-C 200.15) | Required; withdraw if impaired (AR-C 90.10) | Not required, but the report must state a lack of it (AR-C 80.22) |
| Who issues it | A licensed CPA practice | A licensed CPA practice | A licensed CPA practice |
| Weeks practices publish | 4 to 8 for small and mid-sized companies; 6 to 8 or more | 5 to 6 | Days to 1 week (nonprofit page) |

The standards are the AICPA's clarified [AU-C sections](https://www.aicpa-cima.com/resources/download/aicpa-statements-on-auditing-standards-currently-effective) and [AR-C sections](https://www.aicpa-cima.com/resources/download/aicpa-ssarss-currently-effective), read 2026-10-19. The plain-language framing follows the [AICPA's comparison page](https://www.aicpa-cima.com/professional-insights/video/what-is-the-difference-among-a-compilation-review-and-audit), dated 2023-09-30. The weeks come from [Guzman Gray](https://guzmangray.com/cost-financial-statement-audit/), [BPM](https://www.bpm.com/insights/audit-or-review) and [WhippleWood CPAs](https://whipplewoodcpas.com/insights/nonprofit-audit-vs-review-vs-compilation/). They are what those practices publish, not a quote, and they disagree on reviews: BPM says 5 to 6 weeks and WhippleWood says 1 to 3.

## What do the opinions and conclusions actually say?

The auditor's opinion comes in four forms, while a review report and a compilation report each use wording of their own.

| Report | What it says | Source |
| --- | --- | --- |
| Unmodified opinion | The statements are presented fairly, in all material respects, under the stated framework | AU-C 700 |
| Qualified opinion | A material but not pervasive misstatement, or evidence the auditor could not get | AU-C 705.A1 |
| Adverse opinion | The statements are materially and pervasively misstated | AU-C 705.A1 |
| Disclaimer of opinion | The auditor could not get enough evidence, and the possible effects are material and pervasive | AU-C 705.A1 |
| Review report | Whether the accountant is aware of material modifications the statements need; no opinion | AR-C 90.07 |
| Compilation report | No opinion, no conclusion, no assurance; a final paragraph discloses any lack of independence | AR-C 80.02, 80.22 |

Two things follow if you are reading someone else's statements. A lender that asks for audited statements is asking for a report, so ask which opinion it will accept; a qualified opinion still comes from an audit. And nobody who prepares your books can promise you a particular opinion. The CPA practice decides, on the evidence it obtains.

## Who is allowed to issue the report, and where does Finbryn stop?

Only a licensed CPA practice, or an individual with practice privileges, may issue any of the three reports, and Finbryn is neither. Section 14(a) of the [Uniform Accountancy Act](https://nasba.org/app/uploads/2019/12/UAA12.19.19withNewCPEStandardsFINALwithoutlogos.pdf), the model act NASBA and the AICPA publish (2018 edition), reserves the issuing of a report on financial statements, and any offer to render an attest or compilation service, to licensees. The same section lets a non-licensee prepare financial statements without a report. A model act is not law by itself: each state's accountancy statute and board rules govern, and a state may add to it.

Finbryn's line, in the words used across this site:

- Finbryn is not a CPA firm and does not issue audit, review or compilation reports.
- If Finbryn keeps your books, we refer your audit to an independent CPA practice.
- Finbryn receives no fee or commission tied to any audit.
- On request we introduce independent licensed CPA practices; you engage the one you choose directly, under its own engagement letter.

That is why this guide explains the three levels without selling any of them. The CPA practice you pick sets the scope, the price and the opinion. Why the independence line matters is covered in [can a bookkeeper also be your auditor](/guides/can-my-bookkeeper-also-be-my-auditor).

## Which level does a bank, an SBA lender or a surety ask for?

No general rule sets the level: your loan agreement, the lender's credit policy or, for SBA-backed credit, the SBA's standard operating procedures (SOPs) do. Ask for the level in writing, then compare it with these rows.

| Who asks | What the source says | Source |
| --- | --- | --- |
| Bank term loan or line of credit | The level is whatever the loan agreement's reporting covenant names; no statute sets it | Your loan agreement |
| SBA 7(a) lender, change of ownership | The lender analyzes the highest level of financial reporting available, ranked audited, then reviewed, then CPA-compiled, then tax returns | SOP 50 10 8.1, Appendix 15 |
| SBA CAPLine | Borrower-prepared statements and tax returns at $1,000,000 or less; compiled, reviewed or audited statements above that | SOP 50 10 8.1 |
| SBA surety bond program, contract up to $2,000,000 | Internally prepared, computer-generated statements | SOP 50 45 4 |
| Same program, more than $2,000,000 to $3,000,000 | CPA-compiled statements, or In-House Plus (aged receivable and payable schedules, current portion of long-term debt, a correctly structured balance sheet) | SOP 50 45 4 |
| Same program, more than $3,000,000 to $14,000,000 | CPA-reviewed year-end statements | SOP 50 45 4 |

SOP 50 10 8.1 was published 2026-09-25 and took effect 2026-10-01; SOP 50 45 4 took effect 2024-11-21. Both were read on 2026-10-19 at [SBA SOP 50 10](https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs) and [SBA SOP 50 45 4](https://legacy.sba.gov/sites/default/files/2025-01/SOP%2050%2045%204%20%28Final-508%29.pdf). SBA may ask for a higher level in a given case. The surety rows apply to SBA's program only; a surety underwrites its own bonds on its own terms, so ask yours which level it wants. Where SOP 50 10 8.1 names a statement level, it ranks audited statements first without making them a condition of every 7(a) loan, so the lender's own policy usually drives the ask.

## Which level do franchise, HOA, grant, plan and insurer rules set?

Some requesters are rules, not contracts, and each rule sets its own tiers. These are the ones readers ask about most; state rules vary, so a row is a starting point and not a legal answer.

| Requester | Tier the rule sets | Source |
| --- | --- | --- |
| Franchisor's disclosure document | Audited by an independent CPA under generally accepted auditing standards, with a phase-in for start-ups (see the franchise section below) | 16 CFR 436.5(u) |
| Nevada homeowners' association | Annual budget of $45,000 to under $75,000: review in the year before a reserve study. $75,000 to under $150,000: review every fiscal year. $150,000 or more: audit every fiscal year | NRS 116.31144 |
| Florida homeowners' association | Revenue under $150,000: report of cash receipts and expenditures. $150,000 to under $300,000: compiled. $300,000 to under $500,000: reviewed. $500,000 or more, or 1,000 or more parcels: audited | Fla. Stat. 720.303(7) |
| Federal awards | A single audit or program-specific audit once an entity expends $1,000,000 or more in federal awards in its fiscal year | 2 CFR 200.501 |
| Retirement plan filing Form 5500 | An independent qualified public accountant's examination and report, waived for a plan covering fewer than 100 participants at the beginning of the plan year, if the waiver's asset and bonding conditions are met | 29 CFR 2520.104-46 |
| Insurer | An annual audit of its financial statements by an independent CPA under the NAIC model regulation; each state adopts its own version | NAIC Model 205, section 2 |

Nevada also lets 15 percent of voting members force an audit by written request within 180 days before fiscal year-end, except for associations already at the audit tier. Florida lets 20 percent of parcel owners petition the board for a higher level. Charity regulators in each state set revenue tiers of their own for nonprofits, and this guide doesn't list them. The texts behind this table were read on 2026-10-19: [16 CFR 436.5](https://www.ecfr.gov/current/title-16/section-436.5), [NRS 116.31144](https://www.leg.state.nv.us/nrs/nrs-116.html#NRS116Sec31144), [Fla. Stat. 720.303](http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/Sections/0720.303.html), [2 CFR 200.501](https://www.ecfr.gov/current/title-2/section-200.501), [29 CFR 2520.104-46](https://www.ecfr.gov/current/title-29/section-2520.104-46) and the [NAIC model regulation](https://content.naic.org/sites/default/files/model-law-205.pdf), headed third quarter 2015.

## My bank asked for CPA-prepared statements. Which level do they mean?

CPA-prepared isn't one of the three levels, so ask the lender to name one in writing before you pay for any engagement. The phrase can mean a compilation, a review, an audit, or statements a CPA prepared under AR-C 70, which applies when an accountant in public practice is engaged to prepare financial statements and not to audit, review or compile them. Those last statements carry no report on them at all.

Put four questions to the lender in an email:

1. Which level do you need: compilation, review or audit?
2. For which periods, and how recent must the year-end and interim statements be?
3. On which accounting basis: GAAP, or a cash or tax basis?
4. Must the CPA practice be independent of the company, or on an approved list?

The diagram below is the same advice as a path. Start by finding out who asked for the statements. A law or regulator points you to a size tier to look up. A lender or surety points you to a written level to get. A buyer or investor points you to a scope to agree: audit, quality of earnings or both. The lender branch ends at a CPA practice you engage directly, which is where the report gets signed. Finbryn is never that last step.

Diagram: Who asked for the statements, and what to do next. A decision path from the requester of the statements to the CPA practice that signs. A law leads to a size tier, a lender to a written level, a buyer to an agreed scope.

## Is a quality of earnings report the same as an audit?

No. A quality of earnings (QoE) report is a due-diligence study of a company's earnings, written for a buyer or lender, and it is a different product from an audit. SBA's [SOP 50 10 8.1](https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs) describes it as a report that examines the reliability, sustainability and accuracy of a business's historical and projected earnings, performed by an independent, experienced financial professional for the lender's benefit and not prepared by or for the seller.

[BPM's comparison](https://www.bpm.com/insights/quality-of-earnings-vs-audit), dated 2025-03-25, draws the line the same way. A QoE normalizes monthly results, typically over three years plus the trailing twelve months, and centers on adjusted EBITDA. An audit works on annual periods and reported results, and one of its deliverables is an opinion on GAAP compliance. The page doesn't describe a QoE as giving an opinion or any assurance level.

SBA treats the QoE as a requirement of its own, next to the financial statements. For a 7(a) Business Expansion or Initial Acquisition transaction with a purchase price of $3 million or more, the lender must obtain one in addition to the business valuation. Owner Buyout and ESOP and Cooperative transactions are exempt. A buyer who asks for audited statements and a buyer who asks for a QoE want different documents, so ask which one, or both.

## Does a new franchisor need audited statements in the first year?

Not in the first year: the FTC Franchise Rule lets a start-up franchisor open with an unaudited opening balance sheet and phase audited statements in. The general rule in Item 21 of the franchise disclosure document is that the franchisor's statements, under US GAAP, are audited by an independent CPA under generally accepted US auditing standards. The balance sheets cover the previous two fiscal year-ends, and the statements of operations, stockholders' equity and cash flows cover the previous three fiscal years.

[16 CFR 436.5(u)(2)](https://www.ecfr.gov/current/title-16/section-436.5), read 2026-10-19, sets the phase-in for a start-up franchise system:

- **First fiscal year selling franchises:** an unaudited opening balance sheet.
- **Second fiscal year:** an audited balance sheet opinion as of the end of the first partial or full fiscal year.
- **Third and later years:** all required statements for the previous fiscal year, plus earlier audited statements that must still be disclosed.

The franchisor must prepare audited statements as soon as practicable, keep its unaudited statements in a format that conforms as closely as possible to audited ones, and either include one or more years of unaudited statements or disclose clearly that it hasn't been in business for three years. That is the federal rule only. States that register or review franchise offerings have rules of their own, and this guide doesn't cover them.

## How do I choose when nobody has told me which level?

Match the level to what the statements must do for the reader, then check the cost. The AICPA's comparison page, dated 2023-09-30, calls compilations typically appropriate when a business is seeking initial or lower amounts of financing, reviews usually appropriate as a business grows and seeks larger levels of financing, and audits typically appropriate, and often required, for complex financing such as seeking outside investors, selling a business or pursuing a merger.

Practices add their own view of who asks for what. [BPM](https://www.bpm.com/insights/audit-or-review), in a page dated 2025-09-05, says new lending relationships usually demand higher assurance, that multiple lenders often mandate audited statements, and that private equity investors almost always require them. Treat that as one practice's experience, not a rule.

A short sequence works for most owners:

1. Ask whoever requested the statements to name the level, the periods and the basis in writing.
2. If nobody has asked and you're choosing, match the AICPA's use cases above to the people who will read the statements.
3. Get written quotes for the same scope from two or three CPA practices; [what each level costs and how long it takes](/guides/audit-review-compilation-cost) gives dated, practice-published ranges to compare against.
4. Before you engage anyone for an audit or review, check independence, especially if someone else keeps your books: [can a bookkeeper also be your auditor](/guides/can-my-bookkeeper-also-be-my-auditor).
5. Sign the engagement letter with the CPA practice directly.

## What should I hand the CPA practice before any of the three?

Hand over a locked trial balance and reconciled accounts, and expect the practice to tailor the rest. Practices send their own request lists, but the usual core looks like this:

- A locked trial balance and general ledger export for the period.
- Bank reconciliations for every account, with the year-end statements.
- Accounts receivable and payable agings.
- A fixed asset register and depreciation schedule.
- Debt and lease agreements.
- Payroll reports and payroll tax filings.
- An equity roll-forward and board minutes.
- Prior-year statements and tax returns.

A first audit adds one more: support for opening balances. AU-C 510 asks the auditor to determine whether the prior period's closing balances were brought forward correctly and to obtain evidence about the opening balances, which is part of why a first-year audit costs more (see the cost guide linked above).

Finbryn's part is the books underneath. [Audit-ready books](/services/audit-compliance-support/audit-ready-books) covers the reconciliations, schedules and trial balance, and [PBC list management](/services/audit-compliance-support/pbc-lists) tracks the auditor's request list item by item. [Year-end close and CPA handoff pack](/services/accounting-services/year-end-close-cpa-handoff-pack) hands the outside CPA a checked file. For picking help around an audit, the [twelve checks for choosing an audit support provider](/guides/how-to-choose-audit-support-provider) apply to Finbryn too.

## What statements does Finbryn prepare, and what level are they?

The statements Finbryn prepares are none of the three levels, because no report goes with them. The label we put on them is:

**We prepare financial statements. We have not audited or reviewed them and give no assurance.**

A non-licensee may prepare statements without a report, and the model act's Rule 14-2 gives safe-harbor wording for the case: the preparer says it has not audited or reviewed the statements and expresses no opinion or other assurance. The preparation work itself is [financial statement preparation](/services/accounting-services/financial-statement-preparation).

What that means for the level you need: if the requester wants a compilation, review or audit, the statements are what the CPA practice starts from, and the practice reports on them under its own engagement letter. If the requester accepts statements prepared by management, they can be used as they are. Either way, Finbryn doesn't sign, doesn't audit and doesn't tell a lender or surety that your statements meet its standard; the requester decides that.

## Frequently asked questions

**Q: audit vs review vs compilation**

A: An audit gives reasonable assurance and ends in the auditor's opinion. A review gives limited assurance from inquiries and analytical procedures. A compilation gives none. Audits and reviews need an independent CPA practice; a compilation doesn't, but must disclose a lack of independence. Checked against AU-C 200, AR-C 80 and AR-C 90 on 2026-10-19.

**Q: what is the difference between audited and reviewed financial statements**

A: Audited statements carry an opinion built on testing records and weighing internal controls, at reasonable assurance. Reviewed statements carry a conclusion built mostly on inquiries and analytical procedures, at limited assurance, and practices publish fewer weeks for them. Both need an independent CPA practice (AU-C 200.15, AR-C 90.10; read 2026-10-19).

**Q: what is a compiled financial statement**

A: It is a set of statements a CPA practice has helped management present under AR-C 80, without verifying the information or giving any assurance. The report carries no opinion or conclusion and must say so if the practice isn't independent. It is the lowest of the three report levels (AR-C 80.02 and 80.22, read 2026-10-19).

**Q: what are compiled financial statements mainly used for**

A: Mainly smaller or first-time financing and basic bank or internal use. The AICPA's comparison page, dated 2023-09-30, calls compilations typically appropriate when seeking initial or lower amounts of financing, and SBA's surety program (SOP 50 45 4, effective 2024-11-21) accepts CPA-compiled statements for a middle band of contract sizes.

**Q: My bank asked for CPA-prepared statements. Which of the three levels do they mean?**

A: CPA-prepared isn't one of the three levels. It can mean a compilation, a review, an audit, or statements a CPA prepared with no report under AR-C 70. Ask the bank to name the level, the periods and the accounting basis in writing before you engage anyone; the loan agreement controls (checked 2026-10-19).

**Q: Do I need audited financial statements for an SBA 7(a) loan?**

A: Not as a blanket rule. SBA's SOP 50 10 8.1 (effective 2026-10-01) tells the lender, for 7(a) changes of ownership, to analyze the highest level of financial reporting available, ranked audited, then reviewed, then CPA-compiled, then tax returns, and it sets compiled, reviewed or audited statements for larger CAPLines. Your lender's own credit policy usually decides, so ask it.

**Q: quality of earnings report vs audit**

A: A quality of earnings report is a due-diligence study of normalized earnings written for a buyer or lender. It isn't an opinion on whether the statements are fairly presented. SBA's SOP 50 10 8.1 (effective 2026-10-01) requires one from the lender on larger 7(a) acquisitions and treats it as separate from the financial statements.

**Q: Does a new franchisor need audited financial statements in the first year?**

A: Not under the federal rule. 16 CFR 436.5(u), read 2026-10-19, lets a start-up franchisor give an unaudited opening balance sheet for its first fiscal year selling franchises, an audited balance sheet for the second and full statements from the third. State franchise laws are separate; check them before you sell.

## Sources

1. [NASBA and AICPA, Uniform Accountancy Act (8th edition, January 2018), section 14 and Model Rule 14-2](https://nasba.org/app/uploads/2019/12/UAA12.19.19withNewCPEStandardsFINALwithoutlogos.pdf) (2026-10-19)
2. [AICPA, U.S. Auditing Standards (AU-C), sections 200, 510, 700 and 705](https://www.aicpa-cima.com/resources/download/aicpa-statements-on-auditing-standards-currently-effective) (2026-10-19)
3. [AICPA, Preparation, compilation and review standards (AR-C 70, 80 and 90)](https://www.aicpa-cima.com/resources/download/aicpa-ssarss-currently-effective) (2026-10-19)
4. [AICPA and CIMA, What is the difference between a compilation, review, and audit? (2023-09-30)](https://www.aicpa-cima.com/professional-insights/video/what-is-the-difference-among-a-compilation-review-and-audit) (2026-10-19)
5. [SBA, SOP 50 10 8.1 Lender and Development Company Loan Programs (effective 2026-10-01)](https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs) (2026-10-19)
6. [SBA, SOP 50 45 4 for the surety bond program (effective 2024-11-21)](https://legacy.sba.gov/sites/default/files/2025-01/SOP%2050%2045%204%20%28Final-508%29.pdf) (2026-10-19)
7. [eCFR, 16 CFR 436.5 Disclosure (Franchise Rule), Item 21 financial statements](https://www.ecfr.gov/current/title-16/section-436.5) (2026-10-19)
8. [Nevada Legislature, NRS 116.31144 Audit and review of financial statements](https://www.leg.state.nv.us/nrs/nrs-116.html#NRS116Sec31144) (2026-10-19)
9. [Florida Legislature, Fla. Stat. 720.303 Association powers and duties](http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/Sections/0720.303.html) (2026-10-19)
10. [eCFR, 2 CFR 200.501 Audit requirements](https://www.ecfr.gov/current/title-2/section-200.501) (2026-10-19)
11. [eCFR, 29 CFR 2520.104-46 Waiver of examination and report for plans with fewer than 100 participants](https://www.ecfr.gov/current/title-29/section-2520.104-46) (2026-10-19)
12. [NAIC, Annual Financial Reporting Model Regulation #205 (PDF headed 3rd Quarter 2015)](https://content.naic.org/sites/default/files/model-law-205.pdf) (2026-10-19)
13. [BPM, Do I Need an Audit or a Review? (practice-published, 2025-09-05)](https://www.bpm.com/insights/audit-or-review) (2026-10-19)
14. [BPM, Quality of Earnings vs Audit (practice-published, 2025-03-25)](https://www.bpm.com/insights/quality-of-earnings-vs-audit) (2026-10-19)
15. [Guzman Gray, Private Company Audit Costs (practice-published, 2026-01-29)](https://guzmangray.com/cost-financial-statement-audit/) (2026-10-19)
16. [WhippleWood CPAs, Nonprofit Audit vs Review vs Compilation (practice-published, 2026-06-24)](https://whipplewoodcpas.com/insights/nonprofit-audit-vs-review-vs-compilation/) (2026-10-19)

Reviewed October 2026

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## Contact
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