Audits vs. Reviews vs. Compilations: Which Does Your Business Need?

Introduction

You’ve just been asked for financial statements by a lender, investor, or board member—but you’re unsure whether they expect an audit, review, or compilation, and choosing the wrong one could cost you time, money, and trust. 

Understanding the Three Levels of Financial Statement Services 

What Is an Audit? 

An audit is the most comprehensive of all types of financial statement services. It’s performed by an independent CPA and provides the highest level of assurance in financial reporting. The auditor conducts a full risk assessment, tests internal controls, and verifies account balances using external confirmations. At the end of the process, they issue a formal opinion on whether your GAAP financial statements for private companies are accurate and fairly presented. If your company is preparing for a funding round, M&A, or regulatory filing, an audit is likely your best option. 

What Is a Review? 

A review offers a moderate level of assurance. Instead of testing balances, the CPA performs limited procedures like inquiries and financial ratio analysis. There’s no opinion letter, and the CPA does not confirm transactions. The main difference between audit and review is the depth of investigation—reviews are less invasive and faster but still add credibility for external users. They're a common choice for firms needing financial reporting for investors or smaller lenders. 

What Is a Compilation? 

A compilation report is the most basic form of CPA reporting. The CPA simply takes your internal financial data and formats it into statements that follow GAAP, with no opinion or assurance on their accuracy. It’s often used by startups and internal teams for decision-making when no outside party requires validation. Knowing what is a compilation report is critical if you're weighing cost versus transparency in early business stages. 

Comparing Audits, Reviews, and Compilations Side by Side 

Comparison Table: Key Differences 

Assurance Levels Explained 

The CPA financial reporting levels are based on how much confidence your stakeholders need: 

• Reasonable assurance (Audit): Strongest level; gives stakeholders high confidence in your reports. 

• Limited assurance (Review): Provides some validation, but not deep testing. 

• No assurance (Compilation): CPA doesn’t validate the numbers—they just reformat them. 

If you’re trying to decide between review vs compilation vs audit, consider who needs the report and what kind of trust or validation they expect. 

How to Choose the Right Option for Your Business 

Who’s Requesting the Report? 

Your choice often comes down to who’s asking for it. 

• A bank might require at least a review—or even an audit—to approve a loan. 

• Investors, especially in later-stage rounds, usually ask for audits to verify performance. 

• For internal decisions or board updates, a compilation could be enough. 

Knowing the stakeholder helps determine which financial statement is right for your business. 

What Stage Is Your Business In? 

Business stage also matters: 

• Startups may use compilations to track growth and plan budgets. 

• Growth-stage companies moving toward PE or VC funding should consider reviews. 

• Private equity audit requirements often demand audits for portfolio companies to meet LP expectations or prep for exits. 

As you grow, your financial reporting should mature, too. 

Regulatory and Industry Considerations 

Some industries legally require audits. 

• Financial services, insurance, and healthcare companies often operate under strict rules. 

• Government contractors may also face audit mandates. 
  When in doubt, check regulations or talk to a finance advisor before choosing your service level. 

Real-World Examples by Company Type 

Family Offices and Investment Entities 

Family offices track complex assets and may need clear reporting for stakeholders, beneficiaries, or co-investors. While compilations are common in early years, audits can offer credibility and transparency over time. For family wealth entities focused on legacy and risk, GAAP financial statements for private companies become essential tools for trust and compliance. 

Private Equity-Backed Portfolio Companies 

PE-backed firms usually need annual audits as part of their investor agreements. These audits help ensure performance reporting is accurate and support due diligence efforts. Reviews may be acceptable mid-year, but full audits are typically a must to meet private equity audit requirements and preserve investor confidence. 

Mid-Market and Growth-Stage Businesses 

These businesses often shift from compilations to reviews as they pursue funding or prepare for acquisition. Eventually, many move toward audits to support credit applications, board governance, or exit strategies. The key is aligning financial reporting for investors with where your business is headed. 

How Cartesian Supports Financial Statement Readiness 

GAAP-Compliant Financial Report Preparation 

We help you build clean, structured, GAAP financial statements for private companies that align with audit or review requirements. Whether you’re assembling footnotes or preparing for scrutiny, our team ensures your numbers are investor-grade and clear. 

Audit & Review Coordination 

Cartesian supports your team with documentation gathering, internal control reviews, and third-party coordination. We help prepare your company for whatever level of CPA review is needed—compilation, review, or audit—reducing surprises and delays. 

Scalable Reporting Solutions 

As your business grows, so do your reporting needs. We tailor financial packages to match your goals—whether that’s entering a new market, securing funding, or selling your company. We’ll help you scale from a compilation report to full audits when the time comes. 

CTA: Not Sure Which Financial Statement You Need? Talk to Cartesian 

Whether you're navigating early-stage funding, planning a sale, or preparing for investor scrutiny, Cartesian helps you choose and prepare the right level of financial statement service. Let us guide you through the audit vs review vs compilation decision and ensure you’re ready with clean, compliant, stakeholder-approved financials. 

FAQ 

1. What is the difference between audit and review?
   An audit includes testing and a formal opinion; a review relies on inquiries and analytics with no testing or opinion.
   
2. What is a compilation report?
   A compilation report presents your financial data in GAAP format with no assurance—it’s based entirely on what management provides.
   
   
3. If we’re a private company, do we need an audit?
   Only if your investors, lenders, or regulators require it. Otherwise, a review or compilation may be enough.
   
   
4. What are the levels of CPA financial reporting services?
   There are three: compilation (no assurance), review (limited assurance), and audit (reasonable assurance).
   
   
5. What costs more: review or audit?
   Audits cost more due to deeper procedures and longer timelines. Reviews are faster and less expensive but offer lower assurance.
   
   
6. Does a compilation require a CPA?
   Yes. Even though it provides no assurance, only a CPA can issue a compilation report under AICPA guidelines.
   
   
7. Which financial statement is right for your business?
   It depends on your stakeholders, industry, and business stage. Startups often use compilations, while mature companies with outside capital typically need audits.
   
   
8. What are private equity audit requirements?
   PE firms often require annual audits from their portfolio companies to ensure accurate reporting to LPs and support exit planning.
   
   
9. What about financial reporting for investors?
   Investors want clear, consistent reports they can trust—often requiring at least a review, if not a full audit.
   
   
10. What is the level of assurance in financial reporting?
    Audits offer high assurance; reviews provide moderate; compilations offer none. The right choice depends on how much confidence your audience needs.
    
    
11. Can we start with a compilation and move to review later?
    Yes. Many companies start small and scale up as financial needs, funding sources, and complexity increase.
    
    
12. Who pays for these services?
    Your business pays for the service, but the return on investment includes faster decisions, more funding opportunities, and smoother audits.