Audits, Reviews, and Compilations

An audit, required for ECFA members with annual revenue of $3M and above, is a formal examination of financial statements intended to assess the accuracy and thoroughness of financial records. An independent auditor performs this procedure on a set of financial statements in order to render an opinion based on the accounting records provided. An unmodified audit opinion states that the financial statements present fairly the financial position of the ministry in conformity with accounting principles generally accepted in the United States (GAAP). Audits are performed according to auditing standards generally accepted in the United States (GAAS). An audit is more expensive than a review or compilation because an opinion on the accuracy of financial statements requires significantly more work than that involved in either a review or a compilation.

A review is accepted by ECFA for members with annual revenue between $2M and $3M. Although not as comprehensive as an audit, a review provides more assurance on the financial statements than a compilation. A review report states that: 1) the accountants do not express an opinion on the financial statements, and 2) based on their review, they are not aware of any material modifications that should be made to the financial statements. A review is less expensive than an audit but more expensive than a compilation. In performing this accounting service, the accountant must conform to the AICPA Statements on Standards for Accounting and Review Services (SSARS). ECFA requires that the reviewed financial statements include disclosures and be prepared either in conformity with U.S. GAAP or the modified cash basis of accounting.

A compilation, which is accepted by ECFA for members with annual revenue of less than $2M, is the gathering of financial information and the creation of financial statements for a ministry. A compilation involves no assurance on the financial statements, as the accountant merely assembles the financial statements for the ministry. A compilation is less expensive than a review (or an audit). In performing this accounting service, the accountant must conform to the AICPA Statements on Standards for Accounting and Review Services (SSARS). ECFA requires that the compiled financial statements include disclosures and be prepared either in conformity with U.S. GAAP or the modified cash basis of accounting.


 


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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