Financial Statements – Compilation (NTR)

No, a compilation provides no assurance, while reviews and audits provide assurance. A compilation engagement (NTR) involves taking information provided by management and organizing it into financial statement format without verifying accuracy or completeness. We don't test transactions, verify balances, or confirm information with third parties. A review engagement involves inquiry and analytical procedures that provide limited assurance-we ask questions, perform analytical procedures, and provide limited assurance that nothing came to our attention suggesting material misstatement. An audit engagement involves extensive testing, verification, and confirmation procedures that provide reasonable assurance that financial statements are free from material misstatement. The level of work, verification, and assurance increases from compilation to review to audit, as does the cost and time required. Compilations are appropriate when you need professional financial statement presentation but don't require independent verification. However, some lenders or stakeholders may require review or audit engagements, so it's important to confirm requirements before proceeding.

Often yes, but you should confirm with your lender's specific requirements. Many banks and lenders accept Notice to Reader (NTR) financial statements for loan applications, renewals, or ongoing monitoring, particularly for smaller businesses or owner-managed companies. However, lender requirements vary-some may require review or audit engagements, especially for larger loans, complex situations, or higher-risk borrowers. Requirements may also depend on loan size, business size, industry, or specific lender policies. It's important to confirm with your lender what level of financial statement engagement they require before proceeding with compilation preparation. If your lender requires review or audit, we can discuss those engagement types, but compilation is typically the most cost-effective option when acceptable. We recommend confirming lender requirements early in the process to avoid preparing statements that don't meet their needs.

We need your trial balance, general ledger, bank and loan statements, and year-end schedules to prepare compilation financial statements. The trial balance provides account balances at year-end, the general ledger shows transaction detail, and bank and loan statements verify cash and debt balances. Year-end schedules include accounts receivable aging, accounts payable aging, inventory listings (if applicable), fixed asset schedules, depreciation schedules, and shareholder loan statements. We also need information about any year-end adjusting entries, significant transactions, or items requiring disclosure in notes. If you have prior year financial statements, those can be helpful for consistency and comparative purposes. The completeness and accuracy of information you provide affects the compilation-we organize information into financial statement format but don't verify accuracy, so it's important that source documents are complete and accurate. We'll provide a specific checklist based on your situation, but generally these core documents are needed for compilation preparation.

Compilation financial statements are commonly used for lender requirements, shareholder reporting, and internal management purposes. Many banks and lenders accept NTR statements for loan applications, renewals, or ongoing monitoring, particularly for smaller businesses or owner-managed companies. Shareholders may request financial statements to understand company performance and financial position, and compilations provide professional presentation suitable for this purpose. Internal management uses compilations for planning, decision-making, and performance monitoring. Compilations are also used for regulatory filings in some cases, though requirements vary by jurisdiction and entity type. However, use cases depend on stakeholder requirements-some lenders may require review or audit engagements, and some shareholders or investors may prefer higher assurance levels. It's important to confirm requirements with intended users before proceeding. Compilations are most appropriate when professional presentation is needed but independent verification or assurance is not required.

A compilation engagement prepares financial statements from existing accounting records, while bookkeeping involves recording transactions and maintaining accounting records. Bookkeeping services handle day-to-day transaction entry, account reconciliation, and record maintenance throughout the year. Compilation services take completed bookkeeping records (trial balance, general ledger) and organize them into formal financial statements with proper formatting, notes, and disclosures. Bookkeeping creates the underlying records, while compilation presents those records in financial statement format. Compilation assumes bookkeeping is complete and accurate-we organize information into statements but don't verify bookkeeping accuracy or perform bookkeeping work. If bookkeeping is incomplete or inaccurate, compilation may reflect those issues. We coordinate with Bookkeeping Services to ensure records are ready for compilation, but compilation and bookkeeping are separate services. Compilation is typically performed annually at year-end, while bookkeeping is ongoing throughout the year.