The short answer
Compiled financial statements in Arizona are financial statements a CPA prepares from your records and presents in a standard format, following the AICPA's SSARS standards. A compilation provides no assurance: the CPA does not audit or review the numbers. AZ Easy CPA prepares GAAP compilations for lenders, sureties, landlords, investors and franchisors.
What is a compilation of financial statements?
A compilation is a service where a CPA presents your financial information as formal financial statements, following professional standards called SSARS (Statements on Standards for Accounting and Review Services, section AR-C 80). The CPA does not verify the numbers or give an opinion, and the statements come with a short accountant's report saying so.
Think of a compilation as your numbers, put into the format outside readers expect, by a CPA who follows a defined set of rules. Chris takes the information from your books, arranges it into proper financial statements and reads them to see whether they look appropriate in form and free of obvious material errors.
What a compilation does not include matters just as much. There is no testing of transactions, no confirming balances with banks or customers and no review of internal controls. Because of that, the CPA provides no assurance, which simply means the report does not say the statements are correct. You, as the owner, remain responsible for the numbers.
A compilation is often the right fit when someone outside the business wants financial statements with a CPA's name attached but has not specifically asked for a review or an audit. If you are not sure what was requested, send us the lender's or surety's wording and we will help you sort it out.
Who asks for compiled financial statements?
Compiled financial statements are commonly requested by banks and lenders, bonding and surety companies, commercial landlords, investors and partners, franchisors and some grant makers. Each wants a clear, consistently presented picture of your business that is prepared under recognized standards rather than pulled straight from your software.
- Lenders: for lines of credit, equipment loans, renewals and annual covenant reporting
- Bonding and surety companies: contractors seeking bid or performance bonds are often asked for CPA-prepared statements (see our contractor bookkeeping page)
- Commercial landlords: when you sign or renew a lease
- Investors and partners: for periodic reporting or before a buy-in
- Franchisors: many franchise agreements require periodic financial statements
- Grant makers: some funders ask for formal financial statements with applications
The specific requirement depends on the reader. Some will accept a compilation, while others require a review or an audit, so it is worth checking the exact language in your loan agreement, bond application or lease before work begins.
What is the difference between a compilation, a review and an audit?
The main difference is the level of assurance. A compilation provides no assurance, a review provides limited assurance based mostly on inquiries and analytical procedures, and an audit provides reasonable assurance after detailed testing. More assurance means more work, more time and higher cost. AZ Easy CPA offers compilations.
| Compilation | Review | Audit | |
|---|---|---|---|
| Level of assurance | None | Limited | Reasonable (high, not absolute) |
| What the CPA does | Presents your information as financial statements and reads them for obvious material errors | Asks questions of management and performs analytical procedures to look for unusual results | Tests transactions and balances, gathers outside evidence, considers internal controls |
| Report | Accountant's compilation report | Accountant's review report | Auditor's opinion |
| Standards | AICPA SSARS (AR-C 80) | AICPA SSARS (AR-C 90) | Auditing standards (GAAS) |
| Typical uses | Smaller loans, bonding at lower limits, leases, franchisor and investor reporting | Larger loans and bonding programs, some investor agreements | Larger lending relationships, some nonprofits and grants, outside investors who require it |
| Relative effort and cost | Lowest | Moderate | Highest |
AZ Easy CPA prepares compilations. If your lender or surety asks for a review or an audit, Chris can talk through what that request means, help get your books ready for it and point you in the right direction.
What does GAAP format mean for compiled financial statements?
GAAP stands for generally accepted accounting principles, the standard set of accounting rules in the United States. GAAP-format statements use accrual accounting, which records income when earned and expenses when incurred, and they follow standard presentation and disclosure rules so outside readers can compare them with other businesses.
Under GAAP, sales are recorded when you earn them even if the customer has not paid yet, and bills are recorded when you owe them even if you have not paid yet. That gives readers a fuller picture of what you owe, what you are owed and how the business performed over the period.
A GAAP compilation typically includes:
- Balance sheet (statement of financial position)
- Income statement (statement of operations)
- Statement of cash flows, when included
- Notes to the financial statements, or with substantially all disclosures omitted when that is agreed in advance and the report says so
Some readers are fine with notes omitted, which keeps things simpler. Others want full disclosures. We agree on the presentation in your engagement letter before we start.
Can a compilation use cash basis or tax basis instead of GAAP?
Yes. A compilation can be prepared on a special purpose basis, such as cash basis or tax basis, instead of GAAP. These are often simpler and closer to how a small business already keeps its books, but some lenders and sureties specifically require GAAP, so we confirm what the reader wants first.
| Basis | How it records activity | When it fits |
|---|---|---|
| GAAP (accrual) | Income when earned, expenses when incurred, with standard disclosures | Readers who require GAAP, such as many sureties and larger lenders |
| Cash basis | Income when received, expenses when paid | Simpler businesses whose readers accept cash basis |
| Tax basis | Follows the method used on your income tax return | Readers who want statements to line up with filed returns |
If your books are on a cash basis now and the reader needs GAAP, we can help convert the records with the right accrual adjustments as part of the work. Your tax partner should be in the loop when tax basis statements are used, so the numbers match your returns. Learn more about who we work with on our partners page.
What do you need from me to prepare compiled financial statements?
We need reconciled books for the period, bank and credit card statements, loan statements, lists of what customers owe you and what you owe vendors, fixed asset and depreciation details and any information needed for the notes. If the books are behind, we get them current first.
- Access to your QuickBooks file or other accounting records for the period
- Bank, credit card and loan statements through the period end
- Accounts receivable and accounts payable detail
- Inventory counts or values, if you carry inventory
- Fixed asset list with purchase dates and costs, plus depreciation schedules from your tax partner
- Loan agreements, leases and any related party arrangements
- The requirement from the lender, surety, landlord or other reader, in writing if possible
Everything is shared through our secure upload portal. If the records need work before they are ready, we can start with bookkeeping cleanup or catch-up bookkeeping. Clients on monthly bookkeeping usually have most of this ready already.
Why work with AZ Easy CPA on your compilation?
Chris Badulescu is a CPA and QuickBooks ProAdvisor who works closely with small businesses every day. Because we also handle bookkeeping, we understand how the numbers got there, can spot issues early and can explain the finished statements to you in plain language before you send them out.
A compilation is only as useful as the books behind it. Since our everyday work is bookkeeping and accounting for small businesses, we pay close attention to the reconciliations, accruals and classifications that outside readers notice first.
We are a small, Chandler-based team, so you work directly with Chris. He will walk you through the statements before they go to the bank or surety, so you can answer questions about them with confidence. Clients across Arizona can work with us remotely or in person.
How do we get started?
Free phone call
Tell us who is asking for statements and send their exact wording if you have it. We help confirm whether a compilation fits.
Engagement letter
We agree on the period, the basis (GAAP, cash or tax basis), the statements included and whether notes are included or omitted.
Gather records
You upload statements and records through our secure portal, and we get the books current if needed.
Prepare the statements
Chris prepares the financial statements, reads them for obvious material errors and drafts the accountant's compilation report.
Walk-through and delivery
We review the finished statements with you, answer your questions and deliver the final version for the reader.
Compilations questions
Does a compilation mean the CPA checked my numbers?
No. In a compilation the CPA does not verify, test or confirm your numbers, and the report states that no assurance is provided. The CPA does read the statements and would ask about anything that looks obviously wrong or incomplete.
Do you perform reviews or audits?
AZ Easy CPA offers compilations. If a lender or surety asks for a review or an audit, Chris can explain what that involves, help your books get ready for it and talk through your options.
How do I know whether my lender will accept a compilation?
Check your loan agreement, term sheet or the lender's request letter, or simply ask your banker. Wording like compiled, reviewed or audited financial statements tells you what level they need. We are happy to look at the language with you.
Can you compile statements if my books are a mess?
Yes, but the books need to be cleaned up first. A compilation sits on top of your records, so we start with cleanup or catch-up work and then prepare the statements once the numbers are reliable.
Can you prepare compilations every quarter or every year?
Yes. Many lenders and sureties ask for annual statements, and some ask for quarterly or interim statements too. If you are on monthly bookkeeping with us, recurring compilations are usually much simpler to prepare.
How much does a compilation cost?
It depends on the size of the business, the condition of the books, the basis used and whether full notes are included. We quote it after a free phone call and a look at your records.
Will compiled statements match my tax return?
Tax basis statements are designed to follow your return. GAAP statements can differ from the return because the rules are different. We coordinate with your tax partner so any differences are understood and explainable.
Bookkeeping near you
From our Chandler office we work with businesses across the East Valley and Arizona, in person or online.
