Knox Cox & Company L.L.P offers Audit, Review and Compilation Services
An audit provides the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific information as determined by the auditor or as established by general practice.
The objective on an audit engagement is to enable independent professional public accountants to render an opinion on the fairness of the client’s financial statements.
Audited financial statements are the accepted means which many business corporations report to shareholders, to bankers, to creditors and to government.
The financial statements subject to audit are the responsibility of the entity’s management. The auditors’ responsibility is to express an opinion on those financial statements. The auditors must plan the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Through the study and evaluation of the entity’s system of internal control, and by inspection of documents, observation of assets, making inquiries within and outside the entity, and by other generally accepted auditing procedures, the auditors will gather evidence necessary to determine whether the financial statements present a fair picture of the entity’s financial position and its activity during the period being audited.
We also perform physical inspections by observing inventory, as applicable, counting methods and by performing test counts. We document and test each operating cycle, including sales and cash receipts, expenses and cash disbursements, and payroll. Our audit papers include a detailed work program to document the examinations and tests performed, as well as the client’s supporting work papers.
All public companies are required to have an annual audit, but some nonpublic entities must undergo an annual audit as well. These include local governments, not-for-profit agencies and other organizations receiving governmental grants.
A review engagement is conducted to provide limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the financial reporting framework.
A review differs significantly from an audit. Review engagements provide less assurance to the reader of the financial statements because the CPA does not perform many audit procedures.
Analytical procedures are used and they provide better understanding of key relationships among certain numbers. This understanding gives more assurance about the reasonableness of the financial condition presented in the financial statements.
Based on the inquiries and analytical procedures, we are able to express only limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework. Because a review engagement is substantially less intensive in scope than an audit, we cannot express an opinion on the fairness of the financial statements taken as a whole.
In a compilation engagement, the objective is to assist management in presenting financial information in the form of financial statements without undertaking to provide any assurance that there are no material modifications that should be made to the financial statements so they will conform to the acceptable financial reporting framework. Because of the even more limited scope of compilation procedures, our report will not express an opinion or provide any assurance regarding the financial statements.
A compilation involves (1) gaining a general understanding of your business, accounting principles used and financial reporting system and (2) presenting financial information in the accepted format of proper financial statements. We express no assurance about the accuracy of the financial statements presented. The report attached to the financial statement emphasizes that the service is a compilation.
While independence is required at the other levels of service, we do not have to be independent of your organization to perform a compilation.