What is the difference between a compilation, review, and audit?
A compilation has no CPA assurance — the accountant presents financial statements without verifying them. A review provides limited assurance through analytical procedures and management inquiries. A full audit provides the highest assurance level, with independent testing, confirmations, and a formal opinion. Fees rise with the level of assurance; we quote fair fees upfront after a short call.
Key Definitions
- Compilation
- A compilation is a CPA engagement under SSARS where the accountant presents financial statements based on management-provided information without expressing assurance or verifying the data.
- Review
- A review is a CPA engagement providing limited assurance that nothing came to the accountant's attention indicating the financial statements are not fairly presented, based on analytical procedures and inquiries.
- Audit
- An audit is an independent examination of financial statements providing reasonable (not absolute) assurance that statements are fairly presented in accordance with GAAP, following Generally Accepted Auditing Standards.
Audit vs. Review vs. Compilation: Side-by-Side Comparison
| Feature | Compilation | Review | Audit |
|---|---|---|---|
| CPA assurance level | None (no opinion) | Limited assurance | Reasonable assurance |
| Independence required | Yes | Yes | Yes |
| Testing of transactions | |||
| Analytical procedures | |||
| Management inquiries | |||
| Confirmation of balances | |||
| CPA opinion issued | |||
| Relative effort & fee | Lowest | Moderate | Highest |
| Timeline | Least work of the three | More work than a compilation | Most work of the three |
| GAGAS (Yellow Book) option |
Choosing the Right Level of Service
When a Compilation Is the Right Choice
Compilations are appropriate when management needs financial statements presented in a standard format but no outside party requires independent assurance. Common use cases include:
- Real estate disclosure requirements (e.g., condo association budgets)
- Franchise agreements requiring financial statements from franchisees
- Internal management reporting that needs to be CPA-formatted
- Smaller nonprofits below state charitable solicitation audit thresholds
When a Review Makes Sense
Reviews provide a meaningful level of independent assurance at a fraction of audit cost. Consider a review when:
- Applying for bank loans of $250,000–$1,000,000 (many lenders accept reviews)
- Your HOA bylaws require independent financial assurance but not a full audit
- Your nonprofit is below state audit thresholds but above compilation-acceptable levels
- Investors or partners want independent assurance without full audit expense
When a Full Audit Is Required
Audits are required in specific regulatory and contractual situations:
- Larger SBA loans, when the lender requires them
- Federal grants exceeding $1,000,000 (raised from $750,000 effective for fiscal years beginning on or after October 1, 2024) trigger Single Audit requirements (Uniform Guidance)
- M&A due diligence — buyers require audited financials for target companies
- Publicly regulated entities (PCAOB standards apply for SEC registrants)
- Government contractors meeting DCAA audit thresholds
- Employee benefit plans with 100+ participants (DOL requirement)
What Banks and Lenders Usually Require
For a bank loan, the level of CPA involvement is set by the financial reporting covenant in your loan agreement, not by any statute. The covenant usually names the level (compiled, reviewed or audited), the deadline after year-end for delivering statements, and sometimes a compliance certificate showing debt-service coverage or other ratios.
- Compilation: often enough for small lines of credit, usually together with business tax returns.
- Review: a common middle ground for growing companies with term debt; the CPA performs inquiry and analytical procedures and provides limited assurance.
- Audit: more often required for larger commercial, real estate and construction facilities, syndicated loans and borrowers with investors or sureties relying on the statements.
Before you sign a loan, negotiate the reporting level and delivery deadline you can realistically meet. If the lender asks for an upgrade from a review to an audit, start early: first-year audits require evidence about opening balances. See our compilation and review services or small business audits, or talk to a CPA about your covenant.
Which Do DC/MD/VA Organizations Typically Need?
Washington, DC
- Nonprofits: no statutory audit or review threshold for charitable licensing
- Audits driven by Single Audit, DC grants, funders, bylaws
- HOAs: Varies by bylaws
- DC government contractors: GAGAS audit often required
Maryland
- Nonprofits $1M+ charitable contributions: Audit required (from July 1, 2026)
- Nonprofits $400K–$999,999: CPA review required
- Condos: owners of 5% of units may require a CPA audit (Real Prop. § 11-116); otherwise governing documents control
- MD state grants: check grant terms for audit clauses
Virginia
- Nonprofits: no statutory audit or review threshold (Form 990 accepted by VDACS)
- Audits driven by Single Audit, grants, funders, bylaws
- HOAs and condos: level usually set by governing documents
- State contracts and grants: check award terms for audit clauses
Frequently Asked Questions
Reviews are appropriate when lenders or grantors need independent financial assurance but don't require the highest level. Many banks accept reviewed financials for loans under $1M. HOAs often accept reviews. In Maryland, charities with $400,000 to $999,999 in charitable contributions satisfy the state registration requirement with a CPA review (Bus. Reg. § 6-402, as amended by SB 354, effective July 1, 2026).
It depends on the lender, the loan size and your covenants. Smaller lines of credit and term loans are often satisfied by reviewed statements (or even a compilation plus tax returns), while larger commercial, real estate and construction facilities more often require audited statements. The requirement is written into your loan agreement, so read the financial reporting covenant and ask your lender before engaging a CPA.
A compilation involves the least work, a review more, and an audit the most, so fees rise with the level of assurance. Fees depend on the size of the organization, the number of federal programs, and the quality of your records. We are transparent and charge fair fees quoted upfront after a short call.
SSARS (Statements on Standards for Accounting and Review Services) are the professional standards governing CPA compilation and review engagements. Both compilations and reviews are SSARS engagements, while audits are governed by GAAS (Generally Accepted Auditing Standards) or GAGAS (Government Auditing Standards for Yellow Book audits).
Many HOAs use compilations for their annual financial statements, especially smaller associations. However, if your HOA bylaws specify "audit" or "review," you must meet that standard. Some lenders require reviewed or audited HOA financials for unit owners to qualify for mortgages under Fannie Mae/Freddie Mac guidelines.
Only Maryland sets statutory tiers: effective July 1, 2026 (SB 354), a CPA review satisfies registration at $400,000–$999,999 in charitable contributions, and an audit is required at $1,000,000 or more (Md. Code Ann., Bus. Reg. § 6-402; government grants are not counted). Virginia (Va. Code § 57-49) and DC (D.C. Code § 44-1701 et seq.) set no audit or review threshold for charitable registration — the Form 990 generally suffices. Grantors, lenders, and the federal Single Audit rule ($1,000,000+ in federal expenditures) may require more.
Sureties set their own requirements. Contractors with smaller bonding programs are often accepted with reviewed statements, while sureties commonly ask for audited statements as single-job and aggregate bond capacity grows. Contractors planning to grow bonding capacity should ask their surety agent early, because a first audit takes longer than a review.
An audit adds testing and third-party evidence: bank and receivable confirmations, detail testing of transactions, internal control understanding and, where material, observation of inventory. In a first-year audit the auditor must also obtain evidence about opening balances, which can be harder when the prior year was only reviewed or compiled, so plan the transition before year-end.
Compilations and reviews of private companies follow the AICPA Statements on Standards for Accounting and Review Services (AR-C 80 for compilations, AR-C 90 for reviews). Audits follow generally accepted auditing standards (the AU-C sections), and Government Auditing Standards (the Yellow Book) when a grant or law requires them. Agreed-upon procedures follow the attestation standards (AT-C 215).
Related Services
Not Sure Which Service You Need?
Our licensed CPAs will review your situation and recommend the right level of service — compilation, review, or audit — based on your lender, grantor, or regulatory requirements.