Compiled vs Reviewed vs Audited Statements

Reviewed vs audited vs compiled

Also known as: levels of assurance, compilation vs review vs audit, SSARS, CPA financial statements

Definition

In the US, a CPA can be associated with a company’s financial statements at three main levels. A compilation provides no assurance, a review provides limited assurance and an audit provides reasonable assurance. The higher the level, the more evidence the CPA has examined.

Updated November 2026

Reviewed vs audited vs compiled, explained simply

The level of CPA involvement determines how much diligence must re-perform. With audited statements, a buyer can place more reliance on balances and cut-off. With compiled statements, or none, diligence must test revenue, cash and completeness of liabilities directly.

A separate preparation engagement (AR-C 70) covers statement preparation without any report.

The assurance ladder

Interactive

Select a level to see the CPA’s work at each step.

Worked example

Two companies each report $3.0 million of EBITDA. Company A is audited. Company B has compiled statements prepared on a cash basis.

Diligence on Company B requires more work: converting cash results to accrual, testing revenue against bank deposits and searching for unrecorded liabilities. The buyer may also seek a larger escrow to reflect the higher reporting risk.

Illustrative example.

Why it matters in a deal

Many lower middle market targets have compiled or reviewed statements, or no CPA involvement at all. The lower the assurance, the more of the work diligence must re-perform to rely on the numbers.

Red flags

A move from audited to compiled statements shortly before a sale
Review reports with qualifications or missing disclosures

Frequently asked questions

What is the difference between compiled, reviewed and audited financial statements?

Is a review sufficient for a sale?

It can be, but buyers will perform more of their own testing.

Must private companies be audited?

Not by law in most cases. Lenders, investors or contracts often require it.