Compilation and Reviews

There comes a point in the life of any business when financial statements are needed as verification that the business is solvent and in good financial shape. This most often occurs when applying for a business loan, insurance bonding for construction projects, or budgeting and reporting requirements to an accountable body such as a board or association. At Picchi & Martel, the most common financial reporting services we offer are Compilation and Reviews.

Compilation. When a business applies for a loan, the bank is going to require a financial statement to demonstrate the financial stability and solvency of that business. It provides the lender a snapshot of where that business is at the time of the loan application. Typically, the financial statements we create for this purpose are a compilation of data organized into three statements:

  • Balance Sheet
  • Income Statement
  • Cash Flows

With compilation services, we simply organize the financial information provided to us from the client using Generally Accepted Accounting Principles (GAAP). We put this information into the little boxes that are required by the lending institution. Under compilation, we do not verify data or provide budgetary projections.

Reviews. An accounting review is an analytical procedure that develops expectations based on prior data. In New Hampshire, reviews are most often required by insurance companies and bonding agencies for construction projects. Reviews are required by law in Massachusetts annually for any condo association with over 30 units. Typically, the review process involves a five-year comparison. Once the data is in, we can answer the following questions:

  • Why are there fluctuations in the income statement?
  • Does it need to be re-categorized for reporting purposes?
  • How will this affect next year’s financial reports?

Reviews are similar to compilation reports in that both employ Generally Accepted Accounting Principles (GAAP). They are different in that accounting reviews span a longer period of time and are often done for budgetary purposes.

Audits. In the case of large loans and licensing purposes, some institutions will require an audit. An audit is more intensive in scope, subject to random sampling and peer review. This type of financial reporting is not common, however, we may provide assistance should the need arise for a financial auditing service.