If an audit is not required, a review of your financial statements, with considerably less scope than an audit, provides limited assurance at a significantly lower cost. Inquiry and analytical procedures are performed. However, the extent of investigation performed is much less than in an audit. Typically, reviews are prepared for entities that have bank loans or outside investors, but who don’t require audited statements.
A compilation provides no level of assurance that the financial statements are in accordance with GAAP. A compilation presents information that is supplied by management and makes sure the financial statements are free of obvious error. Inquiry and analytical procedures are not performed. Compilations are most often prepared for private businesses that do not need a high level of assurance.