CPA certification engagements (compilation, review, audit)

The primary differences between a compilation, review, and audit engagement are the level of assurance provided by the CPA, the scope of the review, and the engagement of the professional accountant:

• Compilation engagement: The CPA organizes and presents the financial information provided by the company, but does not perform any verification or assurance procedures. He or she compiles the information in the financial statements without guaranteeing its accuracy.
• Review engagement: The CPA performs analytical procedures and limited inquiries to obtain moderate assurance about the reliability of the financial statements. He does not perform an in-depth verification as in an audit, but assesses the plausibility of the data.
• Audit engagement: The CPA performs a complete review of the financial data, with a high level of tests and controls, to provide reasonable assurance about the reliability of the financial statements. The audit is the most in-depth process and is often required by investors or regulators.

A compilation engagement, formerly known as a notice to reader, is generally chosen by small and medium-sized companies that do not require a detailed audit of their financial statements. This service is appropriate when the company wishes to present its financial statements to stakeholders (banks, investors, partners) without requiring assurance on the validity of the data. 

The compilation service is sufficient when the objective is to provide a clear and consistent organization of financial information, but without expressing an opinion on its accuracy. Organized and accurate business bookkeeping is an asset in ensuring that the financial information prepared is reliable.

A review engagement is a good option for companies that need a moderate level of assurance on their financial statements, but do not require a full audit. This service is often appropriate for companies with relatively complex operations, or where stakeholders such as creditors or investors require a limited assessment of the plausibility of financial data. 

A review reduces potential risks through more detailed analysis and procedures than a compilation, but does not go as far as an audit. Good corporate accounting is essential to ensure the quality of the data reviewed during a review engagement.

An audit engagement is required when investors, lenders, or regulators require a complete review of financial statements. Audits are often mandatory for large companies or those with specific legal or contractual obligations. It is also an essential service for companies that want to instill confidence in their stakeholders through a thorough review of their financial statements. 

Auditing provides reasonable assurance of the reliability of financial statements through detailed controls and a thorough examination of transactions.

To select the right assurance engagement, it's important to assess your company's specific needs against a number of criteria:

• Assurance needs: If you simply need to present financial statements without validation, the compilation engagement is sufficient. If a certain level of assurance is required, opt for a review engagement. For full assurance, an audit is required.
• Complexity of operations: Companies with simple operations may be satisfied with a compilation engagement, while those with more complex operations may prefer a review or audit engagement.
• Stakeholder requirements: The expectations of your investors, creditors or regulators will strongly influence your choice. Some stakeholders may require an audit, while others may be satisfied with a review.

In short, the choice depends on your financial needs, the complexity of your operations, and the expectations of your stakeholders.