Compiled financial statements are financial reports that a certified public accountant (CPA) helps prepare by organizing a company’s financial records into standard financial statement formats. A compilation is often the most affordable way to produce professional-looking financial statements for a lender, investor, or other third party—but it’s important to understand what you are (and are not) getting.
Unlike an audit or a review, compiled financial statements provide no level of assurance that the numbers are accurate. The CPA does not perform an auditing process, does not test transactions, and does not evaluate internal controls. Instead, the CPA compiles the financial information provided by management into financial statements, and issues a compilation report that clearly states the CPA is not providing assurance.
What Are Compiled Financial Statements?
A compilation is a type of engagement in which a CPA takes a company’s bookkeeping output—general ledger detail, trial balance, and other financial records—and uses it to create financial statements in a standard presentation. You’ll typically see the CPA’s compilation report attached, which explains the scope of the engagement and emphasizes that no assurance is provided.
The end result is often more credible and easier to read than internally prepared statements because the statements follow a recognized financial reporting framework (often GAAP, but not always). However, compiled financial statements are not “certified,” and they do not indicate the statements are free from material misstatements.
What’s Usually Included in a Compilation?
Compiled financial statements commonly include the same core reports you’d expect in any set of financials:
- Balance sheets showing assets, liabilities, and equity at a point in time
- Income statements (profit and loss statement) showing revenue, expenses, and net income over a period
- Cash flow statements summarizing cash activity across operating, investing, and financing categories
Depending on the engagement and the needs of the user, some compiled sets may include additional schedules or may omit certain disclosures. The key is that the CPA is presenting the company’s financial information in a structured way—not validating it.
Compilation vs Review vs Audit
The biggest difference across these services is the level of assurance (and therefore cost):
- Compilation: No assurance. The CPA compiles information into statements, but does not verify accuracy.
- Review: Limited assurance. The CPA performs inquiry and analytical procedures to determine whether the statements appear reasonable.
- Audit: Highest assurance. The CPA performs extensive testing, gathers evidence, evaluates internal controls, and provides an audit opinion.
If you’re a privately held business seeking a smaller loan or simply trying to provide “CPA-involved” financial statements to a bank, a compilation may be enough. As financing grows larger—or outside investors get involved—many stakeholders upgrade requirements to a review or audit.
When Do Businesses Use Compiled Financial Statements?
Compiled financial statements are most common when a business needs formal financial statements but does not need (or cannot justify paying for) assurance. Common use cases include:
- Applying for bank financing or renewing a line of credit
- Sharing financial information with a potential investor or buyer
- Providing standardized financial reporting to a partner or board
- Upgrading from internal statements to a more professional presentation
In these situations, the CPA’s involvement can increase confidence that the statements are presented properly and are based on organized financial records—even though the CPA is not providing assurance that the financial information is correct.
Important Limitations to Understand
Because a compilation is not an assurance engagement, compiled financial statements should not be treated like audited statements. The CPA is not required to verify balances, confirm amounts with third parties, or test whether the statements are free from material misstatement. If management’s underlying records contain errors, the compiled statements can reflect those same errors.
That said, CPAs are still professionals with ethical responsibilities. If something appears obviously wrong, the CPA may ask questions, request clarification, or recommend corrections. But the goal of the engagement is still compilation—presentation—not verification.
Bottom Line
Compiled financial statements are a practical middle step between DIY internal reporting and higher-assurance services. They can help a company present its financial information in a standardized format, at a lower cost than a review or audit. If you need professional financial statements for a lender or stakeholder—but you don’t need assurance—compiled financial statements may be the right fit.