Audit vs. Review vs. Compilation
Three levels of CPA service, three different price tags, three different levels of assurance. Pick the right one.
The three services, ranked
Audit — highest assurance. The CPA tests transactions, confirms balances with third parties, evaluates internal controls, and issues an opinion. Required by many state charity regulators and most grantmakers above certain revenue thresholds. Cost: $10,000 to $40,000+ for small-to-mid associations.
Review — limited assurance. The CPA performs analytical procedures and inquiries but does not test transactions or confirm balances. The report says the financials "appear reasonable." Cost: roughly half an audit.
Compilation — no assurance. The CPA assembles your financial statements into proper form but provides no opinion. Cost: a few thousand dollars.
Which one do you need?
- You must audit if state law, grant terms, lender covenants, or your bylaws require it. Many states require audit above $500K-$1M in revenue.
- Review is acceptable for many small associations under audit thresholds with clean operations and engaged board oversight.
- Compilation is rarely enough if you receive grants, hold significant restricted funds, or have meaningful staff.
What boards should actually do with an audit
- Meet with the auditor without staff present at least once. This is not optional. It's where you ask "Is there anything you're uncomfortable with that you couldn't put in the management letter?"
- Read the management letter — recommendations on controls. This is often more useful than the financial statements themselves.
- Verify the 990 matches the audit. They should reconcile.
- Rotate auditors every 5-7 years. Familiarity erodes objectivity.
Test what you just learned.
Three quick questions. Pass and you're one step closer to a certificate for the full Financial Stewardship track.
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