BHT&D Certified Public Accountants Blog

My Bank Requested A Compiled Financial Statement. Why?

Posted by Daniel Crawford on Mon, Feb 02, 2015 @ 09:00 AM

Why Compiled Financial Statement?"Why would my bank request a "Compiled Financial Statement" versus my internally prepared QuickBooks reports?"  We are asked this question often by small business owners.

Commonly, people are confused as to why they would need a compiled financial statement prepared by a CPA for their small business, proprietorship or even the individual themselves. 

The usual reason we see a request for a CPA prepared compilation is that a client has a need to present formatted financial statements to another party. For example, in order for an equipment dealership to extend credit to a business, they would like to see some financial statements that are in the correct format. Other reasons might include that the client would like to get a better idea of how the business is doing by looking at properly formatted financials.

What is a compilation?

Generally, a compilation involves a CPA compiling the client’s books into a properly formatted financial statement and using a common sense approach to deciding if account balances/classifications conform to accounting principles and guidelines. It does not provide any assurance that significant or material changes are needed.

It could include making some adjustments that are overlooked by the client but stand out when the CPA takes a top level overview of the financials. Perhaps you expensed the $125,000 you spent on the new front loader purchased this year. Assets like this need to be capitalized in order for the financial statements to properly reflect the state of the business. If the accounts receivables are $100,000 in the negative, a CPA would find this to be an issue and have to further look into the reasoning behind this.

Alternatively, a CPA may offer two other financial statement presentation formats that provide higher levels of assurance than a compilation. Reviews are sort of a middle of the line assurance service and Audits are the highest level of assurance offered by a CPA. These will be covered in future blogs.

At BHT&D CPAs, we are committed to giving each client personal attention and spending the time needed to completely understand their circumstances.  Please contact our office to meet with a professional and discuss your specific situations. Request a complimentary accounting consultation or contact us at (616) 642-9467.

Tags: Compiled Financial Statement, Financial Statement, Small Business Accounting, Assurance