COMPILATION
A compilation engagement is merely putting the information supplied by the client in proper financial statement form without attempting to express any assurance on those statements. Capturing and summarizing reliable financial information is often the most important service that an accountant can provide. In order to manage effectively, companies need vital information about sales, expenses, receivables, and payables. In a compilation, we are not required to make inquiries of management or perform other procedures to verify, corroborate, or review information supplied by the client.
REVIEW
A review engagement goes beyond putting client information together. We also make certain inquires of management and perform analytical procedures. However, in a review, we are not required to understand the company's internal control, test the accounting records, observe inventory, confirm receivables, or obtain other corroborating evidence, as is required during an audit.
AUDIT
An audit engagement goes beyond a review, and, on a test basis, examines evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.