Audit vs Review vs Compilation

When a nonprofit hires a CPA firm to look at its financial statements, there are three levels of service, each with different depths of scrutiny, different costs, and different levels of assurance.

A compilation is the lightest touch. The CPA takes your financial data and organizes it into properly formatted financial statements. They don't verify anything — they're essentially formatting your numbers into GAAP-compliant statements. The CPA provides no assurance that the numbers are correct. It's the cheapest option, typically $3,000-$8,000 for a mid-size nonprofit.

A review is the middle ground. The CPA performs analytical procedures (comparing this year to last year, looking for unusual patterns) and makes inquiries of management. They provide "limited assurance" — essentially saying, "Based on our review, nothing came to our attention that suggests these financial statements are materially incorrect." Cost: typically $8,000-$20,000.

An audit is the gold standard. The CPA tests transactions, confirms balances with third parties (banks, donors, vendors), examines internal controls, and performs extensive procedures. They provide "reasonable assurance" — the highest level — that your financial statements are materially correct. Cost: typically $15,000-$50,000+ depending on your size and complexity.

Many nonprofits don't get to choose — their grantors and state regulators decide for them. Most states require an audit once your revenue exceeds a certain threshold (often $500,000-$1,000,000). Federal grants over $750,000 trigger single audit requirements. Many foundations require audited financial statements as part of grant applications.

Even when not required, an audit builds credibility with donors and funders. It tells them an independent professional has verified your numbers. For smaller nonprofits where an audit isn't required or affordable, a review provides meaningful credibility at a lower cost.