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Audit & Accounting

Business enterprises seldom operate in an unchanging environment. Consequently, it is management’s responsibility to establish effective internal controls and to identify the need for changes.

In order to assist management, it is our policy to make recommendations to you orally or in written form. Our recommendations are addressed to the board of directors, the president, or an appropriate officer depending upon the situation. Before any comment is presented, it will have been discussed at appropriate levels within your organization.

Our firm can perform services at three levels of comfort on financial statements: audit, review, and compilation.

The Audit: Our Highest Level of Service
In an audit we review, study and evaluate your system of internal accounting control and verify from external sources (on a sample basis) amounts reflected in the financial statements. While an audit is not of sufficient scope to discover fraud, it provides the level of comfort required by numerous governmental agencies and lending institutions.

The Review: Our Middle Level of Service
A review is an evidence-based engagement that provides a moderate level of assurance that the financial statements are free of material misstatement. The accountant's report reads in-part..."based on are review we are not aware of any material modifications in order for the financial statements to be in conformity with generally accepted accounting principles."

While a review does not include a study and evaluation of internal accounting controls, a test of accounting records and responses to inquiries, and certain other procedures ordinarily performed during an audit, it does require the following:

  • Knowledge of the accounting principles and practices of the industry
  • Understanding of the client’s business and industry to provide a basis for expressing the limited assurance opinion
  • Inquiries concerning accounting principles and practices, procedures for recording, classifying and summarizing transactions; inquiries concerning actions taken at meetings of stockholders, board of directors, and other comparable meetings that may affect the financial statements; and inquiries of persons responsible for financial and accounting matters
  • Analytical procedures to assist us in identifying relationships and individual items that appear unusual

The Compilation: Our Base Level of Service
The lowest level of service that we can perform is a compilation financial statement. A compilation puts client data and information in the form of a financial statement using an identified accounting framework. We are not required to test the representations made in the financial statements. Since a compilation is not an evidenced-based engagement, no assurance is provided.

However, we are obligated to investigate incorrect, incomplete, or unsatisfactory information.

Copyright 2006 Koly & Company, Inc. All rights reserved.