Compilations, reviews, and audits: Which one fits your construction business?

In construction, trust isn’t just built on the job site. It is reinforced through clear reliable financial statements that help owners, lenders, and bonding agents evaluate the health of your business. Whether you are bidding on a major project, securing financing or bonding, meeting state licensing requirements, or preparing for a potential sale, the level of assurance behind your financial statements can make or break your opportunities.

Certified Public Accountants (CPAs) offer three distinct service options: compilation, review, and audit. Each provides a different level of assurance and carries a different cost. Understanding these options and what stakeholders expect can help you choose which is most appropriate for your needs.

Bonding companies, lenders, and regulators rely on your financial statements to gauge risk. A contractor with a strong equity position and a solid track record may only need a review to satisfy bonding requirements. Meanwhile, a contractor with prior losses, limited visibility into exposure, or involvement in public works contracts might require an audit to secure adequate bonding capacity. There is no one-size-fits-all solution as stakeholder expectations drive the decision.

Think of It Like a Menu

Choosing between compilation, review, and audit is a bit like ordering dinner:

• Compilation = The Starter Salad: Basic and no frills. You provide the ingredients, and we plate them. It’s quick, light, and ideal when you simply need financial statements formatted for internal use or to meet minimal bank requirements.
• Review = The Entrée: A more substantial choice. We perform management inquiries and analytical procedures to assess the financials, adding professional judgment without testing transactions or evaluating the full system of internal controls. Designed for companies seeking limited assurance for lenders, bonding companies, or state licensing renewals.
• Audit = The Chef’s Tasting Menu: This is the premium experience. Key ingredients are sampled, and every course is thoughtfully prepared. An audit delivers the highest level of assurance available (not absolute) and offers a well-supported opinion for stakeholders, investors, and regulators. It is thorough and time-intensive, often required when cash flow is tighter, financing is more complex, or high-stakes contracts demand greater scrutiny.

Your choice depends on your appetite for assurance, your budget, and the expectations of those who rely on your financial statements.

Understanding Your Options

Before making a decision, it’s important to know what each choice involves. Compilations, reviews, and audits differ not only in cost but in the level of assurance, independence, and disclosures they provide. The chart below breaks down these distinctions so you can see how each service aligns with your business needs and stakeholder expectations.

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Making the Right Choice

Financial reporting decisions carry significant weight in construction. With large contracts, multiple stakeholders, and strict compliance standards, choosing the wrong level of service can lead to unnecessary costs or limit your growth potential.

The right approach, however, builds lender trust, expands bonding capacity, and positions your company to compete, and win, on the projects that matter most. While a compilation might suffice for internal reporting, external stakeholders often expect greater assurance. However, don’t assume you need an audit just because it sounds more rigorous.

The right service depends on:

• Who will use your financial statements
• What level of assurance they require
• Your company’s risk profile and growth goals

Making an informed decision helps you meet stakeholder expectations without overspending and positions your business for long-term success.

We Can Help

At Elliott Davis, we help construction companies strategically align assurance services with business objectives. Whether you need a simple presentation, a moderate check-up, or a full assurance experience, we’ll guide you toward the option that supports your goals.

Contact us today to discuss which service best fits your unique needs.

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.