Compiled Financial Statements for Businesses
Compiled financial statements are a type of financial report prepared by accountants using data provided by a company, without performing any assurance or in-depth verification. These statements offer an overview of a business’s financial health and are commonly used by small and medium enterprises (SMEs) that need basic reporting without the cost or complexity of audits or reviews.
In this article, we explore what compiled financial statements include, their benefits, how they differ from other types of financial reports, and when they’re most appropriate.
What Are Compiled Financial Statements?
Compiled financial statements are created by an external accountant or accounting firm based entirely on the information provided by a company’s internal records. Unlike audited or reviewed financial statements, compiled statements do not include verification procedures. The accountant assumes the data is accurate and does not express any assurance on the statements.
These statements typically include:
- Balance Sheet
- Income Statement (Profit & Loss)
- Cash Flow Statement
- Notes to Financial Statements (if applicable)
They are presented in a standard format and may include a compilation report explaining the scope and limitations of the work performed.
Key Characteristics
Here are some distinct features of compiled financial statements:
- No assurance: The accountant does not provide any opinion or assurance about the accuracy of the financial information.
- Based on client-provided data: The accountant compiles the reports using data from the business without conducting any testing or analysis.
- Cost-effective: They are less expensive to prepare compared to reviewed or audited financial statements.
- Suitable for internal use: Often used by business owners for internal decision-making, loan applications, or preliminary reporting to stakeholders.
Benefits of Compiled Financial Statements
Compiled financial statements serve several important purposes, especially for smaller businesses and startups. Here are the main advantages:
1. Affordability
For businesses with limited budgets, compiled financial statements are a more affordable option than reviewed or audited reports. They provide essential financial information without the additional cost of verification.
2. Simplicity
Since no assurance work is done, the process is faster and simpler. This allows businesses to receive timely reports for operational or planning purposes.
Since no assurance work is done, the process is faster and simpler. This allowsbusinesses to receive timely reports for operational or planning purposes.
3. Professional Presentation
Even though no audit or review is involved, a compiled statement prepared by a qualified accountant still ensures the information is well-organized, formatted, and professionally presented—often increasing its credibility with stakeholders.
4. Useful for Management
These statements help business owners track performance, manage cash flow, and make informed business decisions without the need for extensive financial analysis.
5. Preliminary Financial Reporting
Businesses that are preparing for an audit or review often start with compiled financial statements as a preliminary step, ensuring their internal records are in order before further scrutiny.
Differences Between Compiled, Reviewed, and Audited Financial Statements
To fully understand the role of compiled financial statements, it’s important to compare them with other financial reporting services:
| Feature | Compiled Statements | Reviewed Statements | Audited Statements |
|---|---|---|---|
| Assurance Level | None | Limited | Reasonable |
| Accountant’s Opinion | Not Provided | Provided | Provided |
| Verification Procedures | None | Analytical Review | Full Testing |
| Cost | Low | Medium | High |
| Common Use | Internal Planning | Financing Requests | Regulatory Filing |
Compiled statements are the least formal type of financial reporting. They’re best suited for internal stakeholders or third parties who do not require assurance.
When Should a Business Use Compiled Financial Statements?
Compiled financial statements are ideal in the following scenarios:
- Startups or small businesses looking to understand their financial position without undergoing audits.
- Companies not legally required to undergo an audit, such as sole proprietorships or partnerships in Singapore with revenue below the audit threshold.
- Firms preparing for external financing where lenders accept compiled statements as part of an initial review.
- Businesses in early planning stages or internal strategy discussions that require an overview of financial performance.
Legal and Compliance Considerations in Singapore
In Singapore, not all businesses are required to file audited financial statements. According to the Companies Act, private companies with:
- Total annual revenue ≤ S$10 million,
- Total assets ≤ S$10 million, and
- Employees ≤ 50 may qualify as a small company and be exempt from audit requirements.
In such cases, compiled financial statements offer a compliant and cost-effective solution for fulfilling basic statutory obligations and ensuring internal transparency.
Conclusion
Compiled financial statements are a practical and affordable financial reporting tool for many businesses, especially those that don’t need a high level of assurance. While they may not offer the depth of analysis or verification found in audits or reviews, they still provide valuable insights that can support financial management and strategic decision-making.
If your business is growing and needs to present its financials without the cost and complexity of an audit, compiled statements may be the right solution. Always consult a qualified accountant to ensure your financial reports are prepared in line with relevant accounting standards and regulatory requirements.