Final answer:
An audit or compilation is typically done during the financial reporting process of a business to ensure accuracy and reliability of financial statements. An audit involves examination and testing by an external auditor, while a compilation involves the preparation of financial statements by an accountant. These procedures are commonly done at the end of a reporting period to provide an overview of a company's financial status.
Step-by-step explanation:
An audit or compilation is typically done during the financial reporting process of a business. An audit is usually conducted by an external auditor to ensure the accuracy and reliability of the financial statements, whereas a compilation is a preparation of financial statements by an accountant. Both procedures help provide assurance to stakeholders about the financial health of a company.
For example, in an audit, the auditor examines the financial records, performs tests, and gathers evidence to form an opinion on whether the financial statements are presented fairly. In a compilation, the accountant organizes and summarizes financial data without providing any assurance on its accuracy or compliance with accounting principles.
These procedures are commonly done at the end of a reporting period, such as at the end of a fiscal year, to provide an overview of the company's financial performance and position.
Audits and compilations are financial procedures with audits offering a high level of assurance on financial statements and compilations presenting financial information without assurance. The IRS has decreased tax audits in recent decades due to fewer resources, affecting predominantly high-income individuals. These processes typically happen in business financial oversight or for compliance.
An audit or compilation is usually done in the context of financial reporting. An audit is an independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon. It offers the highest level of assurance that financial statements are free from material misstatements. Meanwhile, a compilation involves presenting information in the form of financial statements that management asserts without the CPA providing any assurance that there are no material modifications that should be made to the statements.
Historically, the Internal Revenue Service (IRS) would conduct an audit on tax return filings to ensure accuracy and compliance with tax laws. However, in recent decades in the United States, the likelihood that a citizen's taxes will be audited has dropped substantially, particularly among high-income individuals, as the federal government has devoted fewer resources to such enforcement actions. The routine of only performing an audit or compilation generally occurs in the realm of business financial oversight or in response to specific compliance requirements.