By Neena Shukla, CPA, CFE, CGMA, FCPA, CTP

When navigating the complex world of government contracting, 8(a) companies often face a unique set of challenges and requirements. Among these is the necessity to engage an independent Certified Public Accountant (CPA) for financial statement services. Depending on their level of gross receipts, 8(a) companies are required to undergo either an audit, review, or compilation. Understanding the distinctions between these services is crucial for compliance and financial health. Let’s delve into the specifics of each to provide clarity.

The Basics: What Are Audit, Review, and Compilation?

  1. Audit: An audit is the most comprehensive and rigorous of the three services. It involves an in-depth examination of a company’s financial statements and accompanying disclosures. The primary objective is to provide reasonable assurance that the financial statements are free from material misstatements, whether due to fraud or error. The CPA will perform various procedures, including:
  • Examining records and supporting documents.
  • Testing internal controls.
  • Confirming account balances with third parties.
  • Performing physical inspections and observations.

The result is an audit report, which includes the auditor’s opinion on whether the financial statements present a true and fair view of the company’s financial position.

  1. Review: A review is less extensive than an audit but more involved than a compilation. The goal is to provide limited assurance that no material modifications are needed for the financial statements to conform to generally accepted accounting principles (GAAP). The CPA performs mainly analytical procedures and inquiries of company management, such as:
  • Comparing current financial statements with prior periods.
  • Discussing financial results with management.
  • Identifying unusual or unexpected balances.

The CPA issues a review report stating that they are not aware of any material modifications that should be made to the financial statements.

  1. Compilation: A compilation involves the CPA assisting in the preparation of financial statements without providing any assurance. The CPA compiles the financial data provided by the company into financial statements format but does not perform any procedures to verify the accuracy or completeness of the information. The CPA’s report on a compilation does not provide any opinion or assurance on the financial statements.

8(a) Companies and Their Requirements

The Small Business Administration (SBA) has specific requirements for 8(a) companies regarding financial statement services, which are determined by the company’s level of gross receipts:

  • Less than $2000,000 in Gross Receipts: Companies in this category are generally required to have a compilation of their financial statements. This level of service is sufficient due to the relatively lower financial risk associated with smaller companies.
  • $2,000,000 to $10,000,000 in Gross Receipts: Companies falling within this range must obtain a reviewed financial statement. The review provides a moderate level of assurance and is suitable for mid-sized companies that require more scrutiny than a compilation but do not need the full assurance provided by an audit.
  • More than $10,000,000 in Gross Receipts: Companies with gross receipts exceeding $10 million must undergo an audit. Given the significant financial activity and potential risk, an audit’s thorough examination is necessary to ensure the accuracy and reliability of the financial statements.

Why These Requirements Matter

For 8(a) companies, adhering to these requirements is not merely about compliance: it’s about building credibility and trust. Accurate and reliable financial statements are crucial for:

  • Securing Government Contracts: Government agencies need assurance that the financial statements of 8(a) companies are reliable. This trust is essential for securing and maintaining contracts.
  • Attracting Investors: Investors look for transparent and accurate financial reporting to make informed decisions. Having audited or reviewed financial statements can significantly enhance investor confidence.
  • Managing Business Growth: As companies grow, understanding their financial health becomes increasingly important. Regular financial statement services help businesses manage growth sustainably and identify potential issues early.


Navigating the financial statement requirements for 8(a) companies may seem daunting, but understanding the differences between an audit, review, and compilation can simplify the process. Engaging an independent CPA to provide the appropriate level of service based on gross receipts ensures compliance with SBA regulations and promotes financial transparency and reliability. For 8(a) companies aiming to thrive in the competitive world of government contracting, this understanding is a critical step towards success.

By choosing the right type of financial statement service, 8(a) companies can not only meet regulatory requirements but also strengthen their financial management and enhance their credibility with stakeholders.