Insights
QoE vs audit vs review vs compilation: which one does a buyer actually want?
QoE versus audit is the choice most sellers get backwards. A quality of earnings report argues for your earnings number, which is what a buyer multiplies to reach a price. An audit, a review, and a compilation speak to whether your statements are presented correctly, which is credibility rather than price. Buyers weight the first one most.
Every owner heading toward a sale eventually gets the same advice from three different people, and none of them agree. The banker says get a sell-side quality of earnings report. The CPA says you should probably have a review, maybe an audit. Somebody on a forum says none of it matters, just clean up QuickBooks.
All three are describing real products that do genuinely different jobs. The expensive mistake is buying the wrong one, discovering in diligence that the buyer is going to re-perform the work anyway, and paying for the same three years of history twice.
The four reports side by side
| Dimension | Quality of earnings (QoE) | Audit | Review | Compilation |
|---|---|---|---|---|
| What it is | A transaction analysis of whether your earnings are real, normalized, and repeatable | An examination of your financial statements ending in a formal opinion | Limited procedures ending in limited assurance | Your own numbers put into proper statement format, with no testing |
| What it concludes | Here is adjusted EBITDA, line by line, with support for every adjustment | The statements are fairly stated in accordance with the applicable framework | Nothing came to our attention suggesting a material misstatement | No conclusion at all |
| Question it answers | What will this business earn for the next owner? | Can a third party rely on these statements? | Do these statements look reasonable on a light look? | Are these numbers formatted like real financial statements? |
| Who commissions it | Seller before market, or buyer after the LOI | Seller, usually because a lender, investor, or bonding company asked | Seller, usually a bank covenant or a franchisor | Seller, for internal or light external use |
| Commonly quoted cost | Roughly $30K to $75K full scope, roughly $15K to $30K for a limited scope report | Roughly $20K to $60K, higher in a first year | Roughly $5K to $20K | Roughly $1.5K to $5K |
| Typical elapsed time | Three to six weeks of fieldwork once your data is delivered | Six to twelve weeks in a first year, plus your own prep | Two to six weeks | Days to two weeks |
| Effect on your price | Direct. It is the document the earnings argument is fought over | Indirect. Raises trust, does not defend an add-back | Minimal | None |
Cost and timing vary with revenue, number of entities, inventory, and how clean the underlying records are, so treat every range above as a starting point rather than a quote. In plain prose, one option at a time:
A quality of earnings report is a transaction-focused analysis of whether a company's reported earnings are accurate, normalized for one-time and owner-specific items, and likely to repeat under a new owner. It is the only one of the four built to defend a number a buyer will multiply.
An audit is the highest level of assurance a CPA firm provides on historical financial statements, ending in a written opinion that the statements are fairly stated under the applicable accounting framework. It answers whether your statements can be relied on, not whether your adjusted earnings are defensible.
A review is a limited-assurance engagement in which a CPA performs analytical procedures and inquiries and concludes that nothing came to their attention indicating material misstatement. It costs a fraction of an audit and carries a fraction of the weight.
A compilation is a presentation service in which a CPA formats management's numbers into financial statements without testing them and without expressing any assurance. It proves that your numbers have been put in the right boxes, which is worth something internally and close to nothing in a negotiation.
What a quality of earnings report does that the other three cannot
A QoE is the only one of the four reports that argues about the earnings number itself. Buyers do not pay a multiple of your net income as filed. They pay a multiple of adjusted earnings, which means every add-back, every normalization, and every one-time item is a live negotiation. The QoE is where that negotiation happens on paper.
A sell-side QoE, commissioned by you before you go to market, does three things at once. It builds the adjusted earnings schedule with documentation attached to each line, so your add-backs when selling a business arrive supported instead of asserted. It finds the problems a buyer would have found, at a moment when you can still fix or explain them rather than concede them. And it shortens the buyer's own diligence, because their accountants are testing a schedule that already exists rather than building one from a shoebox.
The catch worth knowing: a QoE is not a standardized engagement. There is no single professional standard defining what one contains, so scope, depth, and quality vary a great deal by provider. Two firms can both hand you a document titled quality of earnings and deliver very different work. Ask what periods get tested, whether revenue is tested at the transaction level, whether working capital and capex are analyzed, and who reads the report besides you.
What an audit buys you, and what it will not defend
An audit buys credibility with institutions, not leverage on price. A lender syndicating debt, a bonding company writing surety, a franchisor, a board, or an institutional investor may require audited statements as a condition of doing business. In those situations the audit is not optional and the cost is simply the price of participation.
What an audit will not do is defend your adjusted earnings. An auditor's opinion covers whether your statements conform to the accounting framework. It says nothing about whether the $180,000 you ran through the business for owner-related expenses should be added back to earnings, or whether last year's revenue spike repeats. A clean audit and a contested earnings number coexist comfortably, which is exactly the outcome that frustrates owners who assumed the audit had settled the argument.
Our longer take on when the spend is justified lives in do you need audited financials to sell a business. The short version: audits earn their cost when a specific counterparty requires one, and rarely when the only stated reason is to look more serious to buyers.
When a review is the right middle option
A review makes sense when somebody has asked for assurance and nobody has asked for an audit. That is a narrower situation than it sounds, and it is usually driven by an existing bank covenant, a landlord, a franchisor, or an insurer rather than by a prospective buyer.
A review does not scale up to fill an audit's role and does not substitute for a QoE. It is a compliance answer to a compliance question. If you are looking at a review purely as a cheaper way to reassure buyers, the money almost always does more work inside a real monthly close and a documented earnings schedule.
What a compilation is actually for
A compilation is a formatting service, and it is priced accordingly. Its legitimate uses are internal reporting discipline, a light lender request, and giving a business with informal books a properly structured set of statements for the first time.
It carries no assurance and no negotiating weight. No buyer has ever paid more because a compilation existed. If your books are messy enough that a compilation feels like progress, the honest read is that the underlying accounting needs work, and a compiled statement puts a clean cover on an unresolved problem.
The reliance test: buy the report the person writing the check will actually use
Before spending a dollar on any of the four, run three questions. Who is financing this transaction. Who underwrites that financing. And what will that party re-perform on their own regardless of what I hand them. Buy the report the answer points to, and skip anything that gets re-done at your expense later.
Here is the arithmetic that makes the point. Take an owner with roughly $2M of adjusted EBITDA who spends $35,000 on a first-year audit specifically to impress buyers. A private equity buyer signs an LOI and immediately commissions its own buy-side quality of earnings review, which re-tests the same three years, rebuilds the adjusted earnings schedule from the general ledger, and challenges $310,000 of the owner's $520,000 add-back schedule. The audit did not participate in that fight, because an audit opinion is not evidence that a specific add-back is legitimate. The same $35,000 spent on a sell-side QoE would have produced the schedule the buyer's accountants had to argue against, along with a supported answer for each line, before exclusivity removed the seller's ability to walk.
That is the whole test. An audit answers a question buyers were not asking. A QoE answers the question that sets the price. And under roughly $5M of enterprise value, where the likely buyer is an individual using SBA financing, neither one is typically required: that lender wants internal statements that tie to filed tax returns and cash flow that services the debt, which is a records problem rather than an assurance problem.
Choose a QoE if, choose an audit if: the decision rules
Four rules, in the order they usually apply.
- Choose a sell-side QoE if you have roughly $1.5M or more of adjusted EBITDA, your add-back schedule is a meaningful share of that earnings number, and your likely buyers include private equity or a larger strategic. This is the highest-return report of the four for a seller, because it is the only one that argues price.
- Choose an audit if a specific named counterparty requires it. A lender, a surety, an institutional investor, a franchisor, or a buyer whose own financing demands audited historicals. Requirements vary by counterparty and by industry, so get the requirement in writing before you engage anyone.
- Choose a review or a compilation if the request is a compliance obligation you already carry, or if you need structured statements where none exist today. Neither is a sale-preparation tool.
- Choose none of them yet if your monthly close is not current, your books are on a cash basis, or your internal statements do not reconcile to your tax returns. This is the most common honest answer, and buying assurance on top of unreliable records is the most expensive mistake in this whole category. Fix the close first. Every one of the four reports gets cheaper, faster, and better once there is a real close underneath it, and the work is the same work described in how to prepare your business for sale.
How the four fit into a sell-side timeline
Sequence matters more than selection. The pattern that works runs in one direction: get the monthly close current and on an accrual basis, reconcile internal statements to filed returns, build the add-back schedule with documentation, then decide whether a sell-side QoE is warranted, then go to market.
Reports commissioned out of order create their own problems. An audit started before the close is clean turns into a cleanup project billed at audit rates. A QoE started before the add-back documentation exists produces a thinner report and a longer invoice. And any of the four started after an LOI is signed is running against a clock set by somebody else, which is the whole reason due diligence when selling a business feels like an ambush to owners who prepared late. For what a buyer's own version of this work looks like from the inside, see what is a quality of earnings report.
The bottom line for McKinney and North Texas owners
Most owner-led businesses in McKinney and the wider North Texas market do not need an audit to sell, and many would be better served by spending that budget on a clean close and a defensible earnings schedule. The businesses that get the highest price are not the ones with the most impressive cover pages. They are the ones whose numbers hold up when a stranger with a spreadsheet pushes on them for three weeks.
Decide by counterparty, not by instinct. Find out who is going to finance your buyer and what that party requires, spend the money on the report they will actually rely on, and put the rest into making the underlying records good enough that no report has to compensate for them.
If you want a straight read on which of these four your situation actually calls for, see how a full sell-side process works on our Texas business broker page, learn how we work with owners on our McKinney business broker page, or book a confidential call. More posts like this are in the Insights library.
Last reviewed: August 2026. This is general information, not legal, tax, or accounting advice. Assurance requirements, engagement scope, and professional standards vary by counterparty, by industry, and by the accounting framework applied, and costs vary widely by size and complexity. Talk to a CPA and an M&A advisor about your own situation before committing to any of these engagements.