What assurance level is provided by a compilation engagement

A “compilation engagement” refers to the assistance of an independent accountant in putting together financial accounts. The accountant must have a better understanding of the company’s internal operations to provide accurate financial statements.

A business without an internal accountant may sometimes save money by employing a seasoned outside accountant to prepare its financial statements rather than having them audited.

Procedure for Compilation Engagement

Make sure the accountant you choose for compilation services is familiar with the industry of your customer. A person is not disqualified from accepting this agreement because they are dependent on the business that needs compilation services. Whether it is a single statement like the balance sheet or the whole set of financial statements, management is entirely responsible for their compilation and presentation.

Comptrollers who do compilations are required to keep adequate records of the steps they took to reach their conclusions. The engagement letter, financial statements, and correspondence between the auditor and the management team about significant problems discovered during the audit are all included in the documentation.

Assurance in Compilation Engagement

Since the accountant has not performed an audit of the financial accounts, the audit is neither a guarantee that the financial statements conform with the financial accounting framework nor an opinion on their accuracy, the accountant states in a compilation report.

When the financial statements include material misstatements, the accountant must stop presenting them. It would be better for the accountant to ask management for further details and if none are given, to end the contract.

There is no guarantee given and no methods to check the content’s accuracy or completeness are needed during a compilation engagement. To assess the financial accounts, a professional will take part in interrogation, discussions with stakeholders, and in-depth study.

Compilation Engagement vs. Audit and Review Engagements

The accountant is not obligated to provide a judgment on the accuracy of the financial statements in a compilation assignment, in contrast to an audit engagement. The accountant only compiles the data and prepare the financial statements.

More importantly, it does not guarantee adherence to generally accepted accounting rules. Therefore, doing audit processes such as analysis, review, or questions is not needed by the accountant performing the compilation. Compilation engagements are the least expensive of the several audit kinds. Organizations with a large number of comfortable stakeholders tend to embrace this approach.

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Compilation Report

The accountant hired to do the compilation job should also provide the customer with a compilation report, which is a report they produced. A compilation report differs from an audit or review report in that it is one paragraph long without headers. The company (client), the time period, and the prepared financial statements must all be mentioned.

The absence of an audit, the lack of an opinion or assurance from the accountant, and management’s responsibility for the financial statements should all be made clear in the report. The report has to be dated, signed by the accountant or accounting firm, and contain the accountant’s name, city, and province.