- June 18, 2021
- Posted by: Smith & Smith
- Category: Compilation Services
The goal of a compilation engagement is for the accountant to collect, classify, and summarise financial information using accounting expertise rather than auditing expertise. Normally, this includes reducing comprehensive data to a manageable and understandable form without the need to validate the claims underlying that data. A compilation engagement would typically entail the development of financial statements, but it might also include the collecting, classification, and summarization of additional financial data.
What is a compilation?
A compilation is a set of financial statements created or collated by an independent accountant for a corporation. A compilation is typically included as part of an accounting firm’s write-up service. The outside accountant translates the client’s data into financial statements without giving assurances or auditing services via compilations or assembled financial statements.
A compilation report should be included with the compiled financial statements to indicate that the financial statements 1) are the company’s management’s representation and 2) have not been reviewed or audited, and thus the accountant does not offer an opinion or assurances on the financial statements. Compilations enable businesses that do not have an accountant to have financial statements prepared by an outside specialist without incurring the extra costs associated with reviewed or audited financial statements.
A compilation ensures that financial figures are presented consistently. Financial information from year to year can be compared using compiled financial statements to spot trends and for strategic planning objectives.
Audit and Review Engagements vs. Compilation Engagements
Unlike an audit engagement, which requires auditors to give an opinion on the fairness of the financial statements, a compilation engagement does not need the accountant to express an opinion on the correctness of the financial statements. Furthermore, it does not guarantee that the corporation followed acceptable accounting procedures. As a result, the accountant executing a compilation assignment is not required to use analytical techniques, review procedures, inquiries, or any other audit procedures. A compilation audit is the least expensive of the audit types. Entities whose major stakeholders approve of this type of engagement prefer it.
What information must be included in a compilation report?
The compilation report supplied by the chartered professional accountant must include the following information:
- Include a note noting that the financial accounts are the responsibility of the company’s management.
- Recognize financial statements.
- Determine the accounting entity.
- Indicate the time frame covered.
- Include a statement confirming that the compilation was completed in compliance with the relevant requirements.
- Include a statement explaining that the accounting expert did not audit or review the financial statements and was not required to adopt processes to verify the authenticity or completeness of the client’s information.
- Include his autograph if possible.
- Include the report’s date (which should be the date when the accountant completed the compilation procedures)
What exactly is the goal of a compilation engagement?
The compilation engagement produces a financial statement report in the format required. This report is useful because it:
- Tax returns will be prepared by management.
- Before making decisions on the company’s future, management should have a comprehensive assessment of its financial health.
- Before giving a loan, financial institutions gain a deeper understanding of the company’s financial situation.
We hope this blog has given you the necessary knowledge. Are you looking for the best compilation service consultants in Arlington, TX? Visit Smith & Smith CPAs to receive answers to any of your questions.