A3 Compilation Engagements

Question 1

Compilation Engagements

Answer 1

These require an auditor to assist mgmt in presenting financial information in the form of FS without undertaking to provide any assurance on them. This requires the auditor to read the financials to ensure they appear to be appropriate in form & free of obvious material errors.

But auditors are not required to perform procedures designed to detect material misstatements due to fraud or noncompliance

Done only for nonissuers

Question 2

Report Title

Answer 2

The report should be appropriately titled. For example, “Accountant’s Compilation Report” and consist of an intro paragraph, scope, disclaimer of opinion, signature, & date.

Question 3

Attestation Engagements

Answer 3

Compilation reports are a form of attestation engagements (like preparations & reviews). They involve the auditor issuing a report on a subject matter that is the responsibility of another party.

These engagements include:
Examinations (reasonable assurance)
Reviews (limited assurance)
AUP (no assurance)

Question 4

Reliance on Compilations

Answer 4

A compilation cannot be relied upon to disclose errors, fraud, or illegal acts. Because a compilation is not an assurance engagement, it doesn’t require the accountant to verify the accuracy or completeness of the information provided by mgmt or otherwise gather evidence to express an opinion on the financials.

Question 5

SSARS

Answer 5

Compilations are compiled in accordance with SSARS, promulgated (promoted) by the Accounting & Review Services Committee of AICPA.

Question 6

Independence for Compilations

Answer 6

No independence required to compile financials, once the lack of independence is disclosed in the compilation report.

Question 7

Compilation Report

Answer 7

In addition to the compiled FS, the auditor also issues a report that is aimed to communicate the extent of the responsibility assumed for the FS.

The standard compilation report includes a disclaimer (no opinion), a conclusion, nor provide any assurance with respect to FS presentation.

Question 8

Withdrawal from Compilations

Answer 8

If the client refuses to provide such information, the accountants should withdraw from the compilation engagement

Question 9

Disclosures for Compilations

Answer 9

Disclosures are used to highlight what isn’t needed or requested by the client. Additional paragraphs are required for this which includes omissions. These are ok so long as they are not being done to mislead.