A6/M3 Compilation Engagements

Question 1

what is compilation of FS?

Answer 1

• to apply accounting and financial reporting expertise to assist private client only in presentation of FS
• no assurance provide
• no independence required, but if not independent, must disclose

Question 2

what are auditor’s responsibilities?

Answer 2

• before issuing the report, accountants should read the compiled FS and consider if there are any error
• if client refuses to provide financial info, withdraw.
• no title in the report of compilation
• a statement that management is responsible for FS
• a statement that the accountant did not audit or review FS, not required to verify accuracy of financial info, does not express an opinion, a conclusion, nor provide any insurance on FS
• Additional paragraph are required when:
  + special purpose framework
  + disclosures are OMITTED. Ex: missing statement of cash flows = ok but disclose (FS is conformity with GAAP, not misleading to users, warns users of missing disclosures)
  + no independent
  + known DEPARTURES from financial reporting framework (DO NOT modify the compilation report or issue an “adverse opinion;” instead disclose or withdraw)
  + supplementary info
• restricted use is not required
• print “no assurance is provided” on each page of FS

Question 3

what are the differences between compilation vs preparation?

Answer 3

• compilation requires a REPORT but preparation does not
• compilation requires the consideration of INDEPENDENCE but preparation does not