A6 M3 Compilation Engagements Flashcards
is an acctnt required to verify completeness and accuracy of info provided by mgmt?
No, because it is not an assurance engagement
establishing an understanding with the client (engagement letter)
1) objectives of engagement
2) mgmt responsibilities
3) acctnt’s responsibilities
4) limitations of engagement, like not relied on to disclose errors, fraud, or noncompliance with laws and regs
5) identification of applicable financial reporting framework
6) expected form and content of compilation report and circumstances where report could differ from form and content
performance requirements of a compilation
1) knowledge of industry and accting principles
2) reading financial statements-ensure free of error
3) noncompliance with laws and regs, going concern, and subsequent events
4) not required but can review info from client if inaccurate or incomplete (get more info if wrong and discuss with mgmt; withdraw if cannot complete engmt)
5) documentation requirements (same as preparation)
compilation engagement elements
1) mgmt responsible for F/S
2) identify F/S subject to compilation
3) identify entity
4) specify date/period covered for F/S
5) acctnt performed engagement in accordance with SSARS by ARSC
6) acctnt did not audit or review F/S or required to
7) signature of acctnt or firm
8) city and state acctnt practices
9) date of report
when are additional paragraphs required for a compilation?
-F/S prepared in accordance with special purpose framework
-disclosures omitted
-acctnt not independent
-known departures from applicable financial reporting framework
-F/S include supplementary info
other requirements for compilation report
-each page of statements marked “See Accountant’s Compilation Report” or “see Independent Accountant’s Compilation Report”
-acctnt letterhead not required to be printed and signature of acctnt or firm can be manual, printed, or digital
-separate paragraph used to emphasize matter disclosed in F/S like going concern or subsequent events
reporting on F/S with a special purpose framework
1) mgmt responsible for identifying special purpose framework and indicate it in F/S and referred in notes to F/S
2) if prepared in accordance with contractual basis of accting, the F/S may not be suitable for another purpose
compiled F/S with omissions of disclosures acceptable if:
1) F/S in conformity with applicable financial reporting framework
2) F/S not be misleading to users
3) compilation report warns users of missing disclosures
departures from applicable financial reporting framework
-disclosed in a separate paragraph
-disclosure include effects on F/S
-if disclosure not adequate to indicate deficiencies, withdraw from engagement
why should the accountant not modify the compilation report about F/S not in conformity with applicable financial reporting framework?
because it’s similar to expressing an adverse opinion and compilations do not express opinions
an accountant who is not independent
-should have a disclosure for lack of independence, but do not have to disclose reasons why, but if acctnt does, disclose all reasons
difference between compilation and preparation
compilation requires a report and determination of independence and a preparation does not
