AUD 6.3 - Compilation Engagements

Question 1

A service to apply accounting and financial reporting expertise to assist management in the presentation of the financial statements without undertaking to obtain or provide any assurance on the financial statements:

Answer 1

Compilation of financial statements

Question 2

This engagement is one level higher than preparation engagement

Answer 2

Compilation

Question 3

Who can request a compilation? Issuers? Nonissuers?

Answer 3

Nonissuers only

Question 4

What level of assurance and independence is required for a compilation engagement?

Answer 4

No assurance is provided
Independence is not required, but must be disclosed if not independent

Question 5

Before issuing a report on compilation, what should the auditor read the financial statements for?

Answer 5

Consider whether he they are appropriate in form and free from arithmetical and clerical mistakes

Question 6

In a compilation, what opinion is given?

Answer 6

No opinion is given - it is a conclusion

Question 7

What documentation should be provided following a compilation engagement?

Answer 7

1. Engagement letter
2. Copy of the financial statements
3. Copy of the accountants report

Question 8

What documentation may be included following a compilation engagement?

Answer 8

1. Any significant findings or issues
2. Oral or written communications with management regarding fraud or noncompliance

Question 9

Additional paragraphs are required in a compilation report when:

Answer 9

1. Prepared in accordance with a special purpose framework
2. Accountant is not independent
3. Disclosures are omitted
4. Known departures from the applicable financial reporting framework
5. Financial statements include supplementary information

Question 10

Each page of the financial statements in a compilation report should be marked:

Answer 10

“See accountants compilation report”
Or
“See independent accountants compilation report”

Question 11

The signature of the accountant or the firm on a compilation report can be:

Answer 11

Manual, printed, or digital

Question 12

What title does a standard compilation report have?

Answer 12

No title

Question 13

If reporting on a compilation financial statements that are prepared in accordance with contractual basis, what should the compilation report include?

Answer 13

A statement that the financial statements may not be suitable for another purpose

Question 14

Compiled financial statements that omit GAAP disclosures are acceptable if:

Answer 14

They are otherwise in conformity with GAAP
It was not to deceive the user
The compilation report warns the user of missing disclosures

restricted use is not required

Question 15

Departures from the applicable financial reporting framework should be:

Answer 15

Disclosures in a separate paragraph of the report

Question 16

If the accountant believes the disclosures in the report would not be adequate to indicate the deficiencies in the financial statements, the auditor should:

Answer 16

Withdraw

Question 17

Why don’t we issue an adverse opinion on compilation report reports if there is a departure from the financial reporting framework?

Answer 17

Because we are not AUDITING and we are not expressing an opinion

Question 18

What are the two main differences between a compilation and preparation engagement?

Answer 18

Compilations: require a report & the consideration of independence
Preparations: do not require a report or independence