Compilation Engagements (SSARS) - M3

Question 1

Rules for Compilation Reports Issuance by Accountant

Answer 1

• An accountant who is not independent with respect to an entity may compile financial statements for such an entity and issue a report. However, the last paragraph of the report should disclose this lack of independence. The accountant is permitted, but not required, to disclose the reason(s) for the lack of independence.
• No assurance (not even negative assurance) is provided in a compilation report.
• An accountant’s standard report issued after compiling the financial statements of a non-issuer should state that the accountant was not required to perform any procedures to verify the accuracy or completeness of information provided by management.
• Should state that the accountant does not express an opinion, a conclusion, nor provide any form of assurance on the financial statements.
• Must not be a issuer/public company

Question 2

How to handle a Compilation Engagement that omits most or all disclosures?

Answer 2

• The accountant may compile financial statements that omit substantially all disclosures provided that:
  1. The accountant’s report clearly indicates the omission by including a fourth paragraph disclosing such omissions, and includes notification that the omission may influence the user’s conclusions about the financial statements.
  2. The omission is not intended to mislead any person who might be expected to use the financial statements.
• Disclosure of the reason for omission of the disclosures is not a requirement for this engagement

Question 3

What type of engagements can be performed if independence is impaired?

Answer 3

Compilation and preparation.

Question 4

What are the required procedures for a compilation engagement?

Answer 4

• The accountant is required to read the financial statements
• Have a general understanding of the client’s business and of the accounting principles and practices used by the client.

Fraud not required but cannot be ignored

Question 5

What is the auditor responsible for regarding fraud/non-compliance with laws and regulations when performing a compilation or review?

Answer 5

• The accountant is not required to specifically assess fraud risk or to perform procedures designed to detect material misstatements due to fraud or noncompliance with laws and regulations.
• Matters regarding inconsequential noncompliance with laws and regulations need not be reported.
• Information indicating that fraud or noncompliance with laws
  and regulations may have occurred should be reported to an appropriate level of management, but it need not be in writing. Oral communication to management should be documented.
• Inconsequential noncompliance with laws and regulations need not be reported.