Compiled financial statements represent the most basic level of service that certified public accountants provide with respect to financial statements. In a compilation, the CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client's industry and applicable accounting principles, having a clear understanding with the client as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles (or, in some cases, another comprehensive basis of accounting used by the entity). It may be necessary for the CPA to perform "other accounting services" (such as creating a general ledger for the client, or assisting the client with adjusting entries for the books of the client (before the financial statements can be prepared). Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles. This is known as the expression of "no assurance." Compiled financial statements are often prepared for privately-held entities that do not need a higher level of assurance expressed by the CPA.
An Alaska Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement between an accounting firm and a client, outlining the terms and conditions of the engagement. This letter serves as a crucial document in establishing the scope of work, responsibilities, and expectations of both parties involved in the review and compilation process. The Alaska Engagement Letter for Review of Financial Statements signifies the commencement of a professional relationship between the accounting firm and the client, ensuring that both parties are on the same page regarding the specific services to be rendered. This letter sets forth the procedures that the accounting firm will undertake in evaluating the client's financial statements, offering an independent assessment, and determining their accuracy and compliance with relevant accounting principles and regulations. The engagement letter guarantees that the accounting firm will review significant accounting records, supporting documents, and internal controls. It also outlines the responsibilities of the client, providing them with guidelines on maintaining accurate financial records, cooperation with the accounting firm, and the provision of all necessary information and access to relevant personnel. There may be different types of Alaska Engagement Letters for Review of Financial Statements and Compilation by an Accounting Firm, tailored to meet the specific needs and requirements of the engagement. These may include: 1. Review Engagement Letter: This type of engagement letter specifically focuses on the review of financial statements. It will outline the procedures for analyzing the client's financial documents, identifying possible misstatements or errors, and providing limited assurance on their accuracy. 2. Compilation Engagement Letter: This letter is used when the accounting firm is engaged solely for the purpose of compiling financial statements without providing any assurance or evaluation. The scope of work will involve organizing and presenting the client's financial information in a proper format, without performing detailed analysis or verification. Regardless of the specific type of engagement letter, certain key components are commonly included. These elements establish the overall understanding of the engagement and include: — Duration and termination of the engagement. — Fee structure and payment terms— - Responsibilities and expectations of both parties. — Confidentiality and non-disclosure provisions. — Limitation of liability— - Applicable laws and jurisdiction. Creating a comprehensive Alaska Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is essential to ensure a clear understanding of the engagement's scope and maintain a professional relationship between the accounting firm and the client.
