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 Alabama Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a legally binding document that outlines the terms and conditions of a professional engagement between the accounting firm and a client in Alabama. This letter serves as an agreement between the two parties and defines the scope of work to be performed by the accounting firm. The purpose of an engagement letter is to establish clear expectations and responsibilities for both the accounting firm and the client. It safeguards the interests of both parties and ensures that the engagement is conducted in compliance with relevant accounting standards and regulations. Keywords: Alabama, engagement letter, review of financial statements, compilation, accounting firm, professional engagement, terms and conditions, scope of work, agreement, expectations, responsibilities, compliance, accounting standards, regulations. There are different types of Alabama Engagement Letters for Review of Financial Statements and Compilation by Accounting Firms, depending on the specific requirements of the engagement. These may include: 1. Review Engagement Letter: This type of engagement letter is used when the accounting firm is engaged to review the financial statements of a client. The reviewer performs analytical procedures and inquiries to obtain limited assurance that there are no material modifications that should be made to the financial statements. 2. Compilation Engagement Letter: This type of engagement letter is used when the accounting firm is engaged to compile financial statements based on information provided by the client. The firm does not perform any verification or validation procedures but presents the information in the form of financial statements. 3. Special Purpose Engagement Letter: This type of engagement letter is used when the accounting firm is engaged to provide specific services related to reviewing or compiling financial statements for unique or specific purposes. These purposes could include regulatory compliance, internal reporting, or specific industry requirements. It is important for both the accounting firm and the client to carefully review and understand the engagement letter before signing it. Any questions or concerns should be discussed and clarified to avoid misunderstandings or disputes in the future. Overall, an Alabama Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a vital document that ensures a professional and transparent relationship between the accounting firm and the client, while complying with relevant accounting standards and regulations.
