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 engagement letter is a crucial document that outlines the terms and conditions of a professional relationship between an accounting firm and its clients. In the state of California, engagement letters play a vital role in ensuring transparency and professionalism in financial statement reviews and compilations conducted by accounting firms. These letters are tailored to meet the specific requirements and regulations set forth by the California Board of Accountancy. The California Engagement Letter for Review of Financial Statements is an agreement between the accounting firm and its client, which establishes the scope of the review engagement. It includes detailed information about the responsibilities of both parties, the objectives of the review, and the specific financial statements to be reviewed. This type of engagement letter is designed to comply with the Generally Accepted Auditing Standards (GAS) and the Statements on Standards for Accounting and Review Services (STARS) issued by the American Institute of Certified Public Accountants (AICPA). On the other hand, the California Engagement Letter for Compilation of Financial Statements is another type of engagement letter used by accounting firms in California. Unlike a review engagement, a compilation engagement does not provide any assurance regarding the financial statements' accuracy or compliance with Generally Accepted Accounting Principles (GAAP). Instead, it involves the preparation of financial statements based on information provided by the client. The engagement letter for compilation clearly states the limited scope and purpose of the engagement, protecting the accounting firm from misconceptions about its level of assurance. Keywords: California, engagement letter, review of financial statements, compilation, accounting firm, scope, terms and conditions, transparency, professionalism, California Board of Accountancy, regulations, responsibilities, objectives, financial statements, Generally Accepted Auditing Standards (GAS), Statements on Standards for Accounting and Review Services (STARS), American Institute of Certified Public Accountants (AICPA), assurance, accuracy, compliance, Generally Accepted Accounting Principles (GAAP), preparation, limited scope, purpose, client, misconceptions.An engagement letter is a crucial document that outlines the terms and conditions of a professional relationship between an accounting firm and its clients. In the state of California, engagement letters play a vital role in ensuring transparency and professionalism in financial statement reviews and compilations conducted by accounting firms. These letters are tailored to meet the specific requirements and regulations set forth by the California Board of Accountancy. The California Engagement Letter for Review of Financial Statements is an agreement between the accounting firm and its client, which establishes the scope of the review engagement. It includes detailed information about the responsibilities of both parties, the objectives of the review, and the specific financial statements to be reviewed. This type of engagement letter is designed to comply with the Generally Accepted Auditing Standards (GAS) and the Statements on Standards for Accounting and Review Services (STARS) issued by the American Institute of Certified Public Accountants (AICPA). On the other hand, the California Engagement Letter for Compilation of Financial Statements is another type of engagement letter used by accounting firms in California. Unlike a review engagement, a compilation engagement does not provide any assurance regarding the financial statements' accuracy or compliance with Generally Accepted Accounting Principles (GAAP). Instead, it involves the preparation of financial statements based on information provided by the client. The engagement letter for compilation clearly states the limited scope and purpose of the engagement, protecting the accounting firm from misconceptions about its level of assurance. Keywords: California, engagement letter, review of financial statements, compilation, accounting firm, scope, terms and conditions, transparency, professionalism, California Board of Accountancy, regulations, responsibilities, objectives, financial statements, Generally Accepted Auditing Standards (GAS), Statements on Standards for Accounting and Review Services (STARS), American Institute of Certified Public Accountants (AICPA), assurance, accuracy, compliance, Generally Accepted Accounting Principles (GAAP), preparation, limited scope, purpose, client, misconceptions.
