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.
A Hawaii Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement between the accounting firm and their client regarding the services provided. This letter outlines the scope of work, responsibilities, terms, and conditions for conducting a review of financial statements or compilation services in accordance with the standards set by the American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Standards Board (FAST). The Hawaii Engagement Letter for Review of Financial Statements entails a professional assessment of a company's financial records and statements to provide limited assurance on their accuracy, completeness, and conformity with applicable accounting principles. This review engagement letter specifies the roles and responsibilities of both the accounting firm and the client, ensuring clear communication and understanding. In Hawaii, the accounting firms offer various types of Engagement Letters for Review of Financial Statements and Compilation services tailored to specific needs. Some commonly used engagement letter types include: 1. Hawaii Engagement Letter for Review of Financial Statements — This engagement letter covers the examination and evaluation of a company's financial statements to express limited assurance over their plausibility, conformity with GAAP (Generally Accepted Accounting Principles), and material misstatement verification. 2. Hawaii Engagement Letter for Review of Financial Statements with Comparative Statements — This type of engagement letter involves reviewing a company's financial statements for two or more accounting periods to assess changes, trends, and variations in financial performance. The comparative statements provide insights into the company's financial health and stability. 3. Hawaii Engagement Letter for Review of Financial Statements for Prospective Financial Information — This engagement letter is specific to clients seeking to provide projections, forecasts, or other prospective financial information. The accounting firm reviews these statements for reasonableness and adherence to appropriate accounting methodologies. 4. Hawaii Engagement Letter for Compilation of Financial Statements — This engagement letter addresses the compilation of financial statements from a client's accounting records without providing an assurance on their accuracy or adherence to GAAP. This service is typically required for internal reporting or loan assessment purposes. These engagement letters are customized to meet the specific requirements and objectives of each client and engagement. It is crucial for both the accounting firm and the client to read and understand the terms, limitations, and responsibilities outlined in the engagement letter before commencing any review or compilation services. By entering into an Engagement Letter for Review of Financial Statements and Compilation with a reputable accounting firm in Hawaii, clients can ensure their financial statements are reviewed or compiled with professional expertise, integrity, and compliance with relevant accounting standards.
