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 New Mexico Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement entered into between the accounting firm and the client to outline the terms and conditions of the engagement. This letter serves as a guide that defines the scope of work to be undertaken, responsibilities of both parties, and outlines the overall purpose of the engagement. Types of New Mexico Engagement Letters for Review of Financial Statements and Compilation by an Accounting Firm: 1. New Mexico Review Engagement Letter: This type of engagement letter is specifically designed for review engagements where the accounting firm assesses the reasonableness of the financial statements and performs analytical procedures. It includes procedures to obtain limited assurance about whether the financial statements are free from material misstatement. 2. New Mexico Compilation Engagement Letter: A compilation engagement letter is utilized when the accounting firm is engaged to prepare financial statements based on information provided by the client. In this engagement, the accounting firm ensures that the financial statements are in compliance with the applicable financial reporting framework. Key components typically included in a New Mexico Engagement Letter for Review of Financial Statements and Compilation: 1. Identification of the Parties: The letter should clearly identify the accounting firm and the client, along with their contact information. 2. Objective and Scope: The letter should outline the objective of the engagement, whether it is a review or a compilation, and specify the period of financial statements to be covered. It should describe the limitations of each engagement type and the procedures to be performed. 3. Responsibilities of the Accounting Firm and the Client: This section delineates the obligations and responsibilities of both parties. It includes the client's role in providing access to relevant information, maintaining records, and ensuring the accuracy of the data provided. The accounting firm's responsibilities, such as adhering to professional standards, conducting procedures with due professional care, and communicating findings, should also be clearly stated. 4. Reporting: The letter should detail the expected form of the final report, including the format and structure of the financial statements, necessary disclosures, and any prior period comparative data. 5. Fees and Payment Terms: The engagement letter should provide a breakdown of fees, billing rates, and the payment terms agreed upon by both parties. 6. Terms of Termination: This section covers the circumstances under which either party can terminate the engagement, including conditions for early termination and notification requirements. Overall, a New Mexico Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm encompasses various components aimed at ensuring clarity, transparency, and professionalism throughout the engagement process. It serves as a legal document that establishes a mutual understanding between the accounting firm and the client, promoting a successful and efficient working relationship.A New Mexico Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement entered into between the accounting firm and the client to outline the terms and conditions of the engagement. This letter serves as a guide that defines the scope of work to be undertaken, responsibilities of both parties, and outlines the overall purpose of the engagement. Types of New Mexico Engagement Letters for Review of Financial Statements and Compilation by an Accounting Firm: 1. New Mexico Review Engagement Letter: This type of engagement letter is specifically designed for review engagements where the accounting firm assesses the reasonableness of the financial statements and performs analytical procedures. It includes procedures to obtain limited assurance about whether the financial statements are free from material misstatement. 2. New Mexico Compilation Engagement Letter: A compilation engagement letter is utilized when the accounting firm is engaged to prepare financial statements based on information provided by the client. In this engagement, the accounting firm ensures that the financial statements are in compliance with the applicable financial reporting framework. Key components typically included in a New Mexico Engagement Letter for Review of Financial Statements and Compilation: 1. Identification of the Parties: The letter should clearly identify the accounting firm and the client, along with their contact information. 2. Objective and Scope: The letter should outline the objective of the engagement, whether it is a review or a compilation, and specify the period of financial statements to be covered. It should describe the limitations of each engagement type and the procedures to be performed. 3. Responsibilities of the Accounting Firm and the Client: This section delineates the obligations and responsibilities of both parties. It includes the client's role in providing access to relevant information, maintaining records, and ensuring the accuracy of the data provided. The accounting firm's responsibilities, such as adhering to professional standards, conducting procedures with due professional care, and communicating findings, should also be clearly stated. 4. Reporting: The letter should detail the expected form of the final report, including the format and structure of the financial statements, necessary disclosures, and any prior period comparative data. 5. Fees and Payment Terms: The engagement letter should provide a breakdown of fees, billing rates, and the payment terms agreed upon by both parties. 6. Terms of Termination: This section covers the circumstances under which either party can terminate the engagement, including conditions for early termination and notification requirements. Overall, a New Mexico Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm encompasses various components aimed at ensuring clarity, transparency, and professionalism throughout the engagement process. It serves as a legal document that establishes a mutual understanding between the accounting firm and the client, promoting a successful and efficient working relationship.
