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 Oklahoma Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a written agreement between the accounting firm and its client, outlining the terms and conditions of their engagement for reviewing and compiling financial statements. This letter serves as a critical document in establishing clear expectations, responsibilities, and scope of services for both parties involved. The primary purpose of an engagement letter is to define the nature and extent of the accounting firm's involvement. It typically covers various aspects such as the objectives of the engagement, the scope of work to be performed, timelines, fee structure, and the responsibilities of both the accounting firm and the client. In Oklahoma, there may be different types of engagement letters for the review of financial statements and compilation services, which are typically tailored to suit the specific needs of the client or comply with regulatory requirements. Some commonly used engagement letters in Oklahoma are: 1. Engagement Letter for Review of Financial Statements: This letter is specific to engagements where the accounting firm is engaged to perform a review of the client's financial statements. It outlines the procedures to be followed, including analytical procedures, inquiries, and other necessary steps to form a basis for the expressed limited assurance provided by the accounting firm. 2. Engagement Letter for Compilation of Financial Statements: This type of engagement letter is used when the accounting firm is engaged by the client to compile their financial statements. It clarifies that the accountant will collect, classify, and summarize the client's financial information without providing any assurance on the accuracy or completeness of the statements. 3. Combination Engagement Letter: In some cases, an accounting firm may be engaged to perform both a review and a compilation engagement. In such situations, a combination engagement letter is prepared, clearly stating the nature and extent of both review and compilation procedures to be conducted. Keywords: Oklahoma, engagement letter, review of financial statements, compilation, accounting firm, objectives of engagement, scope of work, timelines, fee structure, responsibilities, limited assurance, procedures, inquiries, analytical procedures, compilation of financial statements, accuracy, completeness, regulatory requirements.
