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 Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement document between an accounting firm and a client, outlining the scope of services to be provided for the review of financial statements and compilation services. This engagement letter serves as a crucial contract, establishing the terms of the engagement, responsibilities of each party, and the professional standards that the accounting firm will adhere to during the engagement. The purpose of the review of financial statements is to offer limited assurance that the financial statements are free from material misstatements. The accounting firm will perform analytical procedures and make inquiries necessary to express limited assurance that the financial statements are in accordance with the applicable financial reporting framework. On the other hand, a compilation engagement involves the accounting firm assisting the client in the preparation and presentation of financial statements. The firm will gather and compile financial data from the client, organize it into a financial statement format, and issue a compilation report without providing any assurance regarding the accuracy or completeness of the financial information. Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm typically includes key components such as: 1. Identification of parties involved: The engagement letter identifies the accounting firm, client, and any third-party users of the financial statements. 2. Objective and scope of engagement: The letter clearly defines the purpose of the engagement, whether it is a review or compilation, and outlines the specific financial statements to be reviewed or compiled. 3. Responsibilities of the accounting firm: This section outlines the specific services the accounting firm will provide, including the procedures to be performed, any limitations, and the expected completion timeline. 4. Responsibilities of the client: The letter specifies the client's responsibilities, including providing accurate financial information, maintaining internal control systems, and granting access to records and supporting documents. 5. Professional standards: The engagement letter highlights the accounting firm's commitment to adhere to applicable professional standards, such as Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAS). 6. Limitations of engagement: The letter explicitly states that a review engagement does not provide absolute assurance and that a compilation engagement does not provide any assurance regarding the accuracy of the financial information. 7. Reporting and communication: The engagement letter includes details on the type and format of the final report, as well as any required communication between the accounting firm and the client. 8. Billing and fees: This section outlines the billing and fee structure for the engagement, including any additional costs that may arise during the process. It is important to note that different accounting firms may have their own variations or templates for the Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation. However, the key elements mentioned above remain consistent across most engagement letters.An Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm is a formal agreement document between an accounting firm and a client, outlining the scope of services to be provided for the review of financial statements and compilation services. This engagement letter serves as a crucial contract, establishing the terms of the engagement, responsibilities of each party, and the professional standards that the accounting firm will adhere to during the engagement. The purpose of the review of financial statements is to offer limited assurance that the financial statements are free from material misstatements. The accounting firm will perform analytical procedures and make inquiries necessary to express limited assurance that the financial statements are in accordance with the applicable financial reporting framework. On the other hand, a compilation engagement involves the accounting firm assisting the client in the preparation and presentation of financial statements. The firm will gather and compile financial data from the client, organize it into a financial statement format, and issue a compilation report without providing any assurance regarding the accuracy or completeness of the financial information. Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm typically includes key components such as: 1. Identification of parties involved: The engagement letter identifies the accounting firm, client, and any third-party users of the financial statements. 2. Objective and scope of engagement: The letter clearly defines the purpose of the engagement, whether it is a review or compilation, and outlines the specific financial statements to be reviewed or compiled. 3. Responsibilities of the accounting firm: This section outlines the specific services the accounting firm will provide, including the procedures to be performed, any limitations, and the expected completion timeline. 4. Responsibilities of the client: The letter specifies the client's responsibilities, including providing accurate financial information, maintaining internal control systems, and granting access to records and supporting documents. 5. Professional standards: The engagement letter highlights the accounting firm's commitment to adhere to applicable professional standards, such as Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAS). 6. Limitations of engagement: The letter explicitly states that a review engagement does not provide absolute assurance and that a compilation engagement does not provide any assurance regarding the accuracy of the financial information. 7. Reporting and communication: The engagement letter includes details on the type and format of the final report, as well as any required communication between the accounting firm and the client. 8. Billing and fees: This section outlines the billing and fee structure for the engagement, including any additional costs that may arise during the process. It is important to note that different accounting firms may have their own variations or templates for the Oakland, Michigan Engagement Letter for Review of Financial Statements and Compilation. However, the key elements mentioned above remain consistent across most engagement letters.
