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 Phoenix Arizona Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm gives a comprehensive outline of the terms and conditions that govern the client and accounting firm's relationship during the engagement. This letter serves to communicate the responsibilities and expectations of both parties involved in the review of financial statements and compilation process. The engagement letter typically includes several key components such as: 1. Introduction: The engagement letter starts with a formal introduction, stating the accounting firm's name, address, and contact details along with the client's name and relevant business information. 2. Objective and Scope: This section outlines the purpose and objectives of the engagement, such as conducting a review of the client's financial statements or compiling financial data into a statement format. It also details the extent of the engagement, setting the boundaries for the services to be provided. 3. Responsibilities of the Accounting Firm: This portion specifies the role and responsibilities the accounting firm will undertake during the engagement. It includes aspects like gathering financial information, performing analysis, applying accounting principles, evaluating internal controls, and preparing the review report or compiled financial statements. 4. Responsibilities of the Client: This section outlines the client's duties, including providing complete and accurate financial records, ensuring compliance with relevant laws and regulations, and granting the necessary access to financial documents and personnel. 5. Timeframe: The engagement letter includes a proposed timeline for the completion of the review or compilation services, as well as any important reporting deadlines or milestones. 6. Fee Structure: The engagement letter discusses the billing arrangement and fee structure, mentioning the basis for fees, hourly rates, or any additional costs associated with the engagement. It also states the payment terms and conditions. 7. Limitation of Liability: This section clarifies the accounting firm's limited liability in case of errors, omissions, or damages resulting from the engagement, highlighting any applicable insurance coverage. 8. Confidentiality: The engagement letter emphasizes the confidentiality of the client's financial information and the accounting firm's commitment to maintaining data privacy in accordance with professional standards and legal requirements. 9. Termination Clause: This clause outlines the circumstances under which either party may terminate the engagement and the procedures to be followed in such cases. 10. Governing Law: The engagement letter typically states the governing law and jurisdiction under which any disputes or conflicts shall be settled. Different types of Phoenix Arizona Engagement Letters for Review of Financial Statements and Compilation by Accounting Firm may include specific variations or additional sections depending on the nature of the engagement or the client's unique circumstances. For example, engagement letters may vary for reviews of nonprofit organizations, audits of publicly traded companies, or compilations for small businesses. However, the essential elements mentioned above remain consistent across the different types of engagement letters.A Phoenix Arizona Engagement Letter for Review of Financial Statements and Compilation by an Accounting Firm gives a comprehensive outline of the terms and conditions that govern the client and accounting firm's relationship during the engagement. This letter serves to communicate the responsibilities and expectations of both parties involved in the review of financial statements and compilation process. The engagement letter typically includes several key components such as: 1. Introduction: The engagement letter starts with a formal introduction, stating the accounting firm's name, address, and contact details along with the client's name and relevant business information. 2. Objective and Scope: This section outlines the purpose and objectives of the engagement, such as conducting a review of the client's financial statements or compiling financial data into a statement format. It also details the extent of the engagement, setting the boundaries for the services to be provided. 3. Responsibilities of the Accounting Firm: This portion specifies the role and responsibilities the accounting firm will undertake during the engagement. It includes aspects like gathering financial information, performing analysis, applying accounting principles, evaluating internal controls, and preparing the review report or compiled financial statements. 4. Responsibilities of the Client: This section outlines the client's duties, including providing complete and accurate financial records, ensuring compliance with relevant laws and regulations, and granting the necessary access to financial documents and personnel. 5. Timeframe: The engagement letter includes a proposed timeline for the completion of the review or compilation services, as well as any important reporting deadlines or milestones. 6. Fee Structure: The engagement letter discusses the billing arrangement and fee structure, mentioning the basis for fees, hourly rates, or any additional costs associated with the engagement. It also states the payment terms and conditions. 7. Limitation of Liability: This section clarifies the accounting firm's limited liability in case of errors, omissions, or damages resulting from the engagement, highlighting any applicable insurance coverage. 8. Confidentiality: The engagement letter emphasizes the confidentiality of the client's financial information and the accounting firm's commitment to maintaining data privacy in accordance with professional standards and legal requirements. 9. Termination Clause: This clause outlines the circumstances under which either party may terminate the engagement and the procedures to be followed in such cases. 10. Governing Law: The engagement letter typically states the governing law and jurisdiction under which any disputes or conflicts shall be settled. Different types of Phoenix Arizona Engagement Letters for Review of Financial Statements and Compilation by Accounting Firm may include specific variations or additional sections depending on the nature of the engagement or the client's unique circumstances. For example, engagement letters may vary for reviews of nonprofit organizations, audits of publicly traded companies, or compilations for small businesses. However, the essential elements mentioned above remain consistent across the different types of engagement letters.
