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.
San Diego California Engagement Letter for Review of Financial Statements and Compilation by Accounting Firm
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FAQ
An engagement quality reviewer must be a qualified professional with expertise in accounting and auditing. In the context of a San Diego California Engagement Letter for Review of Financial Statements and Compilation by Accounting Firm, this reviewer ensures that the engagement meets all necessary standards. Typically, they possess extensive experience in similar engagements, thus providing an objective assessment of the work performed.
Compiled financial statements generally range in costs from $800 $3,500 based on the size and complexity of your company and can take 1-2 weeks to complete. Reviewed financial statements are the second type of financial statement assurance provided by a CPA.
When performing compilation, the accountant should prepare adequate documentation that provides information on the work that has been carried out. Some of the documentation includes the engagement letter, financial statements, and communication with management regarding significant issues identified during the audit.
A compilation involves (1) gaining a general understanding of your business, accounting principles used and financial reporting system and (2) presenting financial information in the accepted format of proper financial statements. The CPA expresses no assurance about the accuracy of the financial statements presented.
Under a compilation, management takes responsibility for the preparation and presentation of the financial statements. The accountant providing the compilation services should have sufficient industry-level experience and knowledge of the client to compile the financial statements.
Technical answer: Under SSARS 19 the documentation for a compilation and review should include an engagement letter.
The requirement that the accountant modify the accountant's compilation report whenever the accountant's independence is impaired is retained. The accountant is required to obtain an engagement letter signed by both the accountant and the client's management.
The cost of a financial statement review generally ranges from $1,500 to $5,000. Many CPAs will include the review at the time your taxes are prepared and roll the cost together.
The third type of attestation services a CPA may provide is a compilation. In a compilation, the CPA compiles the books and records of a client without any performance of substantive procedures, verification or confirmation of balances.
What are compilation standards? Compilation standards permit an accountant to compile financial statements that omit footnote disclosures required by generally accepted accounting principles or another comprehensive basis of accounting (cash or income tax).