What are compilation engagements? What is a compilation and review engagement? What is the objective of a compilation engagement? Is an engagement letter required for a compilation?
Compilation engagement is an engagement in which a professional accountant applies accounting and financial reporting expertise to assist management in the preparation and presentation of historical financial information of an entity in accordance with an applicable financial reporting framework, and reports.
Management may request an accountant to assist with the preparation and presentation of financial information of an entity. The value of a compilation engagement to users of financial information results from the application of the accountant’s professional expertise in accounting and financial reporting and compliance with professional standards, including relevant ethical requirements.
Since a compilation engagement is not an assurance engagement, a compilation engagement does not require the accountant to verify the accuracy or completeness of the information provided by management for the compilation, or otherwise to gather evidence to express an audit opinion or a review conclusion on the preparation of the financial information.
An engagement is conducted on the premise that management, or those charged with governance where appropriate, have agreed certain responsibilities that are fundamental to the performance of the compilation engagement.
Management retains responsibility for the financial information and the basis on which it is prepared and presented. That responsibility includes application by management of the judgment required for the preparation and presentation of the financial information, including the selection and application of appropriate accounting policies and, where needed, developing reasonable accounting estimates.
The management is responsible for:
(i) The financial information, and for the preparation and presentation thereof, in accordance with a financial reporting framework that is acceptable in view of the intended use of the financial information and the intended users;
(ii) The accuracy and completeness of the records, documents, explanations and other information provided by management for the compilation engagement; and
(iii) Judgments needed in the preparation and presentation of the financial information, including those for which the accountant may provide assistance in the course of the compilation engagement.
Financial information that is the subject of a compilation engagement may be required for various purposes including:
(a) To comply with mandatory periodic financial reporting requirements established in law or regulation; or
(b) For purposes unrelated to mandatory financial reporting under relevant law or regulation, including for example:
• For management or those charged with governance, prepared on a basis appropriate for their particular purposes (such as preparation of financial information for internal use).
• For periodic financial reporting undertaken for external parties under a contract or other form of agreement (such as financial information provided to a funding body to support provision or continuation of a grant).
• For transactional purposes, for example to support a transaction involving changes to the entity’s ownership or financing structure (such as for a merger or acquisition).
The accountant shall compile the financial information using the records, documents, explanations and other information, including significant judgments, provided by management.
Compiling the Financial Information
If you would like to know more, please contact Bestar. We have the appropriate competence and capabilities to perform the compilation engagement. We undertake services relevant to the preparation and presentation of financial information of an entity (such as in relation to preparation of historical financial statements required for public filing).