A compilation engagement applies accounting and financial reporting expertise to help management present financial statements, with a report providing no assurance. Its report form communicates the service performed and the responsibility assumed, without evaluating the statements through an assurance conclusion.
- Compilations follow the Statements on Standards for Accounting and Review Services (SSARS), issued through the American Institute of Certified Public Accountants (AICPA).
- Compilation is classified as an attest service under the professional-conduct framework, despite providing no assurance and permitting disclosed nonindependence.
- That classification does not place compilation under the Statements on Standards for Attestation Engagements (SSAE), which govern different engagements.
- An agreed-upon procedures engagement reports procedures and findings. A compilation report neither lists findings from agreed procedures nor expresses an audit opinion or review conclusion.
The agreed engagement determines the appropriate form of reporting and the procedures required before that report can be issued. Attaching a compilation report after preparing statements requires agreement to a compilation and completion of its requirements.
Common mistakes
- Disclosure in the wrong place. A note stating that the accountant owns shares does not replace the report's final nonindependence paragraph.
- Known effects left out. In Marlon's case, the $30,000 effects are known; saying that management has not determined them would misstate the facts.
- One missing note generalized. Omitting one material debt note while including the remaining disclosures invokes departure reporting, not the substantially-all-disclosures exception.
Bottom line
- Compilation follows SSARS, provides no assurance, and requires a written report describing the service and its limitations.
- Engagement terms, management responsibilities, the framework, usable information, and completed procedures determine whether reporting can proceed.
- Independence is evaluated but is not required; nonindependence is disclosed in a separate final paragraph, with all causes disclosed if any are explained.
- A known material departure requires correction or adequate report disclosure, including known effects or a statement that management has not determined them.
Exam shortcut
Read the engagement verb first. If the facts say preparation or issuer association, identify that communication before selecting compilation language. Resolve information and correction issues before choosing report paragraphs. A request for records that management refuses can stop the engagement before wording choices matter. Mark each independent trigger: known departure, substantially omitted disclosures, special purpose basis, and impaired independence. Combine their paragraph changes and put nonindependence last.
The full lesson (about 4,855 words, 32 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- IV.C2
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