Compilation and Review Services
| Author | Vicky Hoffman |
| Pages | 132-134 |
Page 132
Public accountants are qualified to provide a range of services related to financial statements. Among the services are reviews and compilations. These services are less comprehensive than audits, which are required for publicly owned companies. Statements on Standards for Accounting and Review Services are issued by the Accounting and Review Services Committee, which is the senior technical committee of the American Institute of Certified Public Accountants (AICPA) designated to issue pronouncements in connection with unaudited financial statements or other unaudited financial information of a nonpublic entity.
The most common engagements that are provided by public accountants for nonpublic entities are the compilation and review. Neither of these is as extensive as an audit. An audit requires that the public accountant obtain an understanding of internal control, assess internal control, assess fraud risk, and obtain corroborating evidence to support the figures shown in the included set of financial statements. Compilations and reviews do not have such requirements. While there are specified procedures for compilations and reviews to support the nature of report provided, such procedures are less rigorous and less extensive than those required for an audit.
Compilations is an appropriate description of what the accountant actually does when engaged to provide this type of service. The certified public accountant (CPA) prepares—compiles—financial statements based on information supplied by the company's management. CPAs are expected to be familiar with the accounting principles and practices of the industry in which the entity operates so that the financial statements are compiled in appropriate form for that industry. This standard does not prevent an accountant from accepting a compilation engagement for an entity in an industry with which the accountant has no previous experience. It does, however, impose on the accountant responsibility for obtaining the level of understanding expected for such an engagement. Such understanding is available in AICPA guides, industry publications, financial statements of other entities in the industry, textbooks, periodicals, and relevant Web sites.
To compile financial statements, the accountant must have an understanding of the nature of the entity's business transactions, the form of its accounting records, the stated qualifications of its accounting personnel, the accounting basis on which the...
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