Introduction to Financial Statements Compilation
A Compiled Statement is prepared by an accountant but is not available for audit or certification. And the service of an accountant to assist the management to present its Financial Statements is called Financial Statement Compilation.
Companies engage an accountant from outside to prepare Financial Statements. The compilation is not designed to give any assurance or confirmation of accuracy regarding the information it contains. It is not based on analytical procedures.
A Compilation Engagement can be either severalFinancial Statements or a single statement. It involves a greatly reduced set of activities from an audit. However, the accountant needs to provide sufficient documentation with a clear understanding of his work. The documentation includes the following:
- Engagement letter
- Significant issues
- Communications to management
- Written report
The accountant needs to address in communication any illegal acts if he/she noted during compilation. The accountant can ask for additional information to check on illegal acts to complete the engagement.
And the report, it should be mentioned that the Financial Statements have not been audited and do not give any assurance. The management takes responsibility for the compilation of Financial Statements.
Financial Statements Compilation Engagement is required due to timeliness. A company releases the compiled statements before audit because of timeliness so that these statements can be released promptly to investors.
The Compilation Engagement Service is also used by cost-sensitive firms whose investors do not have any issue with this form of engagement. Lenders and creditors do not prefer this Compilation Engagement because it does not represent the confirmed financial position of a business.
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