What is a Compilation Engagement?

A Compilation Engagement is a type of financial statement engagement in which a professional accountant assists management in preparing and presenting financial statements based on information provided by the client. It is considered the most basic level of engagement compared to reviews or audits because the accountant does not give any assurance about the accuracy or reliability of the financial information.

Key Features of a Compilation Engagement

Purpose to organize financial data into a standard financial statement format that is understandable and suitable for stakeholders, such as creditors or management. Role of the accountant the accountant compiles the information provided by the client without performing any verification or analysis. Their responsibility is limited to ensuring that the financial statements are in proper form and comply with applicable reporting standards. No assurance provided a compilation engagement does not include an assessment of whether the financial statements are free from material misstatement. The accountant explicitly states that no assurance is being provided. Basis of information the financial statements are prepared solely using information provided by management. The accountant does not perform audits or reviews of the data provided. Report issued the accountant provides a “Notice to Reader” report with the compiled financial statements. This notice clarifies that the accountant has not audited, reviewed, or verified the information and, therefore, offers no assurance.

What is a Notice to Reader?

A notice to reader is a disclaimer attached to financial statements in a Compilation Engagement. It informs users that the accountant has not audited, reviewed, or verified the information provided by management and provides no assurance on the accuracy or reliability of the financial statements. It ensures users understand the limitations of the financial information and protects the accountant from liability.

Compilation Engagement vs. Notice to Reader

A Compilation Engagement involves an accountant preparing financial statements based on information provided by management, without verifying its accuracy or providing assurance. A notice to reader is a disclaimer issued within a Compilation Engagement, stating that the accountant has not audited, reviewed, or verified the financial information and provides no assurance.

Key Difference:

• Compilation Engagement is the process of preparing financial statements.
• Notice to Reader is the accompanying disclaimer clarifying no assurance is provided.

 How To Choose The Right Engagement

Consult a professional accountant for guidance. To choose the right engagement, consider:

• Purpose: Determine if you need basic financial statements (Compilation) or assurance (Review/Audit).
• Stakeholder Needs: Assess if lenders, investors, or regulators require assurance.
• Budget: Compilation is cost-effective; audits are more expensive.
• Complexity: Larger businesses or regulated entities often require reviews or audits.

Compilation Engagement Financial Statements

Compilation Engagement Financial Statements are financial statements prepared by an accountant based solely on information provided by the company’s management. The accountant organizes and presents the financial data in accordance with relevant accounting principles, but does not perform any verification, audit, or review of the information. Therefore, no assurance is provided regarding the accuracy or completeness of the financial statements. These types of statements are typically used for internal purposes, basic reporting, or to meet minimal external requirements.

Frequently Asked Questions For Compilation Engagement vs Notice to Reader