How Compilation Engagement Works
A compilation engagement is a process of engaging a Chartered Professional Accountant (CPA) to prepare and present financial statements. This new standard comes from CSRS 4200 and is effective for periods ending on or after December 14, 2021. A CPA providing compilation services must possess more excellent knowledge of the business' operations to compile the financial reports. They are required to be independent of the company to perform such engagement work. The management accepts full responsibility for preparing and presenting the financial information, which can be either a financial statement, such as the balance sheet, or a complete set of financial statements.
The accountant should prepare documentation that provides information on the work that has been carried out. This documentation includes financial statements, engagement letters, and communication with management regarding significant issues identified during the engagement. The standard for compilation engagement related to bookkeeping and tax work states that in bookkeeping services, a compilation engagement is not essential when you present the financial information as part of a bookkeeping engagement, whether you help with some of the work or do all of it.
A new compilation engagement standard is published to protect the public better; it still provides no assurance. The old notice to reader report was intended for management only. This new compilation standard is targeted specifically to the readers of the financial statements that meet these third parties' needs and objectives. If there are no third-party users, then a compilation engagement may or may not be required. In addition to that, new compilation engagement requires a note that describes the basis of accounting applied to provide transparency and responsibilities of the practitioner and the extent of work performed.
Accounting and Advisory Services
Compilation Financial Statement