» Accounting and Compilation

The scope of an accounting and compilation does not give the accountant a basis to express any assurance, since neither audit nor review procedures are performed. Instead, relying on familiarity with industry accounting practices and with the company's business, the accountant helps prepare financial statements using data provided by the company. This allows the accountant the opportunity to consider whether the financial statements are appropriate in form and are free from obvious material errors; however, the accountant does not probe beneath the surface unless it is apparent that the data provided are incomplete or in error. The accountant's report that accompanies compiled financial statements indicates that a compilation service was performed, but, because neither an audit nor a review was performed, it expresses no assurance.

A compilation is merely putting information supplied by the client into proper financial statement form without expressing any assurances. Required procedures are minimal. Our professional pronouncements state that the accountant is not required to make inquiries or perform other procedures to verify, corroborate, or review information supplied by the entity." Likewise, accountants have no obligation to obtain an understanding of or communicate deficiencies in internal control or to assess control risk when performing a compilation. This, of course, does not reduce the accountants' obligation to obtain additional or revised information if they become aware that information supplied to them is inaccurate, incomplete, or misleading. Nor does it reduce the accountants' responsibilities when departures from generally accepted accounting principles are known to them. Also, if the accountant becomes aware of significant weaknesses in the client's internal control, it is only prudent that he or she communicate those findings to the client.

Companies find a compilation service useful mainly for internal needs or as a by-product of other services, such as the preparation of income tax returns. It may also be appropriate when management engages the accountant to prepare monthly financial statements.

The objective of a compilation differs significantly from the objective of a review. The inquiry and analytical procedures performed in a review should provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the financial statements. No expression of assurance is contemplated in a compilation.

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