Compilation of financial statements

Abstract

This chapter discusses the complication of financial statements. According to AR-C section 80, Compilation Engagements,1 applies when the accountant is engaged to perform a compilation of financial statements, prospective financial information, pro forma financial information,2 or other historical financial information. The objective of the accountant in a compilation engagement is to apply accounting and financial reporting expertise to assist management in the presentation of financial statements and report in accordance with AR-C section 80, without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework. Because a compilation engagement is not an assurance engagement, the accountant is not required to verify the accuracy or completeness of the information provided by management for the compilation engagement or otherwise gather evidence to express an opinion or a conclusion on the financial statements. Therefore, the accountant does not express an opinion or a conclusion nor provides any assurance in the compilation report on the financial statements. An effective system of quality control for a firm includes a monitoring process designed to provide the firm with reasonable assurance that the firm's policies and procedures relating to the system of quality control are relevant, adequate, and operating effectively.