Compilation Engagements

Section 9200

Compilation Engagements

Section 9200

Section 9200
  • This section deals with services provided by accountants with respect to compiling F/S from information received from a client
  • No assurance is provided on the F/S compiled
  • This section does not apply to financial information presented/referenced only in tax returns
    • However, when the financial information conveys the financial position and the results of operation, it would be covered under this section
    • When the info presented solely in the tax returns does not convey the financial position and the results of operation, the information should contain a disclaimer saying “prepared solely for income tax purposes without audit or review from information provided by the taxpayer”
  • In a compilation engagement:
    • The public accountant receives information from the client and arranges it into the form of a F/S
    • The public accountant is concerned that the assembly of information is arithmetically correct
    • No assurance is provided on these F/S
    • The F/S do not need to be prepared in accordance with GAAP (I.e. ASPE/IFRS)
  • According to the rules of professional conduct, the public accountant cannot be associated with a F/S that he or she knows, or should know, is false or misleading
  • Perform a compilation engagement only when:
    • There is no reason to believe that the F/S the public accountant has been engaged to compile are false or misleading; and
    • The public accountant believes that the client understands that:
      • Such statements may not be appropriate for general purpose use; and
      • Uninformed readers could be misled unless they are aware of the possible limitations of the statements, and of the public accountant’s very limited involvement
    • The compilation engagement letter would spell out the following
      • That the public accountant will conduct the engagement in accordance with the standards applicable to compilation engagements
      • The anticipated form and content of the notice to reader and the fact that it will be included on or attached to the F/S
      • That compilation services will not result in the expression of any assurance
      • That management will provide the information necessary to permit the public accountant to compile F/S
      • That management is responsible for the accuracy and completeness of the representations in the F/S
      • That each page of the F/S will be conspicuously marked as “Unaudited — See Notice to Reader”
      • That the statements may not be appropriate for general purpose use
      • That uninformed readers could be misled unless they are aware of the possible limitations of the statements, and of the public accountant’s very limited involvement
      • That a compilation engagement cannot be relied on to prevent or detect error and fraud
Professional Standards
  • The services should be performed and the communication should be prepared by a person or persons having adequate technical training and proficiency in accounting, and with due care
  • The work should be adequately planned and properly executed and, if assistants are employed, they should be properly supervised
  • When the public accountant believes the F/S to be false or misleading, request additional or revised information in order to complete the statements.
    • If management does not provide the information requested or does not agree with the F/S, the public accountant should not release the F/S and should withdraw from the engagement
  • There is no requirement that says that the accountant performing the complication needs to be independent from the client; however, the rules of professional conduct requires the accountant to disclose the fact that they are not independent in the Notice to Reader (i.e. I am not independent from XYZ Corp. because I am a shareholder)
Communication
  • A communication called “Notice to Reader” is attached to the F/S that have been compiled;
  • The Notice to Reader should contain the following:
    • What the public accountant did and did not do
      • Compiled the statements from information supplied by management or the proprietor
      • Did not perform an audit or a review engagement on the information supplied
    • Describe the nature of the engagement by stating that the engagement was undertaken using information supplied by management
    • Caution to readers that the statements may not be appropriate
Example of a Notice to Reader:

On the basis of information provided by management (or the proprietor), I have compiled the balance sheet of Client Limited as at December 31, 2017 and the statements of income, retained earnings and cash flows for the (period) then ended.

I have not performed an audit or a review engagement in respect of these financial statements and, accordingly, I express no assurance thereon.

Readers are cautioned that these statements may not be appropriate for their purposes.

City        (printed or signed)  ……………………………..

Date      CHARTERED PROFESSIONAL ACCOUNTANT

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