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
- What the public accountant did and did not do
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