Definition
A compilation under AR-C 80 has the accountant assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide assurance. The report says management is responsible for the statements, that the accountant did not audit or review them, and that the accountant does not express an opinion or conclusion or provide any assurance.
Why it matters in an audit or review
The accountant must understand the client's industry and accounting basis enough to compile competently and must read the statements for obvious material errors. Independence is not required, but the report must say so when the accountant is not independent. Giving the reason is optional. If the accountant becomes aware of material misstatements, the accountant asks management to correct them or withdraws.
Example
Illustrative: a small contractor wants annual statements for its bank file. The accountant compiles them from the trial balance, reads them for reasonableness, and issues a compilation report with no assurance.
Common mistakes
Treating a compilation as the right choice when the lender demands assurance.
FAQ
Can a compilation leave out notes?
Yes, if management elects to omit substantially all disclosures and the report says so, provided the omission is not intended to mislead.
Sources
- AICPA, AR-C Section 80, Compilation Engagements
- AICPA, AR-C Section 60, General Principles for Engagements Performed in Accordance With SSARS
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error