Choosing between a preparation, a compilation and a review

• Compare the assurance, independence and reporting requirements of AR-C 70, 80 and 90
• Select the engagement that meets a lender or user requirement
• Explain why a nonindependent firm cannot accept a review
• Identify when bookkeeping assistance falls outside AR-C 70

Three services, three levels of association

The SSARSs give you three engagements on historical financial statements. The differences turn on what you do, whether you must be independent, and what you sign.

None of the three requires you to verify the accuracy or completeness of management's information. AR-C 70 and AR-C 80 say so directly. A review is the only one that ends in a conclusion.

Start with the user, not the client

The engagement is driven by who reads the statements and what they need:

• A lender covenant that says "reviewed" needs an AR-C 90 review. A compilation does not satisfy it, no matter how clean the statements are.
• A lender or surety that accepts "compiled" can take an AR-C 80 compilation, and the client can elect to omit substantially all disclosures unless that would mislead users (AR-C 80.26).
• Internal use, an owner's own decisions, or a bank that asks only for statements fits AR-C 70 preparation, which has no report.
• A covenant or contract that says "audited" is outside the SSARSs; send it to an AU-C engagement.

Read the loan agreement. Covenants often specify the framework (GAAP or tax basis), the deadline after year-end, and whether comparative statements are required. Those terms go into the engagement letter. The AUP vs review vs audit guide covers the lender conversation.

Independence changes the menu

If your firm provides nonattest services to the client, the Code's Nonattest Services subtopic (ET sec. 1.295) applies to the review or compilation. The AR-C 70 application material reminds you that preparing monthly statements for a client whose annual statements you review, compile or audit may impair independence unless the ET 1.295 safeguards are met.

• A review requires independence. If independence is impaired during the review, AR-C 90 says you should withdraw.
• A compilation permits a lack of independence, but you must say so in the final paragraph of the report (AR-C 80.22).
• A preparation engagement does not require an independence determination at all.

So a firm that keeps the books and cannot meet the ET 1.295 safeguards can compile with disclosure but cannot review.

Preparation versus bookkeeping assistance

AR-C 70 says the line between being engaged to prepare financial statements and merely assisting with them (a bookkeeping service outside AR-C 70) depends on what the client asks you to do and your professional judgment. If the deliverable is financial statements, you are in AR-C 70. If you post entries and the client generates its own statements from the system, you are assisting. SSARS No. 27 also clarifies that AR-C 70 is not required when you prepare statements as part of a consulting engagement under CS section 100 where preparation is not the primary objective, effective for periods ending on or after December 15, 2026.

Common errors

• Accepting a "review" for a client whose bookkeeping you perform without evaluating ET 1.295.
• Issuing a compilation when the covenant requires a review and letting the client find out from the bank.
• Treating a preparation engagement as a compilation without a report, or vice versa.

The comparison guide has more decision examples.

Matching three clients to the right service