ISRS 4410, “Compilation Engagements,” provides guidance for accountants when engaged to compile financial information into a financial statement. A compilation engagement involves the preparation of financial statements based on information provided by management without providing any assurance on the accuracy of the information. Here are the key features and considerations of a compilation engagement:
1. Objective: The objective of a compilation engagement is for the accountant to assist management in presenting financial information in the form of financial statements without providing any assurance on the accuracy or completeness of the information.
2. Responsibility: In a compilation engagement, the responsibility for the preparation and fair presentation of the financial statements rests with management. The accountant’s role is limited to compiling the financial information provided by management into a financial statement format.
3. Scope of Work: The scope of work in a compilation engagement typically involves organizing and presenting the financial information provided by management into a structured format, such as a balance sheet, income statement, and statement of cash flows. The accountant may also provide certain additional disclosures as required by the applicable financial reporting framework.
4. Limited Assurance: Unlike audits or reviews, which provide varying degrees of assurance on the financial statements, a compilation engagement does not involve the performance of any procedures to verify the accuracy or completeness of the financial information provided by management. Therefore, no assurance is provided by the accountant regarding the financial statements.
5. Communication: The accountant’s report in a compilation engagement explicitly states that the financial statements have been compiled based on information provided by management and does not express any assurance on the accuracy or completeness of the information. This communication is essential to ensure that users of the financial statements understand the limited nature of the accountant’s involvement.
6. Documentation: The accountant should maintain adequate documentation of the procedures performed during the compilation engagement, including the financial information provided by management, any adjustments made to the information, and any significant matters discussed with management.
7. Independence: While independence is not explicitly required for compilation engagements, the accountant should adhere to applicable ethical requirements, including those related to objectivity and integrity, to ensure the credibility and reliability of the compiled financial statements.
In summary, a compilation engagement under ISRS 4410 involves the accountant assisting management in presenting financial information in the form of financial statements without providing any assurance on the accuracy or completeness of the information. It is essential for accountants to understand the limited nature of their role and communicate this clearly to users of the financial statements.