A Compilation of Financial Statements is a service engagement, limited in scope, in which an accountant assists company management in the presentation of the financial statements in accordance with the applicable financial reporting framework. Compilations do not include an audit or review. The accountant does not verify the accuracy or completeness of information provided by management, does not express an opinion, and does not provide any assurance on the financial statements.
Compilation of Financial Statements services are performed in accordance with the AICPA’s Statements on Standards for Accounting and Review Services (SSARS). They are structured by an engagement letter which defines the scope of the compilation, the accountant’s responsibilities, management’s responsibilities, the final report, and fees. Usually, the balance sheet and the statements of income, changes in stockholder’s equity, and cash flows for a stated period are included under the terms of the engagement.
Compilations are the lowest level of financial statement services and in some situations, they may be adequate for private companies working with third parties such as bonding companies or banks. The level of service you need depends on the third-party requirements. Therefore, it is important to identify the requirement and obtain only the level of service you need (i.e. compilation, review or audit) since effort and cost increases with higher levels of assurance.