A financial statement compilation is a service to assist the management of a business in presenting

its financial statements. This presentation involves no activities to obtain any assurance that there are
no material modifications needed for the financial statements to be in conformity with the applicable
accounting framework (such as GAAP or IFRS). Thus, a person engaged in a compilation does not use
inquiries, analytical procedures, or review procedures, nor does he need to obtain an understanding of
internal controls, or engage in other audit procedures. In short, compilation activities are not designed
to provide any assurance regarding the information contained within the financial statements.

The general reason for compiled statements being released (without being
certified by an accountant) is for the timely release of financial information, as the
certifying process can take a considerable amount of time.
A financial statement compilation is the least expensive of the various forms of auditing services (the
other two being a review and an audit), and so is preferred by those cost-sensitive entities whose
financial statement users are comfortable with this form of engagement. However, because there is no
assurance that compiled financial statements fairly present the results and financial position of a
business, a compilation is not preferred by lenders and creditors.
A compilation engagement may address either a complete set of financial statements or an individual
statement.
Under a compilation, management takes responsibility for the preparation and presentation of the
financial statements. The accountant providing the compilation services should have sufficient
industry-level experience and knowledge of the client to compile the financial statements.
The accountant should create sufficient documentation to provide a clear understanding of the work
that he has completed. This documentation should include the engagement letter, significant issues,
and any communications to management regarding fraud or illegal acts noted by the accountant.
When completed, the accountant provides a written report that should accompany the compiled
financial statements. This report states that the accountant has not audited or reviewed the financial
statements, and therefore does not express an opinion or provide any assurance that the financial
statements are in accordance with a financial reporting framework.
If the accountant believes that the financial statements being compiled may be materially misstated,
he should obtain additional information to confirm or deny this impression. If he is unable to obtain
such additional information, the accountant should withdraw from the engagement.