Are you considering expanding your business or buying a new business?
The dictionary defines a compilation as the action of producing something, especially a list, book, or report, by assembling information collected from other sources. In the accounting world, a compilation or “Notice to Reader” is the compilation of unaudited financial information into financial statements, schedules or reports based on the information supplied by management.
A compilation engagement is appropriate only where the client and other users do not need financial information that conforms in all respects to generally accepted accounting principles and audit or review assurance is not required, and where the client understands that the statements may not be appropriate for general purpose use.
You may be considering a business expansion or acquiring a new business. Such action usually requires the preparation of a forecast or projection. A compilation report would be issued with the forecast or projection since the financial information would be based on the representations of management.
Through compilation services, Fred Albi, Chartered Professional Accountant can prepare monthly, quarterly, or annual financial statements. However, before agreeing to perform a compilation, we will take a “common sense” look at your business and decide whether there is a need for other accounting services, such as help in adjusting the accounting records.
We become familiar with the accounting principles and practices common to your industry, and acquire a general understanding of the business transactions and how they are recorded.
What does a compilation entail?
After compiling the financial statements, consideration will be given to whether they are appropriate in form and free from obvious material errors. Once completed, a standard report may be issued that says, in effect, that the financial statements were compiled, but because they were not audited or reviewed, no opinion is expressed.
What are compilation standards?
Compilation standards permit an accountant to compile financial statements that omit footnote disclosures required by generally accepted accounting principles or another comprehensive basis of accounting (cash or income tax). This is allowable as long as the omission is clearly indicated in the report and there is no intent to mislead users. However, when footnote disclosures have been left out, the CPA adds a paragraph to the compilation report stating that management has elected to omit disclosures. This paragraph lets the user know that if the financial statements contained this information, it might affect the user’s conclusions.
Are you assured, that your financial statements are reliable?
A compilation is sufficient for many private companies. However, if a business needs to provide some degree of assurance that its financial statements are reliable, it may be necessary to engage a CPA to perform a review or an audit. Please feel free to contact us for a free on-site consultation.