A compilation is the lowest level of service that a CPA can provide for a client’s financial statements. A compilation engagement requires less time than a review or audit engagement because fewer procedures are required. The main difference between a compilation and a higher level of CPA service, such as a review or audit, is that a compilation does not provide a basis for obtaining or providing any assurance regarding the financial statements.
Often times, a compilation is sufficient to satisfy third-party requirements. In a compilation, the accountant must address significant questions that arise in the course of the engagement. If the accountant has reason to believe the information supplied by the client is inaccurate, incomplete or otherwise unsatisfactory, the accountant is required to obtain revised or corrected information before reporting on the financial statements.
The accountant is required to read the compiled financial statements and consider whether they are in appropriate form and free from obvious material errors.
At a minimum, a compilation engagement with the accompanying accountant’s report is required any time an external CPA is associated with the financial statements of a client.