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What is the difference between a prepared, compiled, reviewed, and audited set of financial statements?
The prepared financial statement requires no verification of the independence of the auditor. The Certified Public Accountant [CPA] takes the client information and puts it in the financial statement format without providing any assurance on the accuracy and completeness of the information. It has the lowest form of reliability of the different services on financial statements that can be provided by a CPA. In a compiled financial statement, the CPA is required to evaluate and disclose his or her independence with regards to the entity being audited and evaluate the financial statements for obvious material misstatements. The CPA is required to associate his or her name to the financial statements in a compilation report, but does not provide an opinion. In a review of financial statements, the CPA analyzes the information provided by the client and enquires about any unusual trends. There is no independent verification of the detailed accounting transactions. However, the CPA does provide limited assurance on the financial statements. An audited financial statement provides an independent verification of the information presented in the financial statement. This service provides the highest level of reliability and assurance. For more information, see our training module, The Auditors Report.
SSARS
The Statements on Standards for Accounting and Review Services [SSARS] provide guidance in performing preparation of financial statements, compilation, and review engagements. SSARS engagements tend to take much less time than audits and can be provided at a lesser cost. These services are not, however, as rigorous as an audit. The SSARS are issued by the AICPA.
CPAs can provide any of the following services as provided for in the SSARS:
Preparation Engagement
AR-C 70 provides guidance for preparation of financial statement engagements. This standard allows CPAs to issue financial statements without a compilation report. A disclaimer [no assurance is provided] is required. Disclosures to the financial statements are not required. The CPA need not be independent.
Compilation Engagement
AR-C 80 provides guidance for compilation engagements. The CPA usually assists with the preparation of financial statements and then reads them to see if they appear appropriate. Disclosures to the financial statements are not required. A compilation report is required. The CPA need not be independent.
Review Engagement
AR-C 90 provides guidance for review engagements. The CPA usually assists with the preparation of financial statements and then makes inquiries and creates analytics. These procedures provide the basis for a limited assurance report. A review report is required. The financial statements are full-disclosure. The CPA must be independent.
Here are my SSARS articles to assist you in your work.
Compilation Articles
AR-C 80
In this post, I provide ten steps to better audit
workpapers. Have Do you lack independence in a compilation engagement? If yes, then here’s Do you struggle with creating cash flow statements? Would you like to In this article, I provide information about various special purpose reporting frameworks Knowing how to perform compilation engagements is important for CPAs. Below I Do you ever want to include just one disclosure in your financial statements without What financial statement
references are required at the bottom of financial statement Independence in attest engagements in critical. Peer reviewers continue to focus on Do you need to concern yourself with going concern in compilation and Which
standards apply when you prepare financial statements? The AICPA Accounting and The Accounting and Review Services Committee [ARSC] issued SSARS 22 Compilation of SSARS 21 has been in existence since October 2014. What have
we SSARS 23 changes preparation and compilation engagements. The article summarizes the effects Are you wondering how to present supplementary information in compilation and preparation Today, we’ll answer various questions regarding bookkeeping, preparations, compilations, and review engagement. 10 Steps to Better Audit Workpapers
Lacking Independence in a Compilation
Three Steps to Correct Cash Flow Statement Errors
Special Purpose Reporting Frameworks
AR-C 80: Definitive Guide to Compilations
Selected Disclosures in SSARS Engagements
Financial Statement References
Independence in Attest Engagements
Going Concern in Compilation and Review Engagements
Preparing Financial Statements: Which Standards Apply?
SSARS 22 Pro Forma
Information
SSARS 21: What Have We Learned?
SSARS 23 Preparations and Compilations
Supplementary Information:
SSARS
Bookkeeping, Preparations, Compilations, and Reviews
Review Articles
AR-C 90
Review engagements provide limited
assurance using AR-C 90, Review of Financial Statements. And In this post, I provide ten steps to better audit
workpapers. Have The AICPA has issued SSARS 25. It is titled Materiality in a In this article, I provide
information about various special purpose reporting frameworks What financial statement
references are required at the bottom of financial statement Independence in attest engagements in critical. Peer reviewers continue to focus on Do you need to concern yourself with going concern in compilation and Which
standards apply when you prepare financial statements? The AICPA Accounting and Today, we’ll
answer various questions regarding bookkeeping, preparations, compilations, and review engagement. AR-C 90: Definitive Guide to Review Engagements
10 Steps to Better Audit Workpapers
SSARS 25: Materiality and Adverse Conclusions
Special Purpose Reporting Frameworks
Financial Statement References
Independence in Attest Engagements
Going Concern in Compilation and Review Engagements
Preparing Financial Statements: Which Standards Apply?
Bookkeeping, Preparations, Compilations, and Reviews
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