Accounting and Auditing Research and Databases: Practitioner's Desk Reference

Compilation and Review Services

In response to the needs of nonpublic clients, regulatory agencies, and the investing public, the public accounting profession offers compilation or review services to clients, rather than conducting a more expensive audit examination in accordance with GAAS.⁸ Compilation and review of financial statements are defined as follows:

• Compilation. A service presenting, in the form of financial statements, information that is the representation of management without undertaking to express any assurance on the statements.
• Review. A service performing inquiry and analytical procedures that provides the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statements in order for them to be in conformity with GAAP or, if applicable, with another comprehensive basis of accounting.

Therefore, the basic distinction between these two services is that a review service provides limited assurance about the reliability of unaudited financial data presented by management, whereas a compilation engagement provides no assurance as to the reliability of the data. In a compilation, the CPA prepares financial statements only from information supplied by management. The CPA, in a compilation, need not verify this information furnished by the client and therefore provides no assurance regarding the validity of this information.

The AICPA established guidance for the public accountant for ...