Engagement Essentials

Chapter 1INTRODUCTION TO PREPARATION, COMPILATION, AND REVIEW ENGAGEMENTS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•    Identify the types of engagements that require a report on the financial statements.

•    Recognize how preparation engagements have evolved.

•    Recognize the hierarchy of guidance that applies to preparation, compilation, or review engagements.

•    Recognize the elements of a quality control system.

•    Identify different forms of peer review.

Reporting on Financial Statements

Prior to 1978, accountants engaged to report on financial statements had two options: perform an audit of the financial statements or issue a disclaimer of opinion on the financial statements. Until that time, there was no option in the literature to offer reporting services that were less in scope than an audit that provided some level of comfort to users of financial statements. Accountants could, and still can, provide bookkeeping services, but those services are not subject to Statements on Standards for Accounting and Review Services (SSARSs). With the issuance of SSARS No. 1, Compilation and Review of FinancialStatements, in 1978, accountants were provided other reporting opportunities related to their clients' financial statements.

Reporting Options

When accountants are engaged to report on financial statements, available options include audit, review, or compilation. Each of these engagements is considered an attestation ...