Preparing financial statements is important for managers, bankers and credit debtors. In fact, financial statements greatly influence the decision-making process when it comes to planning the company’s future operations.
In order to make financial statements more reliable and credible, Chartered Professional Accountants (CPAs) handle three types of report which have different levels of assurance: compilation engagement, review engagement and audit engagement.
In this article, we walk you through the basics of the compilation engagement and provide you with an overview of the role of CPAs and the accounting services you can benefit from.
A compilation engagement is a mandate through which a certified public accountant collects the information provided by the management of the company and presents it in the form of financial statements.
Contrary to review and audit engagements, the accounting expert is not required to verify the accuracy of the information included in a compilation report and assumes no responsibility for it.
If the accountant finds that the financial data is likely to be incorrect or misleading, he must request further explanations or supporting documents from his client.
For these reasons, each page of the financial statement report must be accompanied by what is called a "Compilation" to inform the reader that the accountant has not prepared any audit or review engagements.
Source: CPA Canada
As the chart indicates, a compilation engagement is not a certification and the expert does not offer any assurance regarding the financial statements.
With respect to the review engagement, the CPA indicates that the financial statements are plausible and appear to meet applicable standards.
In an audit engagement, the CPA expresses an opinion according to which the financial statements are free from material misstatements and that users may use this information with reasonable assurance.
The compilation report submitted by the chartered professional accountant shall:
The compilation engagement provides a financial statement report in an appropriate format. This report helps:
The Quebec CPA order published a frame of reference that includes the standards governing each step of a compilation engagement:
To learn more about the standards included in each stage of the compilation engagement, consult this document.
Compilation engagements, audit engagements and review engagements can be prepared by Chartered Professional Accountants (CPAs) in accordance with professional standards and ethics.
A Chartered Professional Accountant (CPA) is not just an accountant. His services must meet the specific requirements of the CPA order. The CPA is trained to the highest standards and his competencies are recognized internationally.
In addition, under the Chartered Professional Accountants Act, only CPAs may carry on the business of public accounting.
With their versatile expertise, CPAs contribute to financial management, administrative management, information systems management, etc. In addition, CPAs are hired by companies to train leaders in accounting, taxation and management.
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