Preparation of Financial Statements, Compilations, Reviews: A Comparison

Have you been wondering how the three services covered in SSARS 21–(1) preparation of financial statements, (2) compilations and (3) reviews–compare to one another? This video provides a brief overview of the three services and what the CPA is required to do for each.

Table Comparing Preparation of Financial Statements, Compilations and Reviews

QuestionPreparing Financial StatementsCompilationsReviews
Can notes to the financial statements be
omitted?
YesYesNo
Can the financial statements go to users other than
management?
YesYesYes
Considered an assurance service?
NoNoYes; limited assurance
Considered an attest service?
NoYesYes
Does the engagement require a report?
No - required wording stating “no assurance is provided” or a disclaimer
Yes - compilation reportYes - review report
Effective for periods ending on or after December
15, 2015 (early implementation permitted)?
YesYesYes
If the accountant is
not independent, is that fact required
to be disclosed?
NoYesMust be independent
Is a signed engagement letter required?
YesYesYes
Is the accountant required to determine if he or
she is independent of the client?
NoYesYes
Is the accountant required to make inquiries or
perform other
procedures to
verify, corroborate,
or review
information supplied?
NoNoIf results of analytics are questionable, inquire of management. Not required to corroborate management's responses with other evidence.
Management is responsible for financial
statements?
YesYesYes
Minimum documentation
1. Engagement letter
2. Copy of financial statements
1. Engagement letter
2. Copy of financial statements
3. Copy of report
1. Engagement letter
2. Copy of financial
statements
3. Copy of report
4. Nature, timing and extent of procedures
5. Results of procedures
6. Significant findings or issues and conclusions reached (including judgments)
7. Communications of fraud or noncompliance with laws or regulations
8. Communications concerning the inclusion of emphasis-of-matter paragraph or other-matter paragraph
9. Representation letter
10. Communications with other firms regarding audited or reviewed components

Procedures1. Prepare the financial statements based on the information provided
2. If the accountant becomes aware that supplied information is incorrect or incomplete, request corrected or additional information
1. Read the financial statements
2. Consider whether the financial statements appear appropriate
3. If the accountant becomes aware that supplied information is incorrect or incomplete, request corrected or additional information
4. If the accountant becomes aware that revisions to the financial statements are necessary, request that corrections be made
1. Read the financial statements
2. Consider
whether the financial statements conform to applicable reporting framework
3. If the accountant becomes aware that supplied information is incorrect or incomplete, request management's consideration of effect on statements; request response to the accountant; consider effect on limited assurance determination
4. If the accountant believes statements are materially misstated, perform additional procedures to support limited assurance
5. Understand the industry; obtain knowledge of the entity
6. Perform Analytics
7. Make inquiries
8. Reconcile financial statements to underlying information
Subject to Peer ReviewNot known at this timeYesYes
When does the standard apply?
Accountant engaged to prepare financial statements
Accountant engaged to compile financial statements
Accountant engaged to review financial statements

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