Accounting and Compilation

Accounting services can be broken down into three main categories: compilation, review, and audit engagements. Understanding the differences between these services can help you determine which is the most suitable for your business’s stakeholders.

In this article, we’ll cover everything you need to know about compilations, including what they are, why you need them, and when you should get one.

  • A compilation engagement letter agreeing to prepare the compilation disclosure for the client. This letter is legally binding only when you or your authorized representatives and the accountant have signed it. The document must include:
    • Services provided
    • Compensation amount
    • Timing of payments
    • Due dates for deliverables
    • Contract termination terms

A compilation is a summary of important information in a business’s financial statements created from information provided by the business. During a compilation engagement, an accounting service provider doesn’t conduct any internal audit procedures, so they can’t offer any analytical procedures or provide assurance services.

Typically, compilations are used for presenting information to your internal stakeholders. From time to time, though, they may also be presented to external stakeholders such as lenders. If you’re presenting your compilations externally, you, as the business owner, take responsibility for the information presented in the compilation report and accounting records.

Complilation reviews involve an accountant looking through your information and providing a limited assurance that the numbers in your financial statement are in the right places and make sense. In comparison, an audit—which is the most rigorous level of service—requires the accountant to assess any fraud risks and obtain evidence to support the numbers found in your business’s financial statements. An audit is the highest level of assurance a certified public accountant (CPA) can provide.