M3 Compilation Engagement

Question 1

Does an accountant need to be independent in a compilation engagement?

Answer 1

No. But lack of independence should be disclosed

Question 2

What is the objective of a compilation engagement?

Answer 2

Assist management in the preparation of the FS by applying accounting and financial reporting expertise
No assurance required

Question 3

Understanding the client’s business STAFF

Answer 3

Staff qualifications
Transaction complexity
Accounting principles used
Form of accounting records
Financial statements

Question 4

Why should the accountant read the FS

Answer 4

In order to avoid being associated with false or misleading statements the accountant should read the statements

Question 5

What is included in compilation documentation

Answer 5

-The engagement letter
-A copy of the financial statements
A copy of the accountant’s report (compilation report)

May also include
-Unusual information
-Going concern issues
-Info about failure to comply with laws and regulations
-Resolutions

Question 6

Additional paragraphs are required when:

Answer 6

FS are prepared in accordance with a SPF
Disclosures are omitted
Disclose the accountant is not independent (reasons optional)
Describe the limitations on the projection’s usefulness

Question 7

If modification to the report is insufficient to disclose the departures from GAAP

Answer 7

the accountant should withdraw from the compilation engagement and provide no further service concerning the FS
Do not express an opinion

Question 8

The report should explicitly state that

Answer 8

The FS have not been audited
The accountant does not express an opinion.