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Financial statement compilation services give businesses and nonprofit organizations a practical way to present financial information in a formal financial statement format with the involvement of a CPA. A compilation can be appropriate when professional financial statements are needed but the cost and assurance of a review or audit are not required. A compilation provides no assurance; instead, the accountant applies accounting and financial reporting expertise to assist management in presenting the statements and issues a compilation report. (AICPA, AR-C Section 80 – Compilation Engagements)

At ELT CPA LLC, our CPA compilation services help organizations determine whether a compilation is the right level of financial statement service, organize the accounting information needed for the engagement, and present financial statements that are clear, professional, and appropriate for their intended users. A compilation may be useful when a lender, board, grantor, regulator, owner, or other third party wants financial statements associated with a CPA but does not require limited or reasonable assurance.

Compilation Services at a Glance

What Is a Financial Statement Compilation?

A compilation engagement is a financial statement service in which an accountant applies accounting and financial reporting expertise to assist management in the presentation of financial statements. The accountant does not undertake to obtain or provide assurance that the statements are free of material misstatement. (AICPA, AR-C Section 80)

In practical terms, management remains responsible for the financial information and the financial statements. The CPA uses the information supplied by management, considers the applicable financial reporting framework, and assists in presenting the information in financial statement form. The CPA then issues a compilation report that explains the nature and limitations of the engagement.

A compilation is therefore different from bookkeeping alone. Bookkeeping focuses on recording and organizing transactions. A compilation is a defined professional engagement governed by SSARS and results in financial statements accompanied by an accountant’s compilation report.

Financial Statement Preparation vs. Compilation

Financial statement preparation and a compilation are separate services under the AICPA Statements on Standards for Accounting and Review Services. In a preparation engagement, the accountant prepares financial statements but does not issue a compilation report. In a compilation engagement, the accountant assists management with presenting the financial statements and issues a compilation report explaining that no assurance is provided. (AICPA, Preparation, Compilation and Review Standards)

The difference matters when a lender, board, regulator, or other third party specifically asks for compiled financial statements. If the user requires a CPA compilation report, a preparation engagement alone will not satisfy that request.

What Does a CPA Do During a Compilation?

The exact process depends on the organization and the condition of its accounting records, but a compilation commonly includes the following steps:

• Obtain an understanding of the intended financial reporting framework and significant accounting policies.
• Receive the trial balance, general ledger, supporting schedules, or other financial information supplied by management.
• Apply accounting and financial reporting expertise to assist management in presenting the financial statements.
• Consider whether the financial statements appear appropriate in form and whether information supplied by management appears obviously incomplete, inaccurate, or otherwise unsatisfactory in light of the accountant’s knowledge of the organization.
• Read the compiled financial statements in light of the accountant’s understanding of the organization and the applicable reporting framework.
• Prepare and issue the accountant’s compilation report.
• Address known departures from the applicable financial reporting framework or other reporting matters as required by professional standards.

A compilation is not designed to test whether every number is correct. The AICPA’s compilation standard specifically states that the accountant is not required to verify the accuracy or completeness of information provided by management or gather evidence for the purpose of expressing an opinion or conclusion. (AICPA, AR-C Section 80)

What a Compilation Does Not Include

Because no assurance is provided, a compilation ordinarily does not include the procedures associated with a financial statement review or audit. For example, the CPA is not engaged to perform:

• Audit testing of transactions or account balances
• Confirmation of cash, receivables, debt, or other balances with outside parties
• Inspection of source documents for the purpose of obtaining audit evidence
• Observation of inventory
• Testing of internal controls
• Assessment of control risk or fraud risk as performed in an audit
• Review-level analytical procedures and inquiries for the purpose of obtaining limited assurance
• An audit opinion or review conclusion on the financial statements

A compilation engagement also is not designed to identify or disclose financial statement misstatements, fraud, wrongdoing, or noncompliance with laws and regulations. That limitation is important when deciding whether a compilation will satisfy the needs of the people who will use the financial statements. (AICPA, AR-C Section 80)

When Is a Compilation a Good Fit?

A compilation may be appropriate when users need professionally presented financial statements but do not need the CPA to provide assurance. Common situations include:

• A bank, lender, or creditor requests compiled financial statements
• A nonprofit needs financial statements for a state filing that permits a compilation
• A board of directors wants formal year-end financial statements
• A grant application or funding relationship calls for CPA-compiled statements
• Owners or management want financial statements suitable for internal planning and discussion
• A small or growing organization wants CPA involvement before a review or audit becomes necessary
• A parent organization, franchisor, association, or other third party requests financial statements accompanied by a CPA compilation report

The deciding factor should be the requirement imposed by the intended user. If a loan agreement, grant, regulator, or governing document specifically requires a review or audit, a compilation will not substitute for that higher level of service.

Compilation vs. Review vs. Audit

Compilation, review, and audit engagements are not interchangeable. The key difference is the level of assurance provided and the procedures the CPA is required to perform. ELT CPA LLC’s existing review and audit pages describe the higher-assurance services in more detail. (ELT CPA LLC, Financial Statement Review; ELT CPA LLC, Audit Services)

A compilation can be a cost-conscious choice when assurance is unnecessary. A review becomes appropriate when users want limited assurance, and an audit is appropriate when users require the highest of these three levels of CPA financial statement service. AICPA standards treat compilations under AR-C Section 80 and reviews under AR-C Section 90; audits are performed under Statements on Auditing Standards rather than SSARS. (AICPA, Preparation, Compilation and Review Standards)

Do I Need a Compilation, Review, or Audit?

The right service depends on what the financial statement user actually requires. If no assurance is required and the goal is professionally presented financial statements accompanied by a CPA compilation report, a compilation may be sufficient. If a bank, regulator, grantor, or other user requires limited assurance, a financial statement review may be necessary. If reasonable assurance and an auditor’s opinion are required, an audit is the appropriate service.

Before beginning the engagement, ask the lender, regulator, board, grantor, or other requesting party to confirm the exact level of service it will accept. Choosing the correct engagement at the outset can avoid paying for unnecessary procedures or having to repeat the financial statement process later.

What Financial Statements Can Be Included?

The statements included in a compilation depend on the entity, the reporting framework, and the intended purpose of the engagement. A complete set of financial statements may include:

• Balance sheet or statement of financial position
• Income statement or statement of activities
• Statement of cash flows
• Statement of changes in equity or statement of changes in net assets
• Notes to the financial statements

In some engagements, management may elect to omit substantially all disclosures required by the applicable financial reporting framework when the omission is permitted and appropriately addressed in the compilation report. The accountant must follow the reporting requirements that apply to the specific presentation. (AICPA, AR-C Section 80)

Do Compiled Financial Statements Have to Follow GAAP?

Not necessarily. A compilation can be performed on financial statements prepared under U.S. generally accepted accounting principles (GAAP) or, when appropriate, another acceptable financial reporting framework. Special purpose frameworks may include the cash basis, tax basis, or another contractual or regulatory basis when the circumstances support their use.

The reporting framework matters because it determines how transactions are recognized, measured, presented, and disclosed. The CPA should understand the framework and significant accounting policies intended to be used before performing the compilation. (AICPA, AR-C Section 80; AICPA, Preparation, Compilation, and Review Engagements Guide)

Can a CPA Perform a Compilation Without Being Independent?

Yes. Independence is not a prerequisite to performing a compilation engagement. This is one of the important differences between a compilation and a review or audit.

The accountant must determine whether the accountant is independent. If independence is impaired, the compilation may still be performed, but the accountant’s compilation report must disclose that the accountant is not independent. If the accountant chooses to explain the reasons for the lack of independence, professional standards require the reasons presented to be complete. (AICPA, AR-C Section 80; AICPA peer review guidance)

By contrast, independence is required for a financial statement review or audit. This distinction can be particularly important when the CPA also provides bookkeeping or other accounting assistance to the organization.

What Is a Compilation Report?

A compilation report accompanies the compiled financial statements and tells the reader what the CPA did – and, equally important, what the CPA did not do. The report communicates that management is responsible for the financial statements, that the accountant performed the compilation in accordance with SSARS, and that the accountant did not audit or review the statements and does not express an opinion, conclusion, or assurance on them. (AICPA, AR-C Section 80)

The report may require additional language when the financial statements use a special purpose framework, omit substantially all disclosures, contain a known departure from the applicable reporting framework, or when the accountant is not independent.

Financial Statement Compilation Services for Nonprofits

Nonprofit financial statement compilation services can be useful when an organization needs more formal reporting than internally generated statements but is not required to obtain a review or audit. Depending on the organization, jurisdiction, grant, lender, or governing document, compiled financial statements may support a charitable-registration filing, board or finance committee oversight, a grant application, financing request, or other stakeholder reporting need.

For nonprofits, the statements may include a statement of financial position, statement of activities, statement of functional expenses, statement of cash flows, and related disclosures, depending on the reporting framework and the needs of the engagement. Management should also ensure that contribution revenue, donor restrictions, grant activity, program expenses, and functional expense allocations are properly reflected in the underlying accounting records.

State requirements vary significantly. Some states allow a compilation within a particular contribution or revenue band, while others require a review or audit once specified thresholds are crossed. A nonprofit should verify the exact requirement before engaging a CPA so that the level of service matches the filing obligation.

Who Uses Compiled Financial Statements?

• Owners and management
• Boards of directors and finance committees
• Banks and other lenders
• Grantmakers and foundations
• State charitable-registration agencies
• Investors or prospective buyers, when a compilation is acceptable for the intended purpose
• Landlords, bonding companies, vendors, or other creditors
• Parent organizations, affiliates, or membership organizations

Before requesting a compilation, ask the intended user whether a compilation is sufficient. A third party that specifically asks for reviewed or audited financial statements generally will not accept compiled statements as a substitute.

Preparing for a Financial Statement Compilation

A clean, organized accounting file can make the compilation process faster and more efficient. Depending on the engagement, ELT CPA LLC may request:

• Year-end trial balance
• General ledger
• Bank and credit-card reconciliations
• Accounts receivable and accounts payable schedules
• Payroll reports
• Fixed-asset and depreciation schedules
• Debt agreements and loan balances
• Investment statements
• Inventory information, when applicable
• Contribution and grant schedules for nonprofits
• Net-asset or donor-restriction schedules for nonprofits
• Prior-year financial statements
• Applicable tax returns or draft tax information
• Details of significant or unusual transactions
• Management’s selected financial reporting framework and accounting policies

If the records contain unreconciled balances, missing schedules, or unusual transactions, additional accounting work may be needed before the financial statements can be compiled. Identifying those issues early can help prevent delays.

How Long Does a Compilation Take?

The timeline depends primarily on the size and complexity of the organization, the reporting framework, the number of financial statement disclosures, and the condition of the accounting records. A straightforward engagement with reconciled books can move much faster than an engagement requiring substantial cleanup or accounting adjustments.

The most effective way to shorten the process is to provide complete reconciliations and supporting schedules at the beginning of the engagement and respond promptly to questions that arise during financial statement preparation.

Why Choose ELT CPA LLC for Financial Statement Compilation Services?

ELT CPA LLC provides financial statement services designed around the actual reporting needs of the organization. Our goal is to help clients avoid paying for a higher level of service than a lender, regulator, board, or other user requires – while making sure the engagement selected is sufficient for its intended purpose.

• Financial statement experience across business and nonprofit organizations
• Remote service options for clients in multiple states, subject to applicable professional requirements
• Clear communication about the difference between preparation, compilation, review, and audit services
• A practical, organized process focused on timely completion
• Experience helping nonprofits navigate financial reporting and charitable-registration requirements
• The ability to scale from compilation services to reviews or audits as an organization grows or its reporting obligations change

If you have been told that you need “CPA financial statements” but are unsure whether that means a compilation, review, or audit, we can help you identify the right service before the engagement begins.

Frequently Asked Questions

Does a compilation provide assurance?

No. A compilation provides no assurance on the financial statements. The CPA does not express an audit opinion or review conclusion. (AICPA, AR-C Section 80)

Is a compilation the same as preparing financial statements?

No. Financial statement preparation and compilation are separate SSARS services. A compilation includes an accountant’s compilation report; a preparation engagement is governed by different reporting requirements. (AICPA, Preparation, Compilation and Review Standards)

Is a CPA required to be independent for a compilation?

No. A CPA may perform a compilation when independence is impaired, but the lack of independence must be disclosed in the compilation report. (AICPA, AR-C Section 80)

Does the CPA verify the numbers in a compilation?

The accountant is not required to verify the accuracy or completeness of management-provided information or gather evidence for the purpose of providing assurance. (AICPA, AR-C Section 80)

Can compiled financial statements be used for a bank loan?

Yes, if the lender accepts a compilation. Some lenders require reviewed or audited statements instead, so the loan requirement should be confirmed before the engagement begins.

Can a nonprofit use compiled financial statements for state reporting?

Sometimes. State charitable-registration rules vary. Some jurisdictions permit compiled financial statements at certain financial thresholds, while others require a review or audit.

Are notes to the financial statements required?

It depends on the applicable financial reporting framework and the engagement. In certain compilation engagements, management may elect to omit substantially all disclosures when professional standards permit and the compilation report is appropriately modified.

Is a compilation less expensive than a review or audit?

A compilation is generally less extensive because it does not involve assurance procedures. Actual fees depend on the complexity of the organization, condition of the accounting records, reporting framework, and scope of the financial statements.

What if we later need a review or audit?

ELT CPA LLC can help determine whether the engagement should be upgraded when a lender, regulator, grantor, or other user requires a higher level of assurance.

What are compiled financial statements?

Compiled financial statements are financial statements presented with the involvement of an accountant under a compilation engagement. The accountant applies accounting and financial reporting expertise and issues a compilation report, but does not provide assurance on the statements. (AICPA, AR-C Section 80)

How much does a financial statement compilation cost?

Compilation fees vary based on the size and complexity of the organization, the condition of the accounting records, the reporting framework, the number of statements and disclosures required, and whether accounting cleanup is needed before the compilation can be completed. Because a compilation does not include assurance procedures, it is generally less extensive than a review or audit.

Contact ELT CPA LLC

Need professionally compiled financial statements or help deciding whether a compilation, review, or audit is appropriate? Contact ELT CPA LLC to discuss your reporting requirement, timing, and the financial information you already have available.

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