In a compilation engagement, the accountant presents in the form of financial statements information that is the representation of management (owners) without undertaking to express any assurance on the statements. In other words, using management's records, the accountant creates financial statements without gathering evidence or opining about the validity of those underlying records. Because compiled financial statements provide the reader no assurance regarding the statements, they represent the lowest level of financial statement service accountants can provide to their clients. Accordingly, standards governing compilation engagements require that financial statements presented by the accountant to the client or third parties must at least be compiled.
A Pennsylvania Report from Review of Financial Statements and Compilation by an accounting firm is a comprehensive document that provides a detailed analysis and evaluation of the financial statements prepared by an entity in accordance with generally accepted accounting principles (GAAP). This report is typically prepared by a certified public accounting (CPA) firm that has expertise in conducting financial audits and reviews. The main objective of the Pennsylvania Report from Review of Financial Statements and Compilation is to provide stakeholders with assurance regarding the accuracy, reliability, and transparency of the financial statements. It helps users of financial information, such as investors, creditors, and government agencies, make informed decisions about the entity's financial standing. The report begins with an executive summary, outlining the purpose of the review or compilation and the scope of the work performed. It highlights any significant findings, adjustments, or concerns identified during the process. The executive summary is followed by a detailed description of the procedures undertaken by the accounting firm to review or compile the financial statements. There are two main types of Pennsylvania Reports from Review of Financial Statements and Compilation by Accounting Firm: 1. Review Report: In a review report, the accounting firm performs analytical procedures, inquiries, and limited substantive procedures to obtain limited assurance that there are no material modifications needed for the financial statements to be in accordance with GAAP. This engagement provides a moderate level of assurance to the users of the financial statements. 2. Compilation Report: In a compilation report, the accounting firm assists the entity in preparing financial statements in accordance with GAAP. However, no assurance is provided regarding the accuracy and completeness of the financial statements. This type of report simply presents the financial information as provided by the entity's management without any substantive procedures performed by the accounting firm. Both types of reports are important tools for assessing the financial health and performance of an entity. Depending on the needs of the stakeholders and regulatory requirements, an entity may opt for either a review or compilation report. It is essential for the accounting firm to clearly communicate the limitations of these reports and the level of assurance provided to ensure users correctly interpret and use the information disclosed. Overall, a Pennsylvania Report from Review of Financial Statements and Compilation by an accounting firm serves as a valuable resource for stakeholders seeking a thorough examination and evaluation of an entity's financial statements. It helps ensure transparency and accountability, fostering trust and confidence in the entity's financial reporting.
