compilation

Highlights from compilation and review risk alert – Clarity project

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This is the first of several posts talking about new issues in the compilation and review world.

Last week I read the 2012/13 comp and review risk alert, available here from the AICPA.

Yes, yes, I know I should have read this about 45 days ago. Just a wild guess, but I’ll guess I’m not the only one that has not gotten around to looking at this before now.

I’ll mention a few highlights. If you provide compilation or review services to your clients, it would be wise to read the alert yourself.

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Evaluating a used car as an illustration of the differences between compilation, review, and audit

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I have a post at my other blog, Nonprofit Update which provides an analogy to illustrate the differences between the levels of attestation services provided by CPAs:

Evaluating a used car as an illustration of the differences between compilation, review, and audit

The analogy compares three different ways to figure out the quality of a car. I suggest each of those ways is similar to a level of service. Here’s the conclusion:

  • Look at the car from across the street – very low cost for low quality information – compilation
  • Look around inside in the car and drive it around the block – moderate cost for better information – review
  • Have a mechanic work it over – highest cost in terms of time and money but the best information on the quality of the car – audit

Check out the full post for more details on the analogy.

Sample compilation and review reports under SSARS 19 for NPOs

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(cross-post from my other blog, Nonprofit Update.)

Update – SSARS 19 had been replaced by SSARS 21. All the reports have been revised. See:

Here is a list of the sample reports under SSARS available on my blogs.

Filling up a bucket – word picture for levels of assurance in audit, review, and compilation

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In a webcast on August 31, 2011, Mr. Michael Glynn, CPA, of the AICPA staff, gave a wonderful word picture of the levels of assurance in a review and audit.  Here’s his idea:  Filling up a bucket with procedures produces different levels of assurance.  I would like to expand Mr. Glynn’s description and provide an illustration.

  • In an audit, the accountant provides obtain reasonable assurance that there are no material errors in the financial statements.
  • In a review, the accountant provides obtain limited assurance that there are no material errors in the financial statements.
  • In a compilation,the accountant does not provide obtain any assurance that there are no material errors in the financial statements.

Notice the similarity and difference?  The overlap between these definitions is how much assurance the accountant provides obtains that there are no material errors in the financial statements.

The differences? …

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One sentence explanation of the difference between audits and reviews

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(cross posted from www.ulvog.wordpress.com)

I have discussed the differences between audits, reviews, and compilations here and here. Even developed a visual illustration here.  Ask any CPA and you can get a long explanation of the distinctions.

For something shorter, consult this article by Angus Loten in the Wall Street Journal, which said:

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SSARS 19 – Sample compilation report for omitting the statement of cash flow

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Omission of cash flow statement– Compilation reports will change for organizations with fiscal years ending after December 15, 2010. Here is the modified report I will be using after the first of the year for my non-profit clients if any would choose to omit the statement of cash flow. I doubt that will happen in my client base, but wanted to make this example available to the CPA community.

Update – SSARS 19 had been replaced by SSARS 21. All the reports have been revised. See:

 

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SSARS 19 – Sample compilation report for omitting substantially all disclosures

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Omission of substantially all disclosures — Compilation reports will change for organizations with fiscal years ending after December 15, 2010. I have prepared a modified report for departure from GAAP.  Here is the report I will be using after the first of the year for my non-profit clients if any choose to omit all disclosures.  Please feel free to copy, but make sure you modify this based on your firm’s policies.

Update – SSARS 19 had been replaced by SSARS 21. All the reports have been revised. See:

 

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SSARS 19 Compilation reports for NPOs

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Compilation reports will change starting December 31, 2010.  Some sample reports follow.

Update – SSARS 19 had been replaced by SSARS 21. All the reports have been revised. See:

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