Is Compilation a Form of Attestation Service- Unveiling the Intersections in Financial Reporting
Is a Compilation an Attest Service?
In the world of accounting and auditing, the terms “compilation” and “attest service” are often used interchangeably, but they refer to two distinct processes. While both involve the preparation of financial statements, they serve different purposes and are subject to different levels of regulatory requirements. This article aims to clarify the differences between these two services and determine whether a compilation can be considered an attest service.
A compilation is a service provided by a Certified Public Accountant (CPA) that involves assembling financial information provided by the client into the form of financial statements. The CPA does not express an opinion or assurance on the statements, nor does the CPA provide any level of assurance regarding the fairness of the presentation of the financial statements. The primary goal of a compilation is to help the client present their financial information in a clear and organized manner, making it easier for users to understand the financial position and performance of the entity.
On the other hand, an attest service is a higher level of assurance provided by a CPA. It involves expressing an opinion or assurance on the fairness of the presentation of the financial statements. There are three types of attest services: compilation, review, and audit. While a compilation does not provide any level of assurance, a review involves performing limited procedures to obtain a reasonable basis for expressing an opinion on whether the financial statements are presented fairly in all material respects. An audit, on the other hand, involves obtaining reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
Now, back to the question: Is a compilation an attest service? The answer is no. Although both services involve the preparation of financial statements, the key difference lies in the level of assurance provided. A compilation does not provide any assurance, while an attest service does. Therefore, a compilation cannot be considered an attest service.
However, it is important to note that a compilation can serve as a foundation for an attest service. For example, if a client decides to obtain a review or audit, the CPA can use the compiled financial statements as a starting point. In this case, the compilation is not an attest service, but it plays a crucial role in the overall process.
In conclusion, while a compilation and an attest service both involve the preparation of financial statements, they serve different purposes and are subject to different levels of regulatory requirements. A compilation is not an attest service, as it does not provide any level of assurance. However, a compilation can serve as a valuable tool for clients seeking a higher level of assurance through an attest service.
