A compilation service is basically a service to prepare financial statements. In more precise terms, a compilation service means that an outside accountant who is in the practice of public accounting will prepare financial statements for an entity without expressing any form of assurance on the financial statements.
This may seem pretty straight forward but unless an accountant is familiar with current accounting standards, the financial statements will most likely contain deficiencies even if the financial statements are prepared using the cash or tax financial reporting frameworks. Many accountants do not understand that even if they are using the cash or tax financial reporting frameworks for the financial statements, they must still follow the Accounting Standards Codification for the method of presentation principles and the disclosure principles. Many accountants who perform just a few compilations a year simply don’t understand the current compilation standards or don’t make the effort t to stay current on the standards. One of the greatest sources of current litigation for CPAs is cash and tax basis compilation engagements.
Kevin D. Smith spends many hours each year attending training classes on the accounting standards and studying the accounting standards to stay knowledgeable and proficient with the standards.