Compilation Service Definition

Compilation Service Definition

AR-C 80.04 - the objective of the accountant in a compilation engagement is to apply accounting and financial reporting expertise to assist management in the presentation of financial statements and report in accordance with this section without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework.

Compilations and Management Responsibility

Compilations and Management Responsibility

The compilation standards list several responsibilities for management in connection with a compilation service. AR-C 60.25c states that management is responsible "for the selection of the financial reporting framework to be applied in the preparation of the financial statements".

Compilations and Reporting Frameworks

Compilations and Reporting Frameworks

U.S. entities can use general purpose frameworks or special purpose frameworks for financial reporting. The general purpose frameworks are: U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs). The special purpose frameworks are: Tax, Cash or the AICPA's Financial Reporting Framework for Small and Medium Sized Entities (can only be used by non-public entities).

  • Firm Principles

    The highest reward for a person's toil is not what they get for it, but what they become by it.
    John Ruskin
    Man's biggest mistake is to believe that he's working for someone else.
    Nashua Cavalier
    Integrity is the first step to true greatness. Men love to praise, but are slow to practice it. To maintain it in high places costs self-denial; in all places it is liable to opposition, but its end is glorious, and the universe will yet do it homage.
    Charles Simmons
    Integrity without knowledge is weak and useless, and knowledge without integrity is dangerous and dreadful.
    Samuel Johnson
    A life lived with integrity -- even if it lacks the trappings of fame and fortune is a shinning star in whose light others may follow in the years to come.
    Dennis Waitley
    Honesty is the cornerstone of all success, without which confidence and ability to perform shall cease to exist.
    Mary Kay Ash
    If it is not right do not do it; if it is not true do not say it.
    Marcus Aurelius
    Excellence is doing ordinary things extraordinarily well.
    John W Gardner
    We are what we repeatedly do. Excellence, then, is not an act, but a habit.
    Aristotle
    The daily grind of hard work gets a person polished.
    Source unknown
    An honest man's the noblest work of God.
    Alexander Pope
    There is no twilight zone of honesty in business. A thing is right or it's wrong. It's black or it's white.
    John F. Dodge
    The harder you work, the harder it is to surrender.
    Vince Lambardi
    There is always a best way of doing everything.
    Ralph Waldo Emerson
    The integrity of men is to be measured by their conduct, not by their professions.
    Junius
    Integrity is the essence of everything successful.
    Richard Buckminster Fuller
    I hope I shall possess firmness and virtue enough to maintain what I consider the most enviable of all titles, the character of an honest man.
    George Washington
    No man should advocate a course in private that he's ashamed to admit in public.
    George McGovern
    Honesty is the first chapter in the book of wisdom.
    Thomas Jefferson
    I would give no thought of what the world might say of me, if I could only transmit to posterity the reputation of an honest man.
    Sam Houston
    A racehorse that consistently runs just a second faster than another horse is worth millions of dollars more. Be willing to give that extra effort that separates the winner from the one in second place.
    H. Jackson Brown Jr
    It is not what we eat but what we digest that makes us strong; not what we gain but what we save that makes us rich; not what we read but what we remember that makes us learned; and not what we profess but what we practice that gives us integrity.
    Francis Bacon
    Every noble work is at first impossible.
    Thomas Carlyle
    Genius is one percent inspiration and ninety-nine percent perspiration.
    Thomas Edison
    Excellence can be attained if you care more than others think is wise, Risk more than others think is safe, Dream more than others think is practical, and Expect more than others think is possible.
    Anon
    It is not from ourselves that we learn to be better than we are.
    Wendell Berry
    To aim at excellence, our reputation, and friends, and all must be ventured; to aim at the average we run no risk and provide little service.
    Oliver Goldsmith
    Morality may consist solely in the courage of making a choice.
    Leo Blum
    Would you want to do business with a person who was 99% honest?
    Sidney Madwed
    Real excellence and humility are not incompatible one with the other, on the contrary they are twin sisters.
    Jean Baptiste Lacordaire
    Excellence is the gradual result of always striving to do better.
    Pat Riley
    There are two kinds of people, those who do the work and those who take the credit. Try to be in the first group; there is less competition there.
    Indira Gandhi

Compilations

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.

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