Agenda Item 4F PROPOSED STATEMENT ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES COMPILATION OF FINANCIAL STATEMENTS CONTENTS

Transcription

1 ARSC Meeting May 10-12, 2011 Agenda Item 4F PROPOSED STATEMENT ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES COMPILATION OF FINANCIAL STATEMENTS CONTENTS Paragraph Requirements Emphasis-of-Matter Paragraphs in the Accountant s Compilation Report Departures From the Applicable Financial Reporting Framework Alert as to Intended Use Accountant s Communications With the Entity When the Compiled Financial Statements Are Not Intended to be Used by a Third Party Application and Other Explanatory Material Emphasis-of-Matter Paragraphs in the Accountant s Compilation Report... A91-A92 Departures From the Applicable Financial Reporting Framework... A93-A97 Alert as to Intended Use... A98-A105 Accountant s Communications With the Entity When the Compiled Financial Statements Are Not Intended to be Used by a Third Party... A106-A108 Exhibit B: Illustrative Compilation Reports AX Prepared by: Mike Glynn (April 2011) Page 1 of 46

2 Proposed Statement on Standards for Accounting and Review Services Compilation of Financial Statements Emphasis-of-Matter Paragraphs in the Accountant s Compilation Report 81. An emphasis-of-matter paragraph is never required in the accountant s compilation report but, may be added at the accountant s discretion. Such a paragraph should refer only to information presented or disclosed in the financial statements. (Ref: Par. A91-92) 82. Because an emphasis-of-matter paragraph should not be used in lieu of management disclosures, the accountant should not include an emphasis-of-matter paragraph in a compilation report on financial statements that omit substantially all disclosures unless the matter is appropriately presented or disclosed in the financial statements. 83. The accountant should refer to paragraphs if he or she believes that a disclosure is necessary to keep financial statements in which substantially all disclosures all disclosures are omitted from being misleading. Departures From the Applicable Financial Reporting Framework 84. When the accountant becomes aware of a departure from the applicable financial reporting framework (including inadequate disclosure) that is material to the financial statements, if the financial statements are not revised, the accountant should consider whether modification of the standard report is adequate to disclose the departure. (Ref: Par. A93) 85. If the accountant concludes that modification of the standard report is appropriate, the departure should be disclosed in a separate paragraph of the report under the heading Known Departures From the Applicable Financial Reporting Framework, including disclosure of the effects of the departure on the financial statements if such effects have been determined by management or are known as the result of the accountant's procedures. (Ref: Par. A94-A96) 86. The accountant is not required to determine the effects of a departure if management has not done so; however, in such circumstances the accountant should state in the report that such determination has not been made. 87. If the accountant believes that modification of the standard report is not adequate to indicate the deficiencies in the financial statements as a whole, the accountant should withdraw from the compilation engagement and provide no further services with respect to those financial statements. (Ref: Par. A97) 88. The accountant should not modify the standard report to include a statement that the financial statements are not in conformity with the applicable financial reporting framework because such a statement would be tantamount to expressing an adverse opinion on the financial Comment [MG1]: Paragraph 6 of the clarified SAS, Emphasis-of-Matter Paragraphs and Other- Matter Paragraphs in the Independent Auditor s Report. Comment [MG2]: Paragraph.26 of AR section 80. Comment [MG3]: Paragraph.27 of AR section 80. Comment [MG4]: Paragraph.28 of AR section 80. Comment [MG5]: Paragraph.28 of AR section 80. Reworded as a requirement. Comment [MG6]: Paragraph.29 of AR section 80. Agenda Item 4F Page 2 of 46

3 statements as a whole. Such an opinion can be expressed only in the context of an audit engagement. Alert as to Intended Use (Ref: Par. A98-A105) Comment [MG7]: Paragraphs of Interpretation 1. Reworded as a requirement. 89. An accountant s compilation report should include an alert as to its intended use when the subject matter of the accountant s compilation report is based on a. measurement or disclosure criteria that are determined by the accountant to be suitable only for a limited number of users who can be presumed to have an adequate understanding of the criteria, or b. measurement or disclosure criteria that are available only to the specified parties. 90. The accountant s compilation report on financial statements should include an alert as to the intended use of the accountant s compilation report solely by those within the entity, the parties to the contract or agreement, or the regulatory agencies to whose jurisdiction the entity is subject when the financial statements are prepared in accordance with either Comment [MG8]: Paragraph 7 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. However, the proposed SAS also includes byproduct reports. By-product reports are not addressed in the SSARSs. a. a contractual basis of accounting or b. a basis of accounting that the reporting entity uses to comply with the requirements or financial reporting provisions of a governmental regulatory agency to whose jurisdiction the entity is subject 91. The alert required by paragraph 89 should a. state that the accountant s compilation report is intended solely for the information and use of the specified parties. b. identify the specified parties for whom use is intended. c. state that the accountant s compilation report is not intended to be and should not be used by anyone other than the specified parties. Adding Other Specified Parties 92. When, in accordance with paragraph 89, the accountant includes an alert as to the intended use of the accountant s compilation report by certain specified parties, and the accountant is requested to add other parties as specified parties, the accountant should determine whether to agree to add the other parties as specified parties. 93. When the accountant agrees to add other parties as specified parties, the accountant should obtain affirmative acknowledgment, in writing, from the other parties of their understanding of Agenda Item 4F Page 3 of 46 Comment [MG9]: Paragraph.20 of the clarified SAS, Special Considerations Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks as amended by the proposed Intended Use SAS. The letter b basis is simply referred to as a regulatory basis of accounting in the SAS but, the language shown here is in accordance with the definition of OCBOA included in paragraph.04 of AR section 60. Comment [MG10]: Paragraph 8 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Comment [MG11]: Paragraph 9 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication.

4 a. the nature of the engagement, b. the measurement or disclosure criteria used in the engagement, and c. the related accountant s compilation report. 94. If the other parties are added after the release of the accountant s compilation report, the accountant should take one of the following actions: a. Amend the accountant s compilation report to add the other parties. If the accountant amends the compilation report to add the other parties, the accountant should not change the date of the accountant s compilation report. b. Provide a written acknowledgment to management and the other parties that such parties have been added as specified parties. If the accountant provides a written acknowledgement that the other parties have been added as specified parties, the accountant should state in the acknowledgement that no procedures were performed subsequent to the date of the accountant s compilation report. Accountant s Communications With the Client When the Compiled Financial Statements Are Not Intended to be Used by a Third Party 95. When the accountant submits compiled financial statements to management that are not intended to be used by a third party, the accountant is not required to issue a compilation report. (Ref: A104) 96. When the compiled financial statements are not intended to be used by a third party, the accountant should include a reference on each page of the financial statements alerting users as to the intended use of the compiled financial statements. (Ref: Par. A107-A108) Comment [MG12]: Paragraph 10 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Comment [MG13]: Question to ARSC: Although the proposed SAS refers to amending the report, extant paragraph.37 of AR section 80 refers to reissuing the report. Which word is appropriate in a compilation engagement? Comment [MG14]: Paragraph 11 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Comment [MG15]: This is Expected in extant AR section 80 however, the change from restricted use to intended use makes this change necessary. Comment [MG16]: Paragraph.22 of AR section 80. Comment [MG17]: Paragraph.23 of AR section 80. Application and Other Explanatory Material Emphasis-of-Matter Paragraphs in the Accountant s Compilation Report (Ref: Par. 81) A91. The following are examples of circumstances when the accountant may wish to include an emphasis-of-matter paragraph An uncertainty about an entity s ability to continue as a going concern. Comment [MG18]: The strike-through language is the wording used in the proposed SAS. However, since the EOM is always optional in a compilation engagement, the word wish is used (which is consistent with extant paragraph.25 of AR section 80). An uncertainty relating to the future outcome of unusually important litigation or regulatory action Agenda Item 4F Page 4 of 46

5 A major catastrophe that has had, or continues to have, a significant effect on the entity s financial position The entity is a component of a larger business enterprise Significant transactions with related parties Unusually important subsequent events Accounting matters, other than those involving a change or changes in accounting principles, affecting the comparability of the financial statements with those of the preceding period A92. If the accountant concludes that management's disclosure of the uncertainty is in accordance with the applicable financial reporting framework but further decides to include an emphasis-of-matter paragraph with respect to the uncertainty in the accountant's compilation report, the accountant may use the following language (the following is assuming that the financial statements were prepared in accordance with accounting principles generally accepted in the United States of America): As discussed in Note X, the Company is currently named in a legal action. The Company has determined that it is not possible to predict the eventual outcome of the legal action but has determined that the resolution of the action will not result in an adverse judgment that would materially affect the financial statements. Accordingly, the accompanying financial statements do not include any adjustments related to the legal action under FASB ASC 450. Departures From the Applicable Financial Reporting Framework (Ref: Par ) A93. Unlike accounting principles generally accepted in the United States of America as issued by FASB, IFRSs require an entity to disclose comparative information in respect of the previous comparative period for all amounts presented in the current year s financial statements. When the accountant compiles financial statements that omit prior year information, such omission would be a departure from IFRSs as issued by the IASB. A94. Rule 203, Accounting Principles (ET sec. 203 par..01), of the AICPA Code of Professional Conduct states Comment [MG19]: Paragraph.25 of AR section 80 and paragraph A2 of the clarified SAS, Emphasisof-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor s Report. Comment [MG20]: Paragraph.46 of Interpretation 12. Comment [MG21]: Paragraphs of Interpretation 13. A member shall not (1) express an opinion or state affirmatively that the financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles or (2) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from an accounting principle promulgated by bodies designated by Council to establish such principles that has Agenda Item 4F Page 5 of 46

6 a material effect on the statements or data taken as a whole. If, however, the statements or data contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements or data would otherwise have been misleading, the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement. Rule 203 (ET sec ) does not apply to engagements to report on compiled financial statements. Accordingly, when the accountant is reporting on a compiled financial statements and is confronted with the circumstances contemplated by Rule 203 (ET sec ), the guidance in paragraphs should be followed. Comment [MG22]: Paragraph.15 of Interpretation 6. Comment [MG23]: Paragraph.16 of Interpretation 6 A95. The accountant may wish to include an emphasis-of-matter paragraph in the accountant s compilation report to draw users attention to the limitations of the financial statements depending on the accountant s assessment of the possible dollar magnitude of the effects of the departures, the significance of the affected items to the entity, the pervasiveness and overall impact of the misstatements, and whether disclosure has been made of the effects of the departures. Inclusion of such an emphasis-of-matter paragraph in the accountant s compilation report is not a substitute for disclosure of the specific departures or the effects of such departures when they have been determined by management or are known as a result of the accountant s procedures. A96. Exhibit B contains illustrative examples of compilation reports that disclose departures from the applicable financial reporting framework. A97. The accountant may wish to consult with legal counsel in those circumstances where the accountant withdraws from the compilation engagement and provides no further services with respect to financial statements where modification of the standard report is not adequate to indicate the deficiencies in the financial statements as a whole. Alert as to Intended Use (Ref: Par ) A98. The need for an alert as to the intended use of the accountant s compilation report may result from a number of circumstances, including the purpose of the accountant s compilation report, and the potential for the accountant s compilation report to be misunderstood when taken out of the context in which it was intended to be used. A99. Nothing in SSARSs precludes an accountant from including an alert as to intended use in any accountant s compilation report. Alert as to Intended Use in OCBOA Financial Statements Agenda Item 4F Page 6 of 46 Comment [MG24]: Paragraphs of Interpretation 1. Comment [MG25]: Paragraph.28 of AR section 80. Comment [MG26]: Paragraph.29 of AR section 80. Comment [MG27]: Paragraph A2 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication and paragraph.31 of AR section 80. The SAS includes 3 other bullets, as follows: the nature of the procedures applied in its preparation the basis of or assumptions used in its preparation the extent to which the procedures performed generally are known or understood. I don t think that those bullets are necessary in the compilation standard. Comment [MG28]: Paragraph.30 of AR section 80.

7 A100. Financial statements prepared in accordance with a contractual or regulatory basis of accounting are suitable only for a limited number of users who can be presumed to have an adequate understanding of such bases of accounting. For example, financial statements prepared in accordance with a contractual basis of accounting are developed for and directed only to the parties to the contract or agreement. Accordingly, the alert as to intended use is required due to the nature of the report and the potential for the report to be misunderstood when taken out of the context in which it was intended to be used. A101. In the case of financial statements prepared in accordance with the cash basis of accounting, modifications of the cash basis of accounting having substantial support, or a basis of accounting that the reporting entity uses or expects to use to file its income tax return for the period covered by the financial statements, the accountant may consider it necessary in the circumstances to include an alert as to the intended use of the accountant s compilation report. Illustrative Alert Language A102. The alert as to intended use may list the specified parties or refer to the specified parties listed elsewhere in the written communication. The following illustrates language that includes the elements required by paragraph 91. This report is intended solely for the information and use of [list or refer to the specified parties] and is not intended to be and should not be used by anyone other than these specified parties. Alert as to Intended Use Included in General Use Reports A103. An accountant may issue a single combined accountant s compilation report covering both (a) communications that is required by paragraph 89 to include an alert as to intended use and (b) communications that do not ordinarily include such an alert. In such circumstances, the alert in the single combined accountant s compilation report indicates that only the communications required by paragraph 89 are intended solely for the information and use of the specified parties. Accordingly, the intended use of the accountant s compilation report that is for general use is not affected by this alert. Distribution of the Accountant s Compilation Report A104. The intended use of an accountant s compilation report differs from its distribution. An accountant is not responsible for controlling distribution of the compilation report. The alert is designed to avoid misunderstandings related to the use of the compilation report, particularly when the compilation report is taken out of the context in which it is intended to be used. An accountant may consider informing the entity that the compilation report is not intended for distribution to parties other than those specified in the compilation report. Comment [MG29]: Paragraph A26 of the clarified SAS, Special Considerations Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks as amended by the proposed Intended Use SAS. Comment [MG30]: Paragraph A27 of the clarified SAS, Special Considerations Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks. The references to the OCBOA bases use the wording from paragraph.04 of AR section 60. Comment [MG31]: Paragraph A5 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Comment [MG32]: Paragraph A8 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Extant SSARSs states that the report would be restricted. This new treatment only works if the compilation report includes headings similar to the new auditor s reports. Comment [MG33]: Paragraph A9 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Agenda Item 4F Page 7 of 46

8 A105. Factors the accountant may consider in determining whether to agree to add other parties as specified parties include the identity of the other parties and the intended use of the accountant s compilation report. Accountant s Communications With the Client When the Compiled Financial Statements Are Not Intended to Be Used by a Third Party (Ref: Par ) A106. In the situation in which a client engages an accountant, other than its auditor, to prepare unaudited financial statements on behalf of management and those financial statements are provided by management to its outside auditor for the purposes of the annual audit, although the client s outside auditor is a third party, the auditor is not deemed to be using the financial statements. The auditor s role is to apply auditing procedures to those statements in order to obtain sufficient appropriate audit evidence to support the auditor s opinion on those statements. A107. Examples of references on the financial statements alerting users as to their intended use would be "Intended for Management's Use Only," or "Solely for the information and use by the management of [name of entity] and not intended to be and should not be used by any other party." A108. The intended use of the compiled financial statements differs from its distribution. An accountant is not responsible for controlling distribution of the compiled financial statements. The alert is designed to avoid misunderstandings related to the use of the financial statements, particularly when the financial statements are taken out of the context in which it is intended to be used. An accountant may consider informing the entity that the financial statements are not intended for distribution to parties other than management. Comment [MG34]: Paragraph A10 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. Question to ARSC is this application paragraph needed or is it redundant with what is in the requirements section? Comment [MG35]: Paragraphs of Interpretation 16. Comment [MG36]: Paragraph.23 of AR section 80. Comment [MG37]: Paragraph A9 of the proposed SAS, Alert as to the Intended Use of the Auditor s Written Communication. The ARSC to consider as this is very different than what is in extant AR section 80. Extant literature requires the accountant to determine the appropriate course of action when he or she becomes aware that the financial statements have been distributed to third parties. Agenda Item 4F Page 8 of 46

9 AX. Exhibit B: Illustrations of Accountant s Compilation Reports on Financial Statements (Ref: par. A33) Illustration 1: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When a Compilation Has Been Performed for Both Periods Illustration 2: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Financial Statements of the Current Year Have Been Compiled and Those of the Prior Year Have Been Reviewed Illustration 3: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Financial Statements of the Current Year Have Been Compiled and Those of the Prior Year Have Been Audited Illustration 4: An Accountant s Compilation Report on a Single Year Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America Illustration 5: An Accountant s Compilation Report on a Single Year Prepared in Accordance With International Financial Reporting Standards (IFRSs) as Issued by the International Accounting Standards Board (IASB) Illustration 6: An Accountant s Compilation Report on a Single Year Prepared in Accordance With the Cash Basis of Accounting Illustration 7: An Accountant s Compilation Report on Comparative Financial Statements When the Accountant s Report Includes a Changed Reference to a Departure From Accounting Principles Generally Accepted in the United States of America Illustration 8: An Accountant s Compilation Report on Comparative Financial Statements When the Prior Period Financial Statements Were Compiled by a Predecessor Accountant and the Predecessor s Report is Not Presented Illustration 9: An Accountant s Compilation Report on Comparative Financial Statements When the Prior Period Financial Statements Were Compiled by a Predecessor Accountant and the Agenda Item 4F Page 9 of 46

10 Predecessor s Report is Not Presented and the Accountant is Engaged to Compile the Restatement Adjustments Illustration 10: An Accountant s Compilation Report on Comparative Financial Statements When the Prior Period Financial Statements That Omit Substantially All Disclosures Have Been Compiled From Previously Reviewed Financial Statements of the Same Period Illustration 11: An Accountant s Compilation Report on Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Accountant s Independence Has Been Impaired, and the Accountant Determines to Not Disclose the Reason for the Independence Impairment Illustration 12: An Accountant s Compilation Report on Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Accountant s Independence Has Been Impaired Due to the Accountant Having a Financial Interest in the Entity, and the Accountant Determines to Disclose the Reason for the Independence Impairment Illustration 13: An Accountant s Compilation Report on Financial Statements Disclosing a Departure From Accounting Principles Generally Accepted in the United States of America Illustration 14: An Accountant s Compilation Report on Financial Statements Prepared in Accordance With IFRSs as Issued by the IASB That Omit Comparative Information in Respect of the Previous Comparative Period Illustration 15: An Accountant s Compilation Report on Financial Statements Disclosing a Departure From Accounting Principles Generally Accepted in the United States of America and Including an Emphasis-of-Matter Paragraph Drawing Users Attention to the Limitations of the Financial Statements Illustration 16: An Accountant s Compilation Report on Special-Purpose Financial Statements Prepared on a Basis of Accounting Prescribed in a Contractual Agreement that Results in an Incomplete Presentation But One that is Otherwise in Conformity With GAAP Illustration 17: An Accountant s Compilation Report on Special-Purpose Financial Statements Prepared on a Basis of Accounting Prescribed in a Contractual Agreement That is Not in Conformity With GAAP Illustration 18: An Accountant s Compilation Report When the Compiled Financial Statements are Included in a Prescribed Form that Calls For a Presentation Departure From Accounting Principles Generally Accepted in the United States of America Illustration 19: An Accountant s Compilation Report When the Compiled Financial Statements are Prepared in Accordance With a Special Purpose Framework Prescribed by Contract or Regulation and That Framework Prescribes a Format For the Financial Information Agenda Item 4F Page 10 of 46

11 Illustration 20: An Accountant s Compilation Report on Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country Illustration 21: An Accountant s Compilation Report on Consolidated Comparative Financial Statements Prepared in Accordance With IFRSs as Issued by the IASB When the Compilation Has Been Conducted in Accordance With International Standard on Related Services 4410, Engagements to Compile Financial Statements Issued by the International Audit and Assurance Standards Board Agenda Item 4F Page 11 of 46

12 Illustration 1: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When a Compilation Has Been Performed for Both Periods Circumstances include the following: Compilation of a complete set of comparative financial statements The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheets of XYZ Company as of December 31, 20X2 and 20X1, and the related statements of income, retained earnings, and cash flows for the years then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilations in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s compilation report] Agenda Item 4F Page 12 of 46

13 Illustration 2: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Financial Statements of the Current Year Have Been Compiled and Those of the Prior Year Have Been Reviewed. Circumstances include the following: Compilation of a complete set of financial statements for the current year Review of a complete set of financial statements for the prior year The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ACCOUNTANT S COMPILATION REPORT 1 [Appropriate Addressee] I (we) have compiled the accompanying balance sheet of XYZ Company as of December 31, 20X2, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the 20X2 financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilations in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Other Matter The accompanying 20X1 financial statements were previously reviewed by me (us) and I (we) stated that I was (we were) not aware of any material modifications that should be made to those financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America in my (our) report dated March 31, 20X2, 1 Alternatively, an accountant may use a title that does not describe the level of service such as Accountant s Report or Report of Certified Public Accountants because the report refers to different levels of service. Agenda Item 4F Page 13 of 46

14 but I (we) have not performed any procedures in connection with that review engagement since that date. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s compilation report] Agenda Item 4F Page 14 of 46

15 Illustration 3: An Accountant s Compilation Report on Comparative Financial Statements Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America When the Financial Statements of the Current Year Have Been Compiled and Those of the Prior Year Have Been Audited Circumstances include the following: Compilation of a complete set of financial statements for the current year Audit of a complete set of financial statements for the prior year The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ACCOUNTANT S COMPILATION REPORT 2 [Appropriate Addressee] I (we) have compiled the accompanying balance sheet of XYZ Company as of December 31, 20X2, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilations in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Other Matter The 20X1 financial statements were audited by me (us) (other accountants) and I (we) (they) expressed an unqualified opinion on them in my (our) (their) report dated March 1, 20X2, but I (we) (they) have not performed any auditing procedures since that date. 2 Alternatively, an accountant may use a title that does not describe the level of service such as Accountant s Report or Report of Certified Public Accountants because the report refers to different levels of service. Agenda Item 4F Page 15 of 46

16 [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s report] Agenda Item 4F Page 16 of 46

17 Illustration 4: An Accountant s Compilation Report on a Single Year Prepared in Accordance With Accounting Principles Generally Accepted in the United States of America Circumstances include the following: Compilation of a complete set of financial statements (single year) The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheet of XYZ Company as of December 31, 20XX, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s report] Agenda Item 4F Page 17 of 46

18 Illustration 5: An Accountant s Compilation Report on a Single Year Prepared in Accordance With International Financial Reporting Standards (IFRSs) as Issued by the International Accounting Standards Board (IASB) Circumstances include the following: Compilation of a complete set of financial statements (single year) The financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheets of XYZ Company as of December 31, 20X2 and 20X1, and the related statements of income, retained earnings, and cash flows for the years then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s report] Agenda Item 4F Page 18 of 46

19 Illustration 6: An Accountant s Compilation Report on a Single Year Prepared in Accordance With the Cash Basis of Accounting Circumstances include the following: Compilation of a complete set of financial statements (single year) The financial statements are prepared in accordance with the cash basis of accounting (that is, an OCBOA) Management has a choice of financial reporting frameworks ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying statement of assets and liabilities arising from cash transactions of XYZ Company as of December 31, 20XX, and the related statement of revenue collected and expenses paid for the year then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the cash basis of accounting. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with the cash basis of accounting described in Note X; this includes determining that the cash basis of accounting is an acceptable basis for the preparation of financial statements in the circumstances. Management is also responsible for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Basis of Accounting I (We) draw attention to Note X of the financial statements, which describes the basis of accounting. The financial statements are prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] Agenda Item 4F Page 19 of 46

20 [Date of the accountant s report] Illustration 7: An Accountant s Compilation Report on Comparative Financial Statements When the Accountant s Report Includes a Changed Reference to a Departure From Accounting Principles Generally Accepted in the United States of America Circumstances include the following: Compilation of a complete set of financial statements (comparative) The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America The accountant s compilation report on the financial statements for the prior year included a paragraph disclosing a departure from accounting principles generally accepted in the United States of America During the current year, management changed its method of accounting and restated the prior year financial statements to conform to accounting principles generally accepted in the United States of America. ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheets of XYZ Company as of December 31, 20X2 and 20X1, and the related statements of income, retained earnings, and cash flows for the years then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilations in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Other Matter Agenda Item 4F Page 20 of 46

21 In my (our) report dated March 1, 20X2 with respect to the 20X1 financial statements, we referred to a departure from accounting principles generally accepted in the United States of America because the company carried its land at appraised values. As described in Note X, the Company has changed its method of accounting for land and restated its 20X1 financial statements to conform with accounting principles generally accepted in the United States of America. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] [Date of the accountant s report] Agenda Item 4F Page 21 of 46

22 Illustration 8: An Accountant s Compilation Report on Comparative Financial Statements When the Prior Period Financial Statements Were Compiled by a Predecessor Accountant and the Predecessor s Report is Not Presented Circumstances include the following: Compilation of a complete set of financial statements (comparative) The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America The financial statements for the prior year were compiled by a predecessor accountant and the predecessor s report is not presented ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheet of XYZ Company as of December 31, 20X2, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the 20X2 compilations in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Other Matter The financial statements of XYZ Company as of December 31, 20X1, were compiled by other accountants whose report dated February 1, 20X2 stated that they have not audited or reviewed the 20X1 financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. [Signature of accounting firm or accountant, as appropriate] [Accountant s city and state] Agenda Item 4F Page 22 of 46

23 [Date of the accountant s report] Illustration 9: An Accountant s Compilation Report on Comparative Financial Statements When the Prior Period Financial Statements Were Compiled by a Predecessor Accountant and the Predecessor s Report is Not Presented and the Accountant is Engaged to Compile the Restatement Adjustments Circumstances include the following: Compilation of a complete set of financial statements (comparative) The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America The financial statements for the prior year were compiled by a predecessor accountant and the predecessor s report is not presented The prior year financial statements have been restated and the accountant is engaged to compile the restatement adjustments ACCOUNTANT S COMPILATION REPORT [Appropriate Addressee] I (we) have compiled the accompanying balance sheet of XYZ Company as of December 31, 20X2, and the related statements of income, retained earnings, and cash flows for the year then ended. I (we) have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management (owners) is (are) responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Accountant s Responsibility My (our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. Other Matters The financial statements prior to adjustment of XYZ Company as of and for the year ended December 31, 20X1, were compiled by other accountants whose report dated February 1, Agenda Item 4F Page 23 of 46