ICAEW.com works better with JavaScript enabled.

Accounts preparation/Compilation

During an accounts preparation (compilation) engagement a qualified accountant will ensure that your company’s financial statements are correctly put together.

Download leaflet

Assurance: Accounts preparation leaflet

Download now

The most common compilation engagement is one in which a practitioner receives financial data and information from a client and rearranges it into a set of financial statements. The procedures do not involve verifying the subject matter data, and the practitioner does not express a conclusion on the compiled information.

As such, this type of engagement does not constitute an assurance engagement. However, as the practitioner uses expert knowledge of the subject matter and the reporting framework to compile the information, the client may be provided with some degree of comfort. The practitioner issues a compilation report to set out the nature of the compilation engagement and respective responsibilities to avoid expectation gaps arising among the readers of the report.

Critical considerations

When compiling historical financial information, practitioners should follow the guidance provided in AAF 2/10 Chartered accountants’ reports on the compilation of financial statements of incorporated entities, or AAF 3/10 Chartered accountants’ reports on historical financial information of unincorporated entities.

The relevant international standard issued by the IAASB is International Standards on Related Services (ISRS) 4410 Engagement to Compile Financial Statements. ISRS 4410 also provides useful guidance for engagements regarding non-financial information.

As with assurance and agreed-upon procedure (AUPs) engagements, ISRS 4410 requires compliance with the applicable requirements of the Code of Ethics for Professional Accountants issued by the IESBA. The ethical principles apply to compilation engagements as for AUP engagements. Compliance with the Code of Ethics is an important aspect of compilation engagements.

This is because the value of compilation by the practitioner is driven primarily by these ethical principles as the engagement does not involve any testing. Independence is not a requirement for compilation engagements; however, the specific terms of an engagement may require the practitioner to refer to the independence requirements of IESBA’s Code of Ethics for Professional Accountants. Equally, ISQC1 will apply to all services that the practitioner provides under ISRS 4410. As a result of either a client’s request or the need to comply with legal and regulatory requirements, a practitioner may perform a compilation engagement in accordance with specific requirements or standards other than ISRS 4410.

Where the practitioner is unable to follow ISRS 4410 in full because of a specific regulatory or other requirement, the practitioner should not refer to the engagement as having been conducted in compliance with the standard.

For many such engagements, irrespective of whether the practitioner performs the compilation engagement in accordance with national legal and regulatory requirements, the practitioner should make as much use of the ISRS as is possible.

This is because the ISRS provides a clear set of principles for carrying out compilation engagements.

ISRS 4410 requires clear agreement of the following with the engaging parties:

  • The nature of the engagement including the fact that compilation will not constitute an audit or a review and that accordingly no assurance will be expressed.
  • The stated purpose for the engagement.
  • The identification of the reporting framework to be used.
  • The respective responsibilities of management and the practitioner, including management responsibility for the information compiled, applicability of the financial reporting framework that is acceptable in view of the intended users and the accuracy and completeness of underlying records.
  • The limitations on the use and distribution of the report.

Although ISRS 4410 applies to financial information, the principles could be applied to an engagement to compile non-financial information. In practice, though, it is rare to see published compilation reports on non-financial information. It is more usual for an entity that wants some comfort over non-financial information, but not to the extent of a published assurance opinion, to request a private AUP or narrative advisory report.

This may be because a move to disclose new non-financial information is often part of a broader process of organisational change; compiling the non-financial information in-house can be seen as part of a drive to own the issue and make achievement of strategic non-financial objectives a part of the organisation’s culture.

Chartered accountants have deep expertise in understanding information flows and the systems and controls around these. They can also use technology to analyse data and carry out checks and reconciliations over it. They are therefore well-placed to compile, as well as challenge the compilation of, non-financial information.

Depending on the subject matter, a practitioner may want to consider the need to involve subject matter experts in compilation of non-financial information. For example, a company required to disclose gender pay gap information may need professional help with compilation of the information.

A chartered accountant may be best placed to understand the flow of information from the payroll records and to reconcile this to other publically disclosed information on pay; additional input from a legal specialist may be needed, however, to ensure certain kinds of remuneration and contract terms have been treated appropriately in accordance with statutory requirements and current best practice.

ICAEW's assurance resource

This page is part of ICAEW’s online assurance resource, which replaces the Assurance Sourcebook.

Find out more.