A compilation engagement involves applying accounting expertise to assist management in the preparation and presentation of financial information in the form of financial statements, without expressing any assurance on those statements. In the United States, compilation engagements are governed by AR-C Section 80, Compilation Engagements, under the AICPA’s Statements on Standards for Accounting and Review Services (SSARS). For international engagements, the equivalent standard is ISRS 4410 (Revised), issued by the IAASB. For private companies, small businesses, partnerships, and non-profits that do not require a full audit or review, a compilation offers a practical, cost-effective way to present financial statements in an organised and professionally structured format. [1]
Download the Pierag Compilation Engagements Technical Note (PDF)
What Is a Compilation Engagement?
The defining characteristic of a compilation is that no assurance is provided. The accountant does not audit, test, or verify the underlying data provided by management. The accountant’s role is to read the financial information and consider whether it appears appropriate in form and free from obvious material misstatements. [2] This is fundamentally different from a review engagement, which provides limited assurance, and an audit, which provides reasonable assurance. If a business requires a report providing any level of assurance to third parties such as lenders, investors, or regulators, a compilation alone will not meet that need.
Key Practitioner Requirements Under AR-C Section 80
Independence. The practitioner must consider independence requirements under applicable ethical standards. If not independent, this must be disclosed in the compilation report. Lack of independence does not preclude performing the engagement.
Knowledge of the client’s business. The practitioner must obtain sufficient understanding of the client’s industry, operations, and accounting policies to identify whether compiled information appears appropriate in form. This does not require the depth of knowledge needed in an audit or review.
Engagement letter. A written engagement letter is required before the engagement begins, documenting the nature and limitations of the engagement, management’s responsibilities for data accuracy, and the basis of accounting to be used. [2]
Management responsibility. Management must understand and accept responsibility for the financial statements and the accuracy of data provided. The financial statements remain management’s representation, not the practitioner’s.
No audit or review procedures. Practitioners must not test transactions, confirm balances, or make inquiries beyond what is needed to identify obvious material misstatements. Performing such procedures would change the nature of the engagement.
Compilation report. A compilation report is required for all engagements under AR-C Section 80. [3] It must clearly state that no assurance is provided, identify the compiled financial statements, and note the applicable basis of accounting. If the financial statements contain a known departure from the applicable framework, the practitioner must modify the report or withdraw.
Pierag’s Assurance practice performs compilation engagements for private companies, non-profits, and family-owned businesses across the United States.
Compilation vs. Preparation vs. Review
Preparation (AR-C Section 70) involves preparing financial statements without issuing any report. No assurance is provided, and no report accompanies the statements.
Compilation (AR-C Section 80) requires a compilation report explicitly stating that no assurance is provided. Appropriate when financial statements will be used by third parties who need to know a CPA has been involved.
Review (AR-C Section 90) provides limited assurance through inquiry and analytical procedures. Appropriate when lenders or investors require a moderate level of assurance without a full audit cost.
Frequently Asked Questions
What is the difference between a compilation and an audit?
An audit provides reasonable assurance through testing, confirmation, and verification. A compilation involves no assurance whatsoever. The practitioner assists in presenting financial statements without verifying underlying data. [1]
Is a compilation report required for all compilation engagements?
Yes. Under AR-C Section 80, a compilation report is required and must clearly state that no assurance is provided. [3]
Can a practitioner perform a compilation if they are not independent?
Yes, but lack of independence must be disclosed in the compilation report. It does not automatically preclude the engagement. [2]
When should a business choose a compilation over a review?
A compilation is appropriate when no assurance is required by third parties. A review is appropriate when a lender or investor requires limited assurance on the financial information. [2]
References
[1] AICPA. (2021). AR-C Section 80: Compilation Engagements. AICPA Professional Standards. Retrieved from https://irp.cdn-website.com/897bf1f7/files/uploaded/ar-c-00080.pdf
[2] LSL CPAs. (2025, September 26). Overview of AICPA’s SSARS No. 21: Section 70 and Section 80. Retrieved from https://lslcpas.com/overview-of-aicpas-ssars-no-21-section-70-and-80/
[3] AICPA and CIMA. (2023). SSARS No. 25: Materiality in a review of financial statements and adverse conclusions, amending AR-C Sections 60, 70, 80, and 90. Retrieved from https://www.aicpa-cima.com/resources/download/aicpa-statement-on-standards-for-accounting-and-review-services-no-25
