Guide: Preparation, Compilation, and Review Engagements, 2019

1 Review of Financial Statements .01-.241

Introduction .01-.03

Applicability .04

Consideration of Materiality in a Review Engagement .05-.11

Requirements .12-.236

General Principles for Performing and Reporting on Review Engagements .12

Professional Skepticism in a Review Engagement .13-.16

Engagement Level Quality Control in a Review Engagement .17-.21

Independence .22-.24

Preconditions for Accepting a Review Engagement .25-.30

Communications with Predecessor Accountants .31-.34

Agreement on Engagement Terms .35-.38

Understanding of the Industry .39

Knowledge of the Entity .40-.68

Designing and Performing Review Procedures .69-.72

Analytical Procedures .73-.113

Illustrative Analytics .114-.119

Inquiries and Other Review Procedures .120-.147

Illustrative Inquiries .148-.149

Reading the Financial Statements .150-.152

Reconciling the Financial Statements to the Underlying Accounting Records .153

Evaluating Evidence Obtained From the Procedures Performed .154-.157

Written Representations .158-.164

Communicating to Management and Others Regarding Fraud or Noncompliance with Laws and Regulations .165-.172

Reporting on the Financial Statements — General .173-.174

Reporting on Financial Statements Prepared in Accordance with a Special Purpose Framework .175-.179

Reporting on Comparative Financial Statements .180-.186

Reporting on Known Departures From the Applicable Financial Reporting Framework .187-.192

Emphasis-of-Matter and Other-Matter Paragraphs in the Accountant’s Review Report .193-.197

Alert That Restricts the Use of the Accountant’s Review Report .198-.201

Reporting on Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country .202-.205

The Accountant’s Consideration of an Entity’s Ability to Continue as a Going Concern .206-.207

Consideration of the Effects on the Accountant’s Review Report .208-.209

Subsequent Events and Subsequently Discovered Facts .210-.216

Initial Review Engagements — Opening Balances .217-.219

Reference to the Work of Other Accountants in an Accountant’s Review Report .220-.222

Supplementary Information That Accompanies Reviewed Financial Statements .223-.225

Required Supplementary Information .226-.228

Change in Engagement From Audit to Review .229-.233

Review Documentation .234-.236

Illustrative Engagement Letters .237

Illustrative Representation Letter .238-.240

Illustrative Accountant’s Review Reports on Financial Statements .241

2 Compilation of Financial Statements .01-.103

Introduction .01-.02

Applicability .03

Requirements .04-.87

General Principles for Performing and Reporting on Compilations of Financial Statements .04

Engagement Level Quality Control in a Compilation Engagement .05-.09

Independence .10-.11

Preconditions for Accepting a Compilation Engagement .12-.17

Agreement on Engagement Terms .18-.21

Knowledge and Understanding of the Entity’s Financial Reporting Framework .22-.26

Reading the Financial Statements .27

Other Compilation Procedures .28-.35

Reporting — General .36-.37

Reporting — Financial Statements Prepared in Accordance with a Special Purpose Framework .38-.41

Reporting — Financial Statements that Omit Substantially All the Disclosures Required by the Applicable Financial Reporting Framework .42-.50

Reporting — Comparative Financial Statements .51-.63

Reporting — When the Accountant is Not Independent .64-.66

Reporting — Known Departures From the Applicable Financial Reporting Framework .67-.72

Reporting — Supplementary Information That Accompanies Financial Statements and the Accountant’s Compilation Report Thereon .73-.75

Reporting — Required Supplementary Information .76-.78

Reporting — Alert That Restricts the Use of the Accountant’s Compilation Report .79-.80

Reporting — Emphasis-of-Matter or Other-Matter Paragraphs .81

Reporting — Financial Statements Prepared in Accordance with a Prescribed Format .82-.87

Compilation of Specified Elements, Accounts, or Items of a Financial Statement .88-.91

Change in Engagement From Audit or Review to a Compilation Engagement .92-.97

Documentation Requirements .98-.100

Illustrative Engagement Letters .101

Illustrative Examples of the Accountant’s Compilation Report on Financial Statements .102

Exhibit — Compilation Reporting Requirements When Independence is Impaired .103

3 Preparation of Financial Statements .01-.50

Introduction .01

Applicability .02-.07

Independence .08-.09

Requirements .10-.49

General Principles for Performing Engagements to Prepare Financial Statements .10

Engagement Level Quality Control in an Engagement to Prepare Financial Statements .11-.15

Preconditions for Accepting an Engagement to Prepare Financial Statements .16-.18

Agreement on Engagement Terms .19-.22

Knowledge and Understanding of the Entity’s Financial Reporting Framework .23-.27

Preparing the Financial Statements .28-.34

Preparation of Financial Statements in Accordance with a Special Purpose Framework .35-.36

Preparation of Financial Statements That Contain a Known Departure or Departures From the Applicable Financial Reporting Framework .37-.38

Preparation of Financial Statements That Omit Substantially All Disclosures Required by the Applicable Financial Reporting Framework .39-.41

Preparation of Financial Statements Included in a Prescribed Form .42-.44

Communication with Management .45-.46

Documentation Requirements .47-.49

Illustrative Engagement Letters .50

4 Compilation of Pro Forma Financial Information .01-.24

Introduction .01

Applicability .02-.03

Requirements .04-.22

General Principles for Compilations of Pro Forma Financial Information .04-.06

Acceptance and Continuance of Client Relationships .07-.09

Agreement on Engagement Terms .10-.13

The Accountant’s Knowledge and Understanding of the Entity’s Financial Reporting Framework .14

Compilation Procedures .15-.16

The Accountant’s Compilation Report on Pro Forma Financial Information .17-.20

Documentation .21-.22

Illustrative Engagement Letter for a Compilation of Pro Forma Financial Information .23

Illustrative Accountant’s Compilation Report on Pro Forma Financial Information .24

5 Preparing or Performing a Compilation or Review of Personal Financial Statements .01-.26

Introduction .01

Accounting Considerations .02-.05

Internal Control with Respect to Personal Financial Statements .06-.08

Agreement on Engagement Terms .09-.11

Fraud and Illegal Acts in an Engagement to Prepare or in a Compilation or Review of Personal Financial Statements .12-.14

Representation Letters .15-.17

Compilation and Review Reports on Personal Financial Statements .18-.20

Departures From the Applicable Financial Reporting Framework .21-.22

Illustrative Engagement Letters .23

Illustrative Representation Letter .24-.25

Illustrations of Accountant’s Compilation and Review Reports on Personal Financial Statements .26

6 Special Considerations — International Reporting Issues .01-.26

Introduction .01-.02

Applicability .03-.04

Requirements .05-.24

Considerations When Accepting the Engagement .05-.09

Compilation or Review of Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country .10-.13

Application of Another Set of Compilation or Review Standards .14-.16

Reporting .17-.24

Illustrative Examples of the Accountant’s Compilation and Review Report on Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country Performed in Accordance with SSARSs and Another Set of Compilation or Review Standards .25

Exhibit — Incremental Procedures Required to be Performed if a Review is to be Conducted in Accordance with SSARSs and International Standard on Review Engagements 2400 (Revised), Engagements to Review Historical Financial Statements .26

Appendix A Overview of Statements on Quality Control Standards

Glossary

Index of Pronouncements and Other Technical Guidance

Subject Index

The American Institute of CPAs (AICPA) is the world's largest member association representing the CPA profession, with more than 429,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education, and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the procession.