Pursuant to recent changes in professional standards, we would like to bring to your attention the requirements pertaining to the new standard on Compilation Engagements CSRS 4200, which is effective for compiled ﬁnancial information for periods ending on or after December 14, 2021. This new standard will replace the current Section 9200 – “Notice to Reader”.
WHAT CHANGES CAN YOU EXPECT IN A COMPILATION ENGAGEMENT?
- A discussion about whether the compiled ﬁnancial information is intended to be used by a third party (e.g., your lender) and whether the third party has access to additional information.
- A discussion about the expected basis of accounting.
- A new engagement letter.
- A discussion of your business and operations, accounting system, and accounting records.
- A discussion about signiﬁcant judgments and other matters we have assisted management with, in the preparation of the compiled ﬁnancial information
- Management approval of the final version of the financial information.
- A new compilation engagement report.
WHAT IS THE BASIS OF ACCOUNTING THAT MUST BE DESCRIBED?
Your compiled ﬁnancial information will now include a note describing the basis of accounting applied.
The purpose of the description of the basis of accounting is to assist users in understanding how the compiled ﬁnancial information is prepared. Examples of bases of accounting commonly encountered in compilation engagements are:
- a cash basis of accounting
- a cash basis of accounting with selected accruals and accounting estimates
- a basis of accounting prescribed by a contract or other form of agreement established by a creditor or a regulator
We may help you select the basis of accounting; however, the basis of accounting is still your responsibility, and you will be asked to acknowledge this responsibility.
WHAT WILL THE NEW COMPILATION REPORT LOOK LIKE?
A new report will be attached to your compiled ﬁnancial information that clearly describes your responsibilities as management, our responsibilities as practitioners and an explanation of the limitations of a compilation engagement.
An illustration of the new compilation engagement report is provided below.
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The matters highlighted in this bulletin are presented in broad general terms and, of course, cannot be applied without consideration of all circumstances. FL Fuller Landau will be pleased to discuss the possible effects of these matters in your specific situation. Please do not hesitate to contact your habitual FL specialist.