APPENDIX 1D

COMPARISON OF COMPILATION, REVIEW, AND AUDIT ENGAGEMENTS*


                                                            Compilation                                  Review                                     Audit
                                                            Engagement                               Engagement**                         Engagement

 

1.   Level of Assurance                 No assurance as to GAAP             Limited assurance as to GAAP            Statements are fairly
                                                                                                                                                              presented in accordance
                                                                                                                                                              with GAAP.

2.    Entities Covered                     Nonpublic only                               Nonpublic only                                     Public or Nonpublic

3.    Knowledge of Client's             Knowledge of the accounting          Knowledge same as compila-                Extensive knowledge of the
       Industry                                principles and practices of the        tion plus an increased under-                 economy, the relevant indus-
                                                 industry and general under-             standing of the client's business.           try, and the client's business.
                                                 standing of the client's business.                                                               (SAS No.22)

4.    Inquiry procedures                 Inquiries not required unless             Inquiry and analytical procedures          Inquiry, analytical procedures
       required                                information supplied by the              required plus additional proce-                (SAS No.56), and other audit
                                                 client is questionable.                      dures if the information appears              procedures.
                                                                                                      questionable.

5.    GAAP disclosures                 Substantially all disclosures            All disclosures required by GAAP         Inadequate disclosure requires
       omitted                                 required by GAAP may be               must be included or report must             qualified or adverse opinion.
                                                  omitted, without restriction               be modified to include the dis-             
                                                  on use (Exception, see                    closures.
                                                  SSARS No. 3)

6.    Known departures from           Disclosure required in modi-             Disclosure required in modified             Departure from GAAP requires
       GAAP measurement              fied compilation report (Ex-             review report.                                        qualified or adverse opinion.
                                                  ception, see SSARS No. 3)

7.    Accountant's                          Accountant does not have               Lack of independence precludes             Nonpublic company - comp-
       independence                         to be independent                          issuing review report                               ilation report (SSARS No.1) if
                                                                                                                                                                 not independent.

                                                                                                                                                                 Public company- nonindepen-
                                                                                                                                                                 dence disclaimer (SAS No. 26)
                                                                                                                                                                 if not independent.

8.    Obtain an understand-             Not required                                    Not required                                         Required by SAS No. 55
       ing of the control struc-
       ture and assess control
       risk.

9.    Engagement Letter                 Recommended                               Recommended                                       Not discussed in SAS

10.  Representation Letter             No mention                                      May wish to obtain                                 Must obtain (SAS No. 19)

 

*Adapted from Dan M. Guy, "Disclosure Needs in Financial Reporting for Closely Held Businesses," University of Alabama,
1978 Accounting Research Convocation

** Excludes interim reviews of public companies. See SAS No. 36. (However, Paragraph 140.03 describes a proposed ammendment to SSARS No. 1
    to discuss situations when a SSARS review report may be applicable to public entities.

Class Notes Home Page Previous Page
Next Page E-Mail

Copyright 1998
Steven L. Jager, CPA, An Accountancy Corporation