Agreed Upon Procedures and Compilation

[siddharth]

Hi,

Can anyone give an example for agreed upon procedures and compilation?

[KayPee]

Hi Sid we have in this scenario examples of compilation engagement.

1. One of Kelly Foster & Partners’ clients, a private company that owns several drugstores, is in trouble: the company’s regular accountant was admitted to hospital right before the end of the fiscal year. The client asks one of the audit firm’s partners if he could lend the company some staff to enter the transactions for the last month of the year, make adjusting entries, prepare the financial statements and, as usual, compile the company’s financial statements. Would the partner be violating the independence rules by accepting the compilation engagement?

[KayPee]

Agreed Upon Procedures


When an audit is not needed, an “Agreed Upon Procedures” engagement examines and reviews specific information, accounts or data that is determined by client's needs.

This can involve reviewing a finite group of accounts, procedures or controls to evaluate their effectiveness or accuracy.(See this is unlike an Audit where the auditor through planning and risk assessment determines what accounts to examine)

Upon completion of the engagement a report is issued for the client's review, often with suggestions and recommendations.(no assurance is given)

Who needs agreed upon procedures?
Any business or organization not requiring an audit, but wants a finite group of accounts, procedures, or controls evaluated or reviewed is a good candidate for agreed upon procedures.

What is the process?

Agreed upon procedure engagements follow the process that the client dictates.
As such the auditor makes available their auditing, accounting and risk management knowledge to the client and advises(the word here is advise not impose) the client on a specific course of action.


Compilation


Compilations review the client internal financial info/ underlying accounting records and put it in the form of financial statements with no assurances to whether it is being presented in accordance with accepted financial reporting framework.

Who needs compilation services?

* Business owners(Shareholders)
* Financial Controllers
* Executive directors
* Not-for-profit organizations

When does the need for a compilation arise?

A client might need a compilation when they need to create financial statements to be used by management, Board of Directors or to give to potential lenders or donors.(in a situation where the person on that schedule has been taken ill)/temporary replacement.

I hope this settles it for types of assurance engagements we have:

1.Audits
2.Review
3. Agreed-upon procedures
4.Compilation engagement