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Can an auditor perform a compilation and then an examination/full audit on the same financial statements he prepared? Meaning, if he’s independent to begin with, does performing a compilation kill the independence in terms of the examination?

Thanks in advance!

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[Josh]

Good question! I wonder if it matters if the entity is an issuer or not? Because, imo, it seems unlikely, a practitioner would end up in that position?

[SteelCPA]

My tax teacher used to always tell me not to drive yourself crazy with farfetched questions that most likely won't even be tested. I think this applies here

[Anonymous]

The auditor has to evaluate his/her independence before performing the audit engagement. In preparing the compiled financial statements if the auditor acted on behalf of management in developing estimates, authorizing transactions or any other management or decision making functions then their independence would be impaired. Merely preparing a financial statement based on information provided by the client i.e. trial balance(s), supporting schedules, source document, etc. does not impair independence. Frequently and typically, auditors assist audit clients in preparing their financial statements and that is perfectly acceptable within the GAAS framework. The financial statements and the inputs, assumptions, estimates and other relevant data that support the numbers are the sole responsibility of management, not the auditor.

To answer your question: yes, an auditor can audit a compiled financial statement that they prepared but they must assess their independence. I could easily see a situation where an accountant review or compiled a financial statement and then is asked to perform an audit based on some regulatory or banking requirement.

[Author]

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