[Anonymous]

I understand that SSARS applies only to non-issuers and that SSARS includes standards for Compilations of financial statements. But, aside from SSARS, are public companies allowed to have Compilations performed?

A compilation is not considered “bookkeeping”, so it would not be one of the services prohibited by SOX. Also, consider Googling “AT Section 301” – (Financial Forecasts and Projections) and you will see that PCAOB has adopted this standard and it includes compilations of prospective financial statements. I would think that an auditor can perform a Compilation for a public company – but that independence could not be impaired or that auditor would not be able to perform the financial statement audit under PCAOB. I cannot find any definitive answer in any standards – if anyone can point to a specific standard, that would be much appreciated!

[msgolds]

That is a good question. I would think that as long as the Auditor was independent with respect to the compilation, that would not be an independence impairment.

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[Anonymous]

Thanks for the help msgolds. Congrats on passing all 4 parts.

[Anonymous]

I thought an Auditor does not need to be independent for compilations. Only for a review or audit? I thought I read something where the Auditor would have to state if they are not independent, but it wasn't a requirement.

Is that different when its a compilation for a public company?

[msgolds]

I think the question is more along the lines of, could a CPA who is independent perform both a Compilation AND an Audit of a public company.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[Roxwella]

No independence + compilation = extra paragraph/sentence stating lack of independence (public and non-public companies)

And yes you can compile for a public company. Of course a simple compilation would not due for financial statements to the SEC. But, there are many other reasons a public company may have a compilation done.

Get comfortable with PCAOB website, https://pcaobus.org/standards/attestation/pages/at301.aspx#ps-pcaob_db4ebbb0-891f-4371-adb0-bae694f13575

” .23

A practitioner may compile prospective financial statements for an entity with respect to which he or she is not independent. In such circumstances, the practitioner should specifically disclose his or her lack of independence; however, the reason for the lack of independence should not be described. When the practitioner is not independent, he or she may give the standard compilation report but should include the following sentence after the last paragraph.

We are not independent with respect to XYZ Company.”

[Anonymous]

The issue is in three parts:

A financial statement audit for public companies is only to be performed by an independent auditor per SOX rules and SOX proceeds to list out all the activities that it considers to lack independence (or that are incompatible with a financial statement audit). Included in this listing is “bookkeeping”. I have seen many sources that state a compilation COULD rise to the level of bookkeeping, but usually this is not the case.

So, assuming an auditor is allowed to both compile a public company's financial statements and then audit them, then he/she is able to both “prepare” (based on the information Management provides) the financial statements and then provide assurance on them – which at first blush seems a little “off” in logic. But this could be true IF the auditor maintained independence during the Compilation (i believe).

Third, the PCAOB standard that we refer to is AT Section 301 and this deals with Compilations of Prospective financial statements (forecasts and projections) and NOT historical financial statements. So, I believe we still dont have any support from the standards that state that an auditor can perform a historical financial statement compilation and then audit those very same statements at the end of the year. I just found it interesting that PCAOB had this standard and refers to “compilations” – but maybe compilations are only allowed as to projections and forecasts?

This may be delving too deep into this – I dont know. Maybe the CPA exam will only ask this question in relation to SSARS (private companies). But then I get to exam day and there is a question saying “Becker, Inc. a public company engaged Sam Jones to compile their historical financial statements and perform the year-end audit – can he do this?” Thanks everyone.

[Author]

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