So in a preparation, the auditor is taking the accounting records, documents, and other information provided by management and physically preparing the financial statements. The auditor may also help mgmt with significant judgments concerning estimates and disclosures, etc. Mgmt is STILL responsible for these judgments. No assurance is provided and that should be clearly indicated on each page of the financials. Audit firm's name is not required to be included in the financials.
In a compilation, no prep is done. The auditor is just reading the statements that are already prepared by client and the purpose is to determine whether they are appropriate in form and free from OBVIOUS material errors.
In BOTH engagements, accountants may, but are not required to, make inquiries or perform other procedures to verify, corroborate, or review info supplied by the client. If they discover that info is incorrect, they should obtain additional or revised info. If mgmt refuses to provide such info, the accountant should withdraw.
In BOTH engagements, independence is not required, but if not independent in a compilation, the accountant has to disclose.
Remember in a compilation, you have the acronym STAFF in understanding client's business.
In a compilation, SSARS doesn't require that the compilation report be printed on the accounting firm's letterhead.
In a preparation engagement, there is no report really. You just have to make sure that the financials are clearly marked that no assurance is provided. If you can't for whatever reason, you have to include a disclaimer that will go along with the financials saying that no audit was done, no assurance, blah blah.
I hope this helps! I have audit on Monday too. Wishing you the very best!!
FAR- 1/5/16 PASSED
AUD- 4/18/16 PASSED
BEC- 7/21/16
REG- SEPTEMBER
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