What are the major differences between a compilation engagement and a preparation engagement?
1) In a compilation the CPA must issue a compilation report and each page of the financial statements state 'See accountant's compilation report.' In a preparation service, the CPA does not issue a report, but the CPA includes a statement on each page of the financial statements that indicates, at a minimum, 'no assurance is provided' on the financial statements.
2) A compilation can only be performed for public companies for which an audit has been performed. A preparation service can only be performed for nonpublic companies for which an audit has not been performed.
3) In a compilation the CPA must make inquiries and perform other procedures to verify information supplied by the entity. In a preparation service, the CPA does not have to make inquiries or perform other procedures.
4) In a preparation service the CPA must issue a preparation report and each page of the financial statements state 'See accountant's preparation report.' In a compilation, the CPA does not issue a report, but the CPA includes a statement on each page of the financial statements that indicates, at a minimum, 'no assurance is provided' on the financial statements.