SRS 4410 Compilation Engagements

SRS 4410 deals with the responsibilities of a practitioner when:

1. Engaged to help the management with preparing
2. Presenting the historical financial information without acquiring an assurance on such information
3. Reporting on such engagement as per this SRS

The Compilation Engagement

Management might request the professional accountant who is in public practice for helping them with the preparation and presentation of their financial information. The value of the compilation engagement executed as per SRS 4410 to users of such financial information results from

a) application of professional expertise of the practitioner in financial reporting and accounting and

b) adherence to professional standards, which includes applicable ethical requirements, and

c) clear communication of extent and nature of the involvement of the practitioner with such compiled financial information.

As the compilation engagement isn’t an assurance engagement, the compilation engagement doesn’t need a practitioner’s verification for the completeness or accuracy of information provided by the entity’s management for such compilation, or otherwise for gathering evidence to provide the audit opinion or the review conclusion on the preparation of financial information.

Authority of SRS 4410

SRS 4410 comprises the objectives of a practitioner in following SRS that provides the framework where the requirements of this Standard on Related Services are set and are designed for assisting a practitioner to understand what is required to be achieved in the compilation engagement.

Objectives

The objectives of the practitioner in the compilation engagement under are:

a)  Applying financial reporting and accounting expertise in assisting the management in preparing and presenting financial information as per the relevant financial reporting framework depending upon the information provided by the management

b)  Reporting in line with the requirements of SRS 4410

Conduct of a Compilation Engagement in Accordance with this SRS. A practitioner must have a proper understanding of SRS 4410, together with its application and explanatory material, for understanding its key objectives and applying the requirements appropriately.

Requirements

Complying with Relevant Requirements

A practitioner must adhere to every requirement of SRS 4410 unless a specific requirement isn’t relevant to such compilation engagement, for instance in case the situations addressed by a requirement doesn’t exist in such engagement.

Ethical Requirements

A practitioner must adhere to all the relevant ethical requirements.

Professional Judgment

A practitioner must ensure that he/she exercises professional judgment while conducting the compilation engagement.

Engagement Level Quality Control

An engagement partner must take the responsibility for:

A. Quality of every compilation engagement which is assigned to such partner; and

B. The performance of the engagement as per the quality control procedures and policies of the entity, by:

i. Ensuring appropriate procedures have been followed with respect to acceptance and continuation of client engagements and relationships;

ii. Making sure that the team engaged in the compilation work together has the required proficiency and competencies of performing such compilation engagement;

iii. Having alertness for signs of non-compliance by the members of such engagement team with applicable ethical requirements, and considering the suitable action if the matters come to the attention of the engagement partner signifying that the members of such engagement team haven’t adhered to the applicable ethical requirements;

iv. Supervising, directing and executing such engagement while complying with the relevant professional standards and all the applicable regulatory and legal requirements; and

v. Taking the responsibility for documentation of all applicable engagement is maintained.

Engagement Acceptance and Continuance

Continuance of Client Relationships, Engagement Acceptance and Agreeing to the Terms of the Engagement

A practitioner shouldn’t accept an engagement unless he/she has agreed and decided on all the terms of such engagement with the management, including:

i. The proposed use and circulation of such financial information, and limitations on its use or its circulation wherever applicable

ii. Identification of relevant financial reporting framework

iii. Overall scope and objective of such compilation engagement

iv. The responsibilities of the practitioner, including the requirement to comply with relevant ethical requirements; (Ref: Para. A19)

v. The management’s responsibilities for:

• Overall financial information, and for preparation and presentation of financial statements, as per the financial reporting framework which is relevant in view of the proposed use of such financial information and its intended users
• Scheme, implementation, and continuance of the internal control as management considers necessary for enabling the preparation of such financial statements which are free from any material misstatement, either due to error or fraud;
• The completeness and accuracy of the documents, explanations, records and other such information provided by the management for such compilation engagement; and
• The judgments required in preparation and presentation of such financial information, which includes the ones which a practitioner might offer assistance in course of such compilation engagement

vi. The expected content and form of the report of the practitioner

Recurring Engagements

With respect to recurring compilation engagements, a practitioner should assess and evaluate whether the conditions, which includes the changes in engagement acceptance considerations, necessitate the revision of the terms of engagement and whether there’s a requirement for reminding the management of current terms of engagement.

Communication with Management and those Charged with Governance

A practitioner should communicate with management or persons charged with the governance, as suitable, regularly during the execution of such compilation engagement, all the matters regarding such compilation engagement which in the professional judgment of the practitioner, are of adequate importance for meriting management’s attention or the attention of those who are charged with the governance, as applicable.

Performing the Engagement

The Practitioner’s Understanding

A practitioner should obtain the understanding of the below-mentioned matters which are adequate enough for enabling him/her in performing such compilation engagement:

a) The business and operations of the entity, which includes the accounting records and accounting system of the entity

b) The relevant financial reporting framework which includes its application in the relevant industry of such entity

Compiling Financial Information

While compiling the financial information, a practitioner must seek the help of documents, explanations, records and such other information, which includes the important judgments, offered by the management. A practitioner should also discuss with the management, or persons charged with the governance as suitable, such significant judgments, for which he/she has offered assistance while compiling such financial information.

Before concluding the compilation engagement, a practitioner should go through such compiled financial information based on his/her understanding of business and operations of the entity, and of relevant financial reporting framework. In case, while performing the compilation engagement, a practitioner comes to know that the documents, records, explanations or such other information, which includes important judgments, provided by the management for such compilation engagement are inaccurate, incomplete or otherwise inadequate, the practitioner should bring the same to the management’s attention and request for corrected or additional information.

In case the practitioner is not able to finish the engagement due to management failure in providing documents, records, explanations or such other information, which includes important judgments, the practitioner should withdraw from such engagement and communicate the management and persons charged with the governance of the intentions and the reasons behind the same. In case the practitioner comes to know in course of his/her engagement that:

a) The financial information so compiled doesn’t appropriately describe or refer to the relevant financial reporting framework

b) Any amendments to such compiled financial information required for financial information shouldn’t be materially misstated

c) The financial information so compiled is otherwise misleading, the practitioner should propose appropriate amendments to the management

In case the management doesn’t allow or decline the practitioner in carrying out the proposed amendments to such compiled financial information, he/she should withdraw from such engagement and communicate the management and persons charged with the governance of the intentions and the reasons behind the same.

Documentation

A practitioner should include in his/her engagement documentation:

a) Important matters which have arisen in the course of the compilation engagement and how the practitioner addressed those matters

b) A record showing how financial information so compiled reconciles with underlying documents, records, explanations and such other information, offered by the management

c) A copy of the last version of the compiled financial information for which the management or persons charged with the governance, as apt, has agreed and acknowledged their responsibility, and report of the practitioner

The Practitioner’s Report

The important purpose of the report of the practitioner is to communicate in clear terms the extent and nature of compilation engagement, and his/her role and responsibilities in such compilation engagement. The practitioner’s report isn’t a tool for expressing the opinion or conclusion on financial information.