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Refer to Para 3.3. RELATED SERVICES 9.23
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As per SRS 4410, Compilation engagement is an engagement in which a practitioner applies accounting and financial reporting expertise to assist management in the preparation and presentation of financial information of an entity in accordance with an applicable financial reporting framework and issues a report. Management may request a professional accountant in public practice to assist with the preparation and presentation of financial information of an entity. Financial information that is the subject of a compilation engagement may be required for various purposes including: - • To comply with mandatory periodic financial reporting requirements established in law or regulation, if any or • For purposes unrelated to mandatory financial reporting under relevant law or regulation, including for example: - ✓ For management or those charged with governance, prepared on a basis appropriate for their particular purposes (such as preparation of financial information for internal use). ✓ For periodic financial reporting undertaken for external parties under a contract or other form of agreement (such as financial information provided to a funding body to support provision or continuation of a grant). ✓ For transactional purposes, for example to support a transaction involving changes to the entity’s ownership or financing structure (such as for a merger or acquisition). “Assurance engagement” means an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria. It means that the practitioner gives an opinion about specific information due to which users of information are able to make confident decisions knowing well that chance of information being incorrect is diminished. A compilation engagement is not an assurance engagement. A compilation engagement does not require the practitioner to verify the accuracy or completeness of the information provided by management for the compilation, or otherwise to gather evidence to express an audit opinion or a review conclusion on the preparation of the financial information. Further, SQC 1 is applicable to all Engagement and Quality Control Standards. Since SRS 4410 is also one of Engagement and Quality Control Standards, SQC 1 applies to firms in respect of firm’s compilation engagements too which is covered in Related Services.
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(a) The above situation involves an engagement to perform agreed-upon procedures. In such an engagement, the auditor is engaged by the client to issue a report of factual findings based on specified procedures performed on specified subject matter of specified elements, accounts or items of a financial statement. The management has requested CA Kamna to take up the assignment and prepare a report for management in accordance with professional standards. Such type of engagement and its reporting falls in purview of SRS 4400. The reference to auditor in SRS 4400 does not imply that a person performing related services need necessarily be the auditor of entity’s financial statements. Hence, a person performing related services need not necessarily be auditor of entity’s financial statements. Therefore, it was proper for CA Kamna to accept the above engagement. (b) While reporting, she should take following precautions so that readers of report do not misunderstand its scope: - A statement that the procedures performed do not constitute either an audit or a review and, as such, no assurance is expressed. A statement that had the auditor performed additional procedures, an audit or a review, other matters might have come to light that would have been reported. A statement that the report is restricted to those parties that have agreed to the procedures to be performed. A statement (when applicable) that the report relates only to the elements, accounts, items or financial and non-financial information specified and that it does not extend to the entity’s financial statements taken as a whole.
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As per SRS 4410, “Compilation Engagements”, if the practitioner is unable to complete the engagement because management has failed to provide records, documents, explanations or other information, including significant judgments, as requested, the RELATED SERVICES practitioner shall withdraw from the engagement and inform management and those charged with governance of the reasons for withdrawing. If the practitioner becomes aware during the course of the engagement that: (a) The compiled financial information does not adequately refer to or describe the applicable financial reporting framework (b) Amendments to the compiled financial information are required for the financial information not to be materially misstated; or (c) The compiled financial information is otherwise misleading the practitioner shall propose the appropriate amendments to management. If management declines or does not permit the practitioner to make the proposed amendments to the compiled financial information, the practitioner shall withdraw from the engagement and inform management and those charged with governance of the reasons for withdrawing. If withdrawal from the engagement is not possible, the practitioner shall determine the professional and legal responsibilities applicable in the circumstances. The practitioner shall obtain an acknowledgement from management or those charged with governance, as appropriate, that they have taken responsibility for the final version of the compiled financial information.