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Changing Compilation Engagement Standards QnA

audit2 Changing Compilation Engagement Standards QnA

Who are users, and what is the Basis of Accounting?

A “user” includes anyone who would receive the compiled financial statements. Users may be shareholders, investors, creditors and lenders, government, regulators, suppliers etc.

The basis of accounting reveals details on how transactions were recorded in the records and presented in the compiled financial statements. While there are several different bases of accounting, some common examples include:

  • A cash basis of accounting
  • A cash basis of accounting with select accruals and accounting estimates
  • A basis of accounting prescribed by a contract or agreement instituted by a creditor or regulator.

Our office can assist in describing the basis of accounting used to compile your financial statements.

What other changes can I expect under the new standard?

There were some new and or enhanced requirements introduced to prepare the statements, including:

  1. An accountant must ask more questions about the users you expect to use the compiled financial statements and document the responses
  2. An accountant must ask about, document and describe the basis of accounting and the practices used to record transactions
  3. An Engagement Letter with the updated terms of engagement must be signed by management
  4. A more detailed understanding of the organization’s operations through more questions
  5. An accountant will take other steps to record your review and approval of the statements

These changes will result in more communication between you and the accountant.

Does this mean higher fees?

Possibly.

Please contact us to determine how much these new regulations might affect you or how they may apply to your company.

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Changing Compilation Engagement Standards
 

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Sunday, 25 February 2024