Compilation and Review Engagements AR Section60 Framework for Performing - PDF document

CompilationandReviewEngagementsARSection60FrameworkforPerformingandReportingonCompilationandReviewEngagementsIssuedate,unlessotherwiseindicated:December2009Source:SSARSNo.19Thissectionprovidesaframeworkanddenesanddescribestheobjec-tivesandelementsofcompilationandreviewengagements.ThissectionalsosetsforththemeaningofcertaintermsusedinStatementsonStandardsforAccountingandReviewServices(SSARSs)issuedbytheAccountingandRe-viewServicesCommittee(ARSC)indescribingtheprofessionalrequirementsimposedonaccountantsperformingcompilationandreviewengagements.Thefollowingisanoverviewofthissection:"RelevantDenitions."ThissectiondenesvarioustermsusedthroughoutSSARSs."ObjectivesandLimitationsofCompilationandReviewEngage-ments."Thissectionsetsforththeobjectivesandlimitationsofcompilationandreviewengagementsandidentiesthediffer-encesbetweeneachengagement."ProfessionalRequirements."ThissectionsetsforththemeaningofcertaintermsusedinSSARSsindescribingtheprofessionalrequirementsimposedonaccountantsperformingacompilationorreviewengagement."HierarchyofCompilationandReviewStandardsandGuidance."ThissectionsetsforththehierarchyofSSARSsliterature."ElementsofaCompilationorReviewEngagement."Thissec-tionidentiesanddiscussesveengagementelements:athreepartyrelationshipinvolvingmanagement,anaccountant,andin-tendedusers;anapplicablenancialreportingframework;nan-cialstatements;evidence(inareviewengagement);andawrit-tencommunicationorreport.Itexplainsimportantdistinctionsbetweencompilationengagementsinwhichtheaccountantob-tainsnoassuranceandreviewengagementsthataredesignedtoobtainlimitedassurance."Materiality."Thissectiondiscussestheconceptofmaterialityinthecontextofthepreparationandpresentationofnancialstate-ments.Thissectionisintendedtohelpaccountantsbetterunderstandtheirprofessionalresponsibilitieswhenengagedtocompileorreviewnancialstate-mentsornancialinformation.AdditionalstandardsofSSARSshavebeenes-tablishedtosetforthspecicperformanceandreportingrequirements.Such©2016,AICPAAR§60.03 StatementsonStandardsforAccountingandReviewServicesadditionalstandardsarebasedontheframeworkprovidedbythisstandard,andanyrequirementscreatedbythisstandardalsohavebeenincorporatedintotheadditionalstandardsofSSARSs.RelevantDe“nitionsTermsdenedforpurposesofSSARSsareasfollows:Applicablenancialreportingframework.Thenancialreportingframeworkadoptedbymanagementand,whenappropriate,thosechargedwithgovernanceinthepreparationofthenancialstatementsthatisacceptableinviewofthenatureoftheentityandtheobjectiveofthenancialstatements,orthatisrequiredbylaworregulation.Assuranceengagement.Anengagementinwhichanaccountantissuesareportdesignedtoenhancethedegreeofcondenceofthirdpartiesandmanagementabouttheoutcomeofanevaluationormeasurementofnancialstatements(subjectmatter)againstanapplicablenancialreportingframework(criteria).Attestengagement.Anengagementthatrequiresindependence,asde-nedinAICPAProfessionalStandardsFinancialreportingframework.Asetofcriteriausedtodeterminemeasurement,recognition,presentation,anddisclosureofallmaterialitemsappearinginthenancialstatements.Financialstatements.Astructuredrepresentationofhistoricalnan-cialinformation,includingrelatednotes,intendedtocommunicateanentity'seconomicresourcesandobligationsatapointintimeorthechangesthereinforaperiodoftimeinaccordancewithanancialre-portingframework.Therelatednotesordinarilycompriseasummaryofsignicantaccountingpoliciesandotherexplanatoryinformation.Thetermnancialstatementsordinarilyreferstoacompletesetofnancialstatementsasdeterminedbytherequirementsoftheappli-cablenancialreportingframework,butcanalsorefertoasingle-nancialstatementornancialstatementswithoutnotes.Theperson(s)withexecutiveresponsibilityforthecon-ductoftheentity'soperations.Forsomeentities,managementincludessomeorallofthosechargedwithgovernance(forexample,executivemembersofagovernanceboardoranowner-manager).Nonissuer.AllentitiesexceptforthosedenedinSection3oftheSecuri-tiesExchangeActof1934[15U.S.C.78c],thesecuritiesofwhichareregisteredunderSection12ofthatAct(15U.S.C.78l),orthatisre-quiredtolereportsunderSection15(d)(15U.S.C.78o(d)),orthatlesorhasledaregistrationstatementthathasnotyetbecomeef-fectiveundertheSecuritiesActof1933(15U.S.C.77aetseq.),andthatithasnotwithdrawn.Othercomprehensivebasisofaccounting(OCBOA).Adenitesetofcriteria,otherthanaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaorInternationalFinancialReportingStan-dards(IFRSs),havingsubstantialsupportunderlyingthepreparationofnancialstatementspreparedpursuanttothatbasis.ExamplesofanOCBOAareasfollows:.Abasisofaccountingthatthereportingentityusestocom-plywiththerequirementsornancialreportingprovisionsofaAR§60.04©2016,AICPA CompilationandReviewEngagementsgovernmentalregulatoryagencytowhosejurisdictiontheen-tityissubject(forexample,abasisofaccountingthatinsurancecompaniesusepursuanttotherulesofastateinsurancecom-.Abasisofaccountingthatthereportingentityusesorexpectstousetoleitsincometaxreturnfortheperiodcoveredbythenancialstatements..Thecashbasisofaccountingandmodicationsofthecashbasishavingsubstantialsupport(forexample,recordingde-preciationonxedassets).Ordinarily,amodicationwouldhavesubstantialsupportifthemethodisequivalenttotheac-crualbasisofaccountingforthatitemandifthemethodisnotReviewevidence.Informationusedbytheaccountanttoprovidearea-sonablebasisfortheobtainingoflimitedassurance.Submissionofnancialstatements.Presentingtomanagementnan-cialstatementsthatanaccountanthasprepared.Thirdparty.Allpersons,includingthosechargedwithgovernance,exceptformembersofmanagement.Thosechargedwithgovernance.Theperson(s)withresponsibilityforoverseeingthestrategicdirectionoftheentityandobligationsrelatedtotheaccountabilityoftheentity.Thisincludesoverseeingthenan-cialreportingprocess.Thosechargedwithgovernancearespecicallyexcludedfrommanagement,unlesstheyperformmanagementfunc-tions.ObjectivesandLimitationsofCompilationandReviewEngagementsAcompilationisaservice,theobjectiveofwhichistoassistmanage-mentinpresentingnancialinformationintheformofnancialstatementswithoutundertakingtoobtainorprovideanyassurancethattherearenoma-terialmodicationsthatshouldbemadetothenancialstatementsinorderforthestatementstobeinconformitywiththeapplicablenancialreportingframework.Althoughacompilationisnotanassuranceengagement,itisanattestengagement.Acompilationdifferssignicantlyfromarevieworanauditofnancialstatements.Acompilationdoesnotcontemplateperforminginquiry,analyticalprocedures,orotherproceduresperformedinareview.Additionally,acompila-tiondoesnotcontemplateobtaininganunderstandingoftheentity'sinternal InJanuary2013,theProfessionalEthicsExecutiveCommitteeadoptedaprovisioninthe"ScopeandApplicabilityofNonattestServices"interpretation(ETsec.1.295.010)underthe"Inde-pendenceRule"(ETsec.1.200.001)oftheAICPACodeofProfessionalConduct.Thisprovisionpro-vides,amongotherthings,thatnancialstatementpreparationisconsideredoutsidethescopeoftheattestengagementand,therefore,constitutesanonattestservicesubjecttotherequirementsofthe"NonattestServices"subtopic(ETsec.1.295).Theprovisioniseffectiveforengagementscoveringpe-riodsbeginningonorafterDecember15,2014.[Footnoteadded,October2013,toreectconformingchangesnecessaryduetotherevisionofEthicsInterpretationNo.101-3.Footnoterevised,January2015,toreectconformingchangesnecessaryduetotheissuanceoftherevisedAICPACodeofPro-fessionalConduct,effectiveDecember15,2014.]ForpurposesoftheStatementsonStandardsforAccountingandReviewServices,withrespecttocompilationengagements,referencesto"nancialstatements"include,whenapplicable,otherspec-iedelements,accounts,oritemsofanancialstatementandproformanancialinformation.©2016,AICPAAR§60.06 StatementsonStandardsforAccountingandReviewServicescontrol;assessingfraudrisk;testingaccountingrecordsbyobtainingsufcientappropriateauditevidencethroughinspection,observation,conrmation,ortheexaminationofsourcedocuments(forexample,cancelledchecksorbankimages);orotherproceduresordinarilyperformedinanaudit.Therefore,acompilationdoesnotprovideabasisforobtainingorprovidinganyassuranceregardingthenancialstatements.Areviewisaservice,theobjectiveofwhichistoobtainlimitedassur-ancethattherearenomaterialmodicationsthatshouldbemadetothenan-cialstatementsinorderforthestatementstobeinconformitywiththeappli-cablenancialreportingframework.Inareviewengagement,theaccountantshouldaccumulatereviewevidencetoobtainalimitedlevelofassurance.Are-viewengagementisanassuranceengagementaswellasanattestengagement.Areviewdifferssignicantlyfromanauditofnancialstatementsinwhichtheauditorobtainsahighlevelofassurance(expressedintheaudi-tor'sreportasobtainingreasonableassurance)thatthenancialstatementsarefreeofmaterialmisstatement.Areviewdoesnotcontemplateobtaininganunderstandingoftheentity'sinternalcontrol;assessingfraudrisk;testingaccountingrecordsbyobtainingsufcientappropriateauditevidencethroughinspection,observation,conrmation,ortheexaminationofsourcedocuments(forexample,cancelledchecksorbankimages);orotherproceduresordinarilyperformedinanaudit.Accordingly,inareview,theaccountantdoesnotobtainassurancethatheorshewillbecomeawareofallsignicantmattersthatwouldbedisclosedinanaudit.Therefore,areviewisdesignedtoobtainonlylimitedassurancethattherearenomaterialmodicationsthatshouldbemadetothenancialstatementsinorderforthestatementstobeinconformitywiththeapplicablenancialreportingframework.ProfessionalRequirementsSSARSscontainprofessionalrequirements,togetherwithrelatedguidance,intheformofexplanatorymaterial.Accountantsperformingacom-pilationorreviewhavearesponsibilitytoconsidertheentiretextofaSSARSincarryingouttheirworkonanengagementandinunderstandingandapplyingtheprofessionalrequirementsoftherelevantSSARSs.NoteveryparagraphofaSSARScarriesaprofessionalrequirementthattheaccountantisexpectedtofulll.Rather,theprofessionalrequirementsarecommunicatedbythelanguageandthemeaningofthewordsusedinSSARSs.SSARSsusetwocategoriesofprofessionalrequirementsidentiedbyspecictermstodescribethedegreeofresponsibilitytheyimposeonaccoun-tants.Theyareasfollows:Unconditionalrequirements.Theaccountantisrequiredtocom-plywithanunconditionalrequirementinallcasesinwhichthecircumstancesexisttowhichtheunconditionalrequirementap-plies.SSARSsusethewordsisrequiredtoindicateanunconditionalrequirement.Presumptivelymandatoryrequirements.Theaccountantalsoisre-quiredtocomplywithapresumptivelymandatoryrequirementinallcasesinwhichthecircumstancesexisttowhichthepresump-tivelymandatoryrequirementapplies;however,inrarecircum-stances,theaccountantmaydepartfromapresumptivelymanda-toryrequirementprovidedthattheaccountantdocumentshisorAR§60.07©2016,AICPA CompilationandReviewEngagementsherjusticationforthedepartureandhowthealternativeproce-duresperformedinthecircumstancesweresufcienttoachievetheobjectivesofthepresumptivelymandatoryrequirement.SSARSsusethewordtoindicateapresumptivelymanda-toryrequirement.IfaSSARSprovidesthataprocedureoractionisonethattheaccountant"shouldconsider,"theconsiderationoftheprocedureoractionispresumptivelyrequired,whereascarryingouttheprocedureoractionisnot.TheprofessionalrequirementsofaSSARSaretobeunderstoodandappliedinthecontextoftheexplanatorymaterialthatprovidesguidancefortheirapplication.Thespe-cictermsusedtodeneprofessionalrequirementsarenotintendedtoapplytointerpretativepublicationsissuedundertheauthorityoftheARSCbecauseinterpretativepublicationsarenotSSARSs.ExplanatoryMaterialExplanatorymaterialisdenedasthetextwithinaSSARS(excludinganyrelatedappendixesorinterpretations)thatmaydothefollowing:Providefurtherexplanationandguidanceontheprofessionalre-IdentifyanddescribeotherproceduresoractionsrelatingtotheactivitiesoftheaccountantExplanatorymaterialthatprovidesfurtherexplanationandguidanceontheprofessionalrequirementsisintendedtobedescriptiveratherthanim-perative.Thatis,itexplainstheobjectiveoftheprofessionalrequirements(whennototherwiseself-evident);itexplainswhytheaccountantmightcon-sideroremployparticularprocedures,dependingonthecircumstances;anditprovidesadditionalinformationfortheaccountanttoconsiderinexercisingprofessionaljudgmentinperformingtheengagement.Explanatorymaterialthatidentiesanddescribesotherproceduresoractionsrelatingtotheactivitiesoftheaccountantisnotintendedtoim-poseaprofessionalrequirementfortheaccountanttoperformthesuggestedproceduresoractions.Rather,theseproceduresoractionsrequiretheaccoun-tant'sattentionandunderstanding;howandwhethertheaccountantcarriesoutsuchproceduresoractionsintheengagementdependsontheexerciseofprofessionaljudgmentinthecircumstancesconsistentwiththeobjectiveofthestandard.Thewords,andareusedtodescribetheseactionsandprocedures.HierarchyofCompilationandReviewStandardsandGuidanceCompilationandReviewStandardsAnaccountantmustperformacompilationorreviewengagementofanonissuerinaccordancewithSSARSs,exceptforcertainreviewsofinterimnancialinformationasdiscussedinparagraph.01ofsection90,ReviewofFinancialStatements.SSARSsprovideameasureofqualityandtheobjectivestobeachievedinbothacompilationandreviewengagement.The"ComplianceWithStandardsRule"(ETsec.1.310.001),requiresanAICPAmemberwhoperformscompilationsorreviewstocomplywithstan-dardspromulgatedbytheARSC.TheARSCdevelopsandissuesstandardsintheformofSSARSsthroughadueprocessthatincludesdeliberationsin©2016,AICPAAR§60.16 StatementsonStandardsforAccountingandReviewServicesmeetingsopentothepublic,publicexposureofproposedSSARSs,andafor-malvote.FinalizedSSARSsarecodied.[Revised,January2015,toreectcon-formingchangesnecessaryduetotheissuanceoftherevisedAICPACodeofProfessionalConduct,effectiveDecember15,2014.]ThenatureofSSARSsrequiresanaccountanttoexerciseprofessionaljudgmentinapplyingthem.InterpretativePublicationsInterpretativepublicationsconsistofcompilationandreviewinterpre-tationsofSSARSs;appendixestoSSARSs;compilationandreviewguidanceincludedinAICPAAuditandAccountingGuides;andAICPAStatementsofPosition,totheextentthatthosestatementsareapplicabletocompilationandreviewengagements.Interpretativepublicationsarenotstandardsforaccount-ingandreviewservices.InterpretativepublicationsarerecommendationsontheapplicationofSSARSsinspeciccircumstances,includingengagementsforentitiesinspecializedindustries.Aninterpretativepublicationisissuedun-dertheauthorityoftheARSCafterallARSCmembershavebeenprovidedanopportunitytoconsiderandcommentonwhethertheproposedinterpretativepublicationisconsistentwithSSARSs.Theaccountantshouldbeawareofandconsiderinterpretativepubli-cationsapplicabletohisorhercompilationorreview.Iftheaccountantdoesnotapplytheguidanceincludedinanapplicableinterpretativepublication,theaccountantshouldbepreparedtoexplainhowheorshecompliedwiththeprovisionsofSSARSsaddressedbysuchguidance.OtherCompilationandReviewPublicationsOthercompilationandreviewpublicationsincludeAICPAaccountingandreviewpublicationsnotreferredtopreviously;theAICPA'sannualpilationandReviewAlert;compilationandreviewarticlesintheJournalofandotherprofessionaljournals;compilationandreviewarticlesintheAICPA'sTheCPALetter;continuingprofessionaleducationprogramsandotherinstructionalmaterials,textbooks,guidebooks,compilationandreviewprograms,andchecklists;andothercompilationandreviewpublicationsfromstateCPAsocieties,otherorganizations,andindividuals.Othercompilationandreviewpublicationshavenoauthoritativestatus;however,theymayhelptheaccountantunderstandandapplySSARSs.Anaccountantisnotexpectedtobeawareofthefullbodyofothercompilationandreviewpublications.Ifanaccountantappliestheguidanceincludedinanothercompilationandreviewpublication,heorsheshouldbesatisedthat,inhisorherjudg-ment,itisbothrelevanttothecircumstancesoftheengagementandappropri-ate.IndeterminingwhetheranothercompilationandreviewpublicationthathasnotbeenreviewedbytheAICPAAuditandAttestStandardsstaffisappro-priate,theaccountantmaywishtoconsiderthedegreetowhichthepublicationisrecognizedasbeinghelpfulinunderstandingandapplyingSSARSsandthedegreetowhichtheissuerorauthorisrecognizedasanauthorityincompila-tionandreviewmatters.OthercompilationandreviewpublicationspublishedbytheAICPAthathavebeenreviewedbytheAICPAAuditandAttestStan-dardsstaffarepresumedtobeappropriate.EthicalPrinciplesandQualityControlStandardsInadditiontoSSARSs,AICPAmemberswhoperformcompilationandreviewengagementsaregovernedbyAR§60.17©2016,AICPA CompilationandReviewEngagements.theAICPA'sCodeofProfessionalConduct(code),whichexpressestheprofession'srecognitionofitsresponsibilitiestothepublic,toclients,andtocolleagues.Theprinciplesofthecodeguidemembersintheperformanceoftheirprofessionalresponsibilitiesandexpressthebasictenetsofethicalandprofessionalconduct.Theprinciplescallforanunswervingcommitmenttohonorablebehavior,evenatthesacriceofpersonaladvantage..StatementsonQualityControlStandards(SQCSs),whichestab-lishstandardsandprovideguidanceonarm'ssystemofqualityThecodesetsoutthefundamentalethicalprinciplesthatallAICPAmembersarerequiredtoobserve.Whenperformingacompilationorreviewengagement,thecoderequiresanaccountanttomaintainobjectivityandin-tegrityandcomplywithallotherapplicableprovisions.Anaccountanthastheresponsibilitytoadoptasystemofqualitycon-trolinconductinganaccountingpractice.Thus,armshouldestablishqualitycontrolpoliciesandprocedurestoprovidereasonableassurancethatperson-nelcomplywithSSARSsincompilationandreviewengagements.Thenatureandextentofarm'squalitycontrolpoliciesandproceduresdependonfactorssuchasitssize,thedegreeofoperatingautonomyalloweditspersonnelanditspracticeofces,thenatureofitspractice,itsorganization,andappropriatecost-benetconsiderations.SSARSsrelatetotheconductofindividualcompilationandreviewen-gagements;SQCSsrelatetotheconductofarm'saccountingpractice.Thus,SSARSsandSQCSsarerelated,andthequalitycontrolpoliciesandproceduresthatarmadoptsmayaffectboththeconductofanindividualengagementandtherm'saccountingpracticeasawhole.However,decienciesin,orinstancesofnoncompliancewith,arm'squalitycontrolpoliciesandproceduresdonot,inandofthemselves,indicatethataparticularrevieworcompilationengagementwasnotperformedinaccordancewithSSARSs.ElementsofaCompilationorReviewEngagementThefollowingelementsofacompilationandreviewengagementarediscussedinthissection:.Athreepartyrelationshipinvolvingmanagement,anaccountant,andintendedusers.Anapplicablenancialreportingframework.Financialstatementsornancialinformation.Inareview,sufcientappropriatereviewevidence.AwrittencommunicationorreportThreePartyRelationshipAcompilationorreviewengagementinvolvesthreeparties:manage-ment(ortheresponsibleparty);anaccountantinpublicpractice,asdenedbytheAICPAcode;andintendedusersofthenancialstatementsornancialinformation.[Revised,January2015,toreectconformingchangesnecessaryduetotheissuanceoftherevisedAICPACodeofProfessionalConduct,effectiveDecember15,2014.]©2016,AICPAAR§60.27 StatementsonStandardsforAccountingandReviewServicesInsomecases,managementandtheintendedusersmaybethesame.Intendedusersmaybefromdifferententities(forexample,abankerorpoten-tialinvestor)orthesameentity.Ifanaccountantisnotinpublicpractice,theissuanceofawrittencom-municationorreportunderSSARSswouldbeinappropriate.[Revised,January2015,toreectconformingchangesnecessaryduetotheissuanceoftherevisedAICPACodeofProfessionalConduct,effectiveDecember15,2014.]Management(ResponsibleParty)Managementresponsibilitiesincludetakingresponsibilityforthepreparationandfairpresentationofthenancialstatementsinaccordancewiththeapplicablenancialreportingframeworkandtakingresponsibilityfordesigning,implementing,andmaintaininginternalcontrol.Abasicpremiseunderlyingtheperformanceofacompilationorreviewengagementisthattheaccountantisperforminganattestserviceonsubjectmatterthatistheresponsibilityoftheclient'smanagement.Therefore,anac-countantisprecludedfromissuinganunmodiedcompilationreportorare-viewreportonnancialstatementswhenmanagementisunwillingtoacceptresponsibilityforthepreparationandfairpresentationofthenancialstate-mentsinaccordancewiththeapplicablenancialreportingframeworkortotakeresponsibilityforthedesign,implementation,andmaintenanceofinter-nalcontrol.Aspartoftheirresponsibilityforthepreparationandpresentationofthenancialstatements,managementand,whenappropriate,thosechargedwithgovernance,areresponsiblefortheidenticationoftheapplicablenan-cialreportingframeworkandthepreparationandpresentationofthenancialstatementsinaccordancewiththatframework.Duringtheperformanceofacompilationorreviewengagement,theaccountantmaymakesuggestionsabouttheformorcontentofthenancialstatementsorpreparethem,inwholeorinpart,basedoninformationthatistherepresentationofmanagement.AccountantinPublicPracticeTheaccountantshouldpossessalevelofknowledgeoftheaccountingprinciplesandpracticesoftheindustryinwhichtheentityoperatesthatwillenablehimorhertocompileorreviewnancialstatementsthatareappropri-ateinformforanentityoperatinginthatindustry.Asaddressedintherm'squalitycontrolsystem,anaccountantshouldnotacceptanengagementifpre-liminaryknowledgeoftheengagementcircumstancesindicatesthatethical TheCommitteeofSponsoringOrganizationsoftheTreadwayCommissiondenesinternalcon-asaprocesseffectedbymanagement(orthosechargedwithgovernanceandotherpersonnel)designedtoprovidereasonableassuranceabouttheachievementoftheentity'sobjectives.Internalcontrolconsistsofveinterrelatedcomponents:1.Controlenvironmentsetsthetoneofanorganization,inuencingthecontrolconsciousnessofitspeople.Itisthefoundationforallothercomponentsofinternalcontrol,providingdisciplineandstructure.2.Entity'sriskassessmentistheentity'sidenticationandanalysisofrelevantriskstoachieve-mentofitsobjectives,formingabasisfordetermininghowtherisksshouldbemanaged.3.Informationandcommunicationsystemssupporttheidentication,capture,andexchangeofinformationinaformandtimeframethatenablespeopletocarryouttheirresponsibilities.4.Controlactivitiesarethepoliciesandproceduresthathelpensurethatmanagementdirectivesarecarriedout.5.Monitoringisaprocessthatassessesthequalityofinternalcontrolperformanceovertime.Seefootnoteinparagraph.04inthischapter.AR§60.28©2016,AICPA CompilationandReviewEngagementsrequirementsregardingprofessionalcompetencewillnotbesatised.Insomecases,thisrequirementcanbesatisedbytheaccountantusingtheworkofper-sonsfromotherprofessionaldisciplines,referredtoas.Insuchcases,theaccountantshouldbesatisedthatthosepersonscarryingoutaspectsoftheengagementpossesstherequisiteskillsandknowledgeandthattheaccountanthasanadequatelevelofinvolvementintheengagementandunderstandingoftheworkforwhichanyexpertisused.[Revised,January2015,toreectcon-formingchangesnecessaryduetotheissuanceoftherevisedAICPACodeofProfessionalConduct,effectiveDecember15,2014.]IntendedUsersoftheFinancialStatementsorFinancialInformationTheintendedusersaretheperson(s)orclassofpersonswhounder-standthelimitationsofthecompilationorreviewengagementandnancialstatements.Theaccountanthasnoresponsibilitytoidentifytheintendedusers.Insomecases,intendedusers(forexample,bankersandregulators)mayimposearequirementonorrequesttheclienttoarrangeforadditionalprocedurestobeperformedforaspecicpurpose.Forexample,abankermayrequestthatcertainagreed-uponproceduresbeperformedwithrespecttotheentity'saccountsreceivableinadditiontothenancialstatementsbeingcom-piled.Anaccountantmayperformadditionalservicesinconjunctionwiththecompilationorreview,aslongasheorsheadherestoprofessionalstandardswithrespecttothoseadditionalservices.AnApplicableFinancialReportingFrameworkManagementand,whenapplicable,thosechargedwithgovernanceareresponsiblefortheselectionoftheentity'sapplicablenancialreportingframe-work,aswellasindividualaccountingpolicieswhenthenancialreportingframeworkcontainsacceptablealternatives.Thenancialreportingframeworkencompassesnancialaccountingstandardsestablishedbyanauthorizedorrecognizedstandardssettingorganization.Therequirementsoftheapplicablenancialreportingframeworkde-terminetheformandcontentofthenancialstatements.Althoughtheframe-workmaynotspecifyhowtoaccountforordisclosealltransactionsorevents,itordinarilyembodiessufcientlybroadprinciplesthatcanserveasabasisfordevelopingandapplyingaccountingpoliciesthatareconsistentwiththeconceptsunderlyingtherequirementsoftheframework.Examplesofnancialreportingframeworksincludeaccountingprinci-plesgenerallyacceptedintheUnitedStatesofAmerica,aspromulgatedbytheFinancialAccountingStandardsBoard,theGovernmentalAccountingStan-dardsBoard,ortheFederalAccountingStandardsAdvisoryBoard;IFRSsis-suedbytheInternationalAccountingStandardsBoard;andOCBOA.FinancialStatementorFinancialInformationAnaccountantmaybeengagedtocompileorreviewacompletesetofnancialstatementsoranindividualnancialstatement(forexample,bal-ancesheetonly).Thenancialstatementsmaybeforanannualperiodorforashorterorlongerperiod,dependingonmanagement'sneeds.Therequirementsoftheapplicablenancialreportingframeworkde-terminewhatconstitutesacompletesetofnancialstatements.Inthecaseofmanyframeworks,nancialstatementsareintendedtoprovideinforma-tionaboutthenancialposition,nancialperformance,andcashowsofan©2016,AICPAAR§60.41 StatementsonStandardsforAccountingandReviewServicesentity.Forexample,acompletesetofnancialstatementsmightincludeabal-ancesheet,anincomestatement,astatementofretainedearnings,acashowstatement,andrelatednotes.Forsomeothernancialreportingframeworks,asinglenancialstatementandtherelatednotesmightconstituteacompletesetofnancialstatements.Thepreparationofthenancialstatementsrequiresmanagementtoexercisejudgmentinmakingaccountingestimatesthatarereasonableinthecircumstances,aswellastoselectandapplyappropriateaccountingpolicies.ThesejudgmentsaremadeinthecontextoftheapplicablenancialreportingWhenperformingacompilationengagement,theaccountanthasnoresponsibilitytoobtainanyevidenceabouttheaccuracyorcompletenessofthenancialstatements.Asaresult,acompilationdoesnotprovideabasisforobtaininganylevelofassuranceonthenancialstatementsbeingcompiled.Whenperformingareviewengagement,theaccountantshouldper-formproceduresdesignedtoaccumulatereviewevidencethatwillprovideareasonablebasisforobtaininglimitedassurancethattherearenomate-rialmodicationsthatshouldbemadetothenancialstatementsinorderforthestatementstobeinconformitywiththeapplicablenancialreportingframework.Theaccountantshouldapplyprofessionaljudgmentindeterminingthespecicnature,timing,andextentofreviewprocedures.Suchproceduresshouldbetailoredbasedontheaccountant'sunderstandingoftheindustryinwhichtheclientoperatesandtheaccountant'sknowledgeoftheentity.Thenature,timing,andextentofproceduresforgatheringreviewevidencearede-liberatelylimitedrelativetoanaudit.Reviewevidenceobtainedthroughtheperformanceofanalyticalpro-ceduresandinquiriesordinarilywillprovidetheaccountantwithareasonablebasisforobtaininglimitedassurance.CompilationandReviewReportsIftheaccountantperformsacompilation,areportorwrittencommu-nicationisrequiredunlesstheaccountantwithdrawsfromtheengagement.Iftheaccountantisnotindependent,heorshemayissueacompilationreport,providedthattheaccountantcomplieswiththecompilationstandards.Inmak-ingajudgmentaboutwhetherheorsheisindependent,theaccountantshouldbeguidedbytheAICPA'sCodeofProfessionalConduct.Iftheaccountantperformsareview,awrittenreviewreportisrequiredunlesstheaccountantwithdrawsfromtheengagement.Financialreportingframeworksoftendiscusstheconceptofmaterial-ityinthecontextofthepreparationandpresentationofnancialstatements.Althoughnancialreportingframeworksmaydiscussmaterialityindifferentterms,theygenerallyexplainthat Asfurtherdescribedinparagraphs.22….24ofsection80,CompilationofFinancialStatementsanaccountantmaybeassociatedwiththesubmissionofnancialstatementsnotexpectedtobeusedbyathirdparty.Suchservicedoesnotrequiretheaccountanttoissueareportonthenancialstate-ments.AR§60.42©2016,AICPA CompilationandReviewEngagementsmisstatements,includingomissions,areconsideredtobemate-rialifthey,individuallyorintheaggregate,couldreasonablybeexpectedtoinuencetheeconomicdecisionsofuserstakenonthebasisofthenancialstatements;judgmentsaboutmaterialityaremadeinlightofsurroundingcir-cumstancesandareaffectedbythesizeornatureofamisstate-mentoracombinationofboth;andjudgmentsaboutmattersthatarematerialtousersofthenan-cialstatementsarebasedonaconsiderationofthecommonnan-cialinformationneedsofusersasagroup.Thepossibleeffectofmisstatementsonspecicindividualusers,whoseneedsmayvarywidely,isnotconsidered.Suchadiscussion,ifpresentintheapplicablenancialreportingframework,providesaframeofreferencetotheaccountantindeterminingwhetherthereareanymaterialmodicationsthatshouldbemadetothe-nancialstatementsinorderforthestatementstobeinconformitywiththeapplicablenancialreportingframework.Iftheapplicablenancialreportingframeworkdoesnotincludeadiscussionoftheconceptofmateriality,thechar-acteristicsreferredtoinparagraph.48providetheaccountantwithsuchaframeofreference.Theaccountant'sdeterminationofmaterialityisamatterofprofes-sionaljudgmentandisaffectedbytheaccountant'sperceptionofthenancialinformationneedsofusersofthenancialstatements.Inthiscontext,itisrea-sonablefortheaccountanttoassumethatusers.haveareasonableknowledgeofbusinessandeconomicactivitiesandaccountingandawillingnesstostudytheinformationinthenancialstatementswithreasonablediligence;.understandthatnancialstatementsareprepared,presented,andreviewedtolevelsofmateriality;.recognizetheuncertaintiesinherentinthemeasurementofamountsbasedontheuseofestimates,judgment,andthecon-siderationoffutureevents;and.makereasonableeconomicdecisionsonthebasisoftheinforma-tioninthenancialstatements.EffectiveDateThissectioniseffectiveforcompilationsandreviewsofnancialstate-mentsforperiodsendingonorafterDecember15,2010. ©2016,AICPAAR§60.51