APES 315 Compilations: Engagement Letter and Report

APES 315 sets the requirements for compiling a client’s financial information without giving assurance. Agree the entity, reporting basis and intended users in the engagement letter, then explain your work in the compilation report.

When APES 315 Applies to Your Work

APES 315 Compilation of Financial Information is issued by the Accounting Professional & Ethical Standards Board (APESB) for members in public practice undertaking compilation engagements. It covers historical and prospective financial information.

In a tax practice, a compilation can include special purpose financial statements for a company, family trust or partnership. Statements prepared for a lender can also be compilation work. Establish what the recipient requires before accepting the job. A lender requiring audited statements will not receive that assurance from a compilation.

Preparing a tax return alone is not automatically a compilation engagement. The standard’s scope and decision trees distinguish compilation engagements from other preparation work. Use APESB’s compilation standard to assess the actual service.

APES 315 adapts the international ISRS 4410 (Revised), issued by the International Auditing and Assurance Standards Board. The AUASB related-services register lists ASRS 4400 and ASRS 4450, not an Australian compilation standard numbered ASRS 4410. For Australian members subject to APES 315, the Australian standard governs this engagement.

A Compilation is Not an Audit or a Review

A compilation uses your accounting expertise to prepare financial information from the client’s records, without an assurance opinion or conclusion. Routine compilation work does not require verification of balances or testing of internal controls. An apparent misstatement changes what you must consider, as explained below.

Clients or lenders can mistake professionally prepared statements for independently checked figures. The report must explain the absence of an audit or review and the resulting absence of assurance. Avoid describing compiled statements as certified or verified.

Compilation	Review	Audit
Prepares information from records supplied by the client.	Mainly uses enquiries and analytical procedures, with further work where required.	Obtains sufficient appropriate audit evidence through risk-based procedures.
Gives no assurance on the compiled information.	Gives limited assurance in a review conclusion.	Gives reasonable assurance through an audit opinion.
Follows APES 315 for the relevant compilation engagement.	Follows the applicable review standard.	Follows the applicable auditing standards.

The AUASB’s review standards govern review engagements separately. Reasonable assurance is a high level of assurance, not a guarantee that every error will be found.

What the Compilation Engagement Letter Covers

Document and communicate the compilation engagement under APES 305, with compilation-specific terms that explain the information you will prepare and who will use it. The general engagement requirements sit around this narrower service.

Paragraph 6.2 of APES 315 sets out matters to consider for the engagement document. Use the following checklist when adapting your accountant engagement letter.

• Name the entity and reporting period, the statements you will prepare and the purpose of the work.
• Identify the intended users and any restriction on use or distribution.
• Describe the accounting basis, any known departures and how these will be disclosed to those responsible for governance.
• State that the work gives no assurance and cannot be relied on to detect fraud or other irregularities.
• Describe the records the client must provide and their responsibility for complete and accurate information.
• Record management’s responsibility for the statements, accounting judgements and an appropriate financial reporting framework.
• Explain the report you will issue, relevant professional obligations and any appropriate liability terms.
• For forecasts, identify the client’s assumptions and how you will bring your own assumptions to their attention.

General purpose statements must follow Australian Accounting Standards. A special purpose label does not remove the need to assess the accounting basis against the intended use and applicable requirements.

Management retains responsibility for choosing the framework, even when you advise on that choice. Management also owns the underlying records. For general purpose or special purpose statements, obtain written acknowledgement of the client’s responsibility for the records and disclosure of material information.

As a practical file arrangement, issue a compilation letter for each entity, naming its reporting period. Do not assume one group contact can accept responsibility for every company and trust. This separate-letter approach makes the scope visible. APES 315 requires documented engagement terms, rather than prescribing one physical letter per entity.

Doing the Compilation Work

Understand the client’s business and accounting practices well enough to compile information appropriate to the engagement. Ask how the business earns revenue and records transactions. Identify its accounting policies and unusual transactions before turning the records into statements.

Assess the compiled information’s form and content for misstatements. Where records appear incomplete or inaccurate, ask management for explanations and missing documents. If you form a view that information includes a misstatement, consider further enquiries, checking relevant information or assessing internal controls.

For example, a family trust’s loan balance might differ from the company’s record of the same loan. Ask for the movements and supporting records before treating either balance as the answer. Preparing both sets of statements does not establish that either balance is correct.

If the client refuses additional information or appropriate amendments, assess whether to continue under your practice’s client-acceptance policies. Where you cannot resolve misleading information and cannot continue consistently with professional obligations, withdraw. Record the reason and communicate the problem to those responsible for governance. Paragraph 7.4 requires a continuance assessment, not automatic withdrawal after every unanswered request.

Working papers must record the procedures performed and sources used, and demonstrate compliance with applicable requirements. Keep the agreed scope with management’s written acknowledgement and other representations obtained. Record explanations, proposed adjustments and the decisions made about unresolved matters. Include the reconciliation from the underlying records to the statements, and document the engagement review before issuing the report.

Wording the Compilation Report

The compilation report explains your involvement and the client’s responsibility without giving an assurance conclusion. Paragraph 10.10 of APES 315 specifies its contents.

Include the title and addressee, identify the compiled information and describe the client’s responsibility. State compliance with APES 315 and relevant ethical requirements. Explain that you carried out neither an audit nor a review and give no assurance.

For special purpose statements, name the specific purpose and explain that the statements might be unsuitable for another use. Describe the accounting basis in the report or the relevant notes. Include the report date and the member’s or practice’s name, address and signature, with an appropriate liability disclaimer. Explain a lack of independence where applicable. Prospective information also needs its forecasting basis and assumptions.

A report is required in the circumstances described in paragraph 10.2, including where your name is identified with the information. Internal-use work and information audited or reviewed by another practitioner have separate reporting rules. Record any decision to omit a compilation report under those rules.

The following outline illustrates a fictional family trust engagement. It is an original drafting guide, not an assurance report or a completed report for a client.

1. Title the document Compilation Report and address it to the family trust’s trustee.
2. Identify the trust’s special purpose statements and reporting period. Illustrative balances are $100,000 in assets, $30,000 in liabilities and $70,000 in net assets.
3. Explain that the trustee supplied the records and accepts responsibility for the statements, accounting judgements and completeness of the information.
4. Identify the basis described in the accounting-policy note. State that the statements serve the trustee’s agreed annual reporting purpose and might not suit other uses.
5. Describe the compilation under APES 315 and compliance with relevant ethical requirements. Add a lack-of-independence statement if applicable.
6. Explain that the engagement gives no assurance because an audit or review was not performed. Do not describe the illustrative balances as checked.
7. Add an appropriate liability disclaimer, report date, practice address and signature. Leave the actual entity details and reporting period to the real engagement.

Add the required unaudited or compilation-report reference to every page of the financial information. Keep report language consistent with the work actually performed. A statement that you verified all records would contradict an ordinary compilation engagement.

Setting Up a Compilation Client at Onboarding

Collect the entity and reporting requirements before drafting the compilation letter. Ask for every entity in the group, who will read the statements and the prior-year financial statements. Obtain relevant reporting clauses from the trust deed and loan agreements. These can change the purpose, reporting basis or recipient’s assurance requirement.

Use ABN Lookup to compare the supplied ABN, legal name and entity type. For a company, check its ACN and registered name through ASIC’s registers. Keep a corporate trustee distinct from the trust it acts for. Match the trust name to its deed, not just the trustee’s company name.

A group entity chart helps staff keep those roles separate. With the client’s authority, request prior-year records and relevant working papers through professional clearance. Ask what the previous accountant can supply. Do not assume their entire internal file transfers automatically.

Tax Genie’s guided form collects the people and entity details involved. It drafts the engagement letter from the client’s answers and keeps the signed version after online signing. Prepare the compilation scope for each entity, review the letter and obtain acceptance before starting the compilation work.

For your first year with a company and family trust, check that each file has the correct entity, an agreed reporting basis and identified users. Match each compilation report to that scope before releasing the statements.