This compilation engagement letter template is a free sample engagement letter for a compilation of financial statements, written around the terms that SSARS (AR-C section 80, Compilation Engagements) requires the letter to contain. Copy it below or download it for Word and Google Docs. Treat it as a starting point: review it against the current SSARS text and your firm’s quality management policies before you send it.
A compilation is the one engagement in this cluster where the standards dictate what the letter must say. AR-C 80 requires you to agree the terms with management in writing, lists six things the agreement must include, and requires both your firm and the client to sign it. The letter below covers each of those terms and keeps the rest (fees, timing, other services) as short as the general engagement letter template.
Sample engagement letter for a compilation of financial statements
[Your firm letterhead]
[Date]
[Name of management or those charged with governance] [Client / entity name] [Client address]
Re: Engagement to compile financial statements
Dear [Client name],
You have asked us to compile the financial statements of [Client / entity name], which comprise the balance sheet as of [December 31, 20XX] and the related statements of income, [changes in stockholders’ equity,] and cash flows for the [year] then ended, [and the related notes to the financial statements / and which will omit substantially all disclosures]. This letter confirms our acceptance and our understanding of this engagement.
Our Objective. The objective of our engagement is to apply accounting and financial reporting expertise to assist you in the presentation of financial statements in accordance with [accounting principles generally accepted in the United States of America / the income tax basis of accounting / other framework], and to report in accordance with Statements on Standards for Accounting and Review Services (SSARSs) promulgated by the Accounting and Review Services Committee of the AICPA, without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements for them to be in accordance with that framework.
Our Responsibilities. We will conduct the engagement in accordance with SSARSs. We will read the financial statements in light of our understanding of the financial reporting framework and your significant accounting policies, and consider whether they appear appropriate in form and free from obvious material misstatements. If we become aware that records, documents, explanations, or other information you provide are incomplete, inaccurate, or otherwise unsatisfactory, we will bring that to your attention and ask for additional or corrected information. We are not required to verify the accuracy or completeness of the information you provide, or to gather evidence to express an opinion or a conclusion on the financial statements.
Limitations of the Engagement. A compilation is not an audit or a review. We will not express an opinion or a conclusion, or provide any form of assurance, on the financial statements. Our engagement cannot be relied on to identify or disclose misstatements in the financial statements, including those caused by fraud or error, or to identify or disclose wrongdoing within the entity or noncompliance with laws and regulations.
Your Responsibilities. The engagement is conducted on the basis that management acknowledges and understands that our role is to assist with the presentation of the financial statements, and that management is responsible for:
- The selection of the financial reporting framework to be applied in preparing the financial statements
- The preparation and fair presentation of the financial statements in accordance with that framework, including all informative disclosures appropriate for it [and, for special purpose financial statements, a description of the framework, a summary of significant accounting policies, and how the framework differs from GAAP]
- The design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements
- The prevention and detection of fraud
- Ensuring that the entity complies with the laws and regulations applicable to its activities
- The accuracy and completeness of the records, documents, explanations, and other information, including significant judgments, you provide to us
- Providing us with access to all information you are aware of that is relevant to the financial statements, any additional information we request, and unrestricted access to the people within the entity we need to make inquiries of
- Including our compilation report in any document containing the financial statements that indicates we performed a compilation engagement on them [unless we agree otherwise in writing]
Financial Reporting Framework. The financial statements will be presented in accordance with [accounting principles generally accepted in the United States of America / the income tax basis of accounting / other framework].
Our Report. We will issue a written compilation report when the engagement is complete. We expect the report to state that management is responsible for the financial statements, that we performed the compilation engagement in accordance with SSARSs, and that we did not audit or review the financial statements, were not required to perform any procedures to verify the accuracy or completeness of the information provided by management, and do not express an opinion, a conclusion, or provide any assurance on them. [If the financial statements omit substantially all disclosures, the report will say so.] [We are not independent with respect to [Client / entity name], and the report will state that.] There may be circumstances in which our report differs from its expected form and content. If we are unable to complete the engagement, we may withdraw and will tell you why.
Other Services. [List any other services, such as tax return preparation or bookkeeping, with a separate scope for each. If they are nonattest services, set out management’s responsibility for overseeing them, as the AICPA independence rules require. Delete this paragraph if not applicable.]
Fees. Our fee for the compilation is $[amount], [invoiced on completion / billed in [number] installments], and payable within [14] days. Work outside this scope will be quoted and agreed with you before it begins.
Term. This letter covers the financial statements for the [period] ended [date]. [It will continue to apply to future periods unless either of us ends or amends it in writing.]
Acceptance. Please sign and return a copy of this letter to confirm that it reflects your understanding of the engagement, including management’s responsibilities.
Signed for [Your Firm Name]:
Signature: ______________________ Name: [Name], CPA, [Title] Date: [Date]
Agreed and accepted for [Client / entity name] by management or those charged with governance:
Signature: ______________________ Name: [Name], [Title] Date: [Date]
What AR-C 80 requires in a compilation engagement letter
AR-C section 80 says the accountant should agree the terms of the engagement with management or those charged with governance, and document them in an engagement letter or other suitable written agreement that includes:
- The objectives of the engagement: assisting management in presenting the financial statements and reporting under SSARSs, without obtaining or providing assurance
- Management’s responsibilities: the responsibilities set out in AR-C 60 (framework selection, internal control, fraud, compliance with laws and regulations, accurate and complete information, access) plus the AR-C 80 items (preparation and fair presentation with appropriate disclosures, and including your report with the statements)
- The accountant’s responsibilities: performing the engagement in accordance with SSARSs
- The limitations of the compilation engagement: no audit, no review, no assurance, and no reliance on it to find fraud or errors
- The applicable financial reporting framework: GAAP or a special purpose framework such as the income tax basis
- The expected form and content of the compilation report, with a statement that the report may differ from it in some circumstances
The letter must be signed by the accountant or the accountant’s firm and by management or those charged with governance, as appropriate. These requirements come from AR-C 80 as amended through SSARS No. 25; the AICPA publishes illustrative compilation reports you can use to settle the expected report wording. Check the current AICPA Professional Standards for later amendments before relying on this template.
How to use this template
Choose the framework and delete the alternatives everywhere they appear, decide whether the statements will include disclosures, and delete the independence sentence if you are independent. If the client is also a monthly accounting client, the CPA engagement letter template covers that ongoing work. Payroll and return preparation belong in their own letters: the payroll engagement letter template, the tax preparation engagement letter template, and for clients who only need their books kept, the bookkeeping engagement letter template.
Send compilation engagement letters in Tidyflow
In Tidyflow, save the letter as a reusable engagement letter template in proposals and engagement letters, send it for electronic signature, and get it back with a timestamped audit trail. The signed letter sits on the client’s file next to the year-end job, so you can show the agreed terms when the next period comes around.