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Financial statements: compilation versus audit

In reading this post, please keep its age in mind.

In my review of ‘Medium’ sized[i] ACT charities in the weekend, via the ACNC charity register, I found that in five cases (approximately 10%) the ‘annual financial statements’ contained a ‘compilation report’. Why such an inclusion?


A compilation report is a report ‘prepared in accordance withAPES 315 Compilation of Financial Information, a standard applying to professional accountants issued by their standards board[iii].  It may be required as the result of you asking the accountant to ‘assist (you) in the preparation and presentation of financial information in accordance with an Applicable Financial Reporting Framework’ Which is what they would be doing if you asked them to prepare your financial statements for audit.


When, then, in the process leading to the lodgement of your Annual Information Statement (AIS) and annual financial statements, is a ‘compilation report’, necessary? The short answer is that normally it’s not. This is because no such report is required if you then get another public accountant to audit the statements that have been compiled[v]. And this is the normal situation.


Nor does the ACNC want to see one. However, with four of the five charities above, there was no audit report with the financial statements, so perhaps the charity thought that the compilation report[vi] was a good substitute?


With the fifth charity, there was an audit. But it was performed by the same accountant who compiled the statements, so a compilation report probably was appropriate. (Although it needn’t have been included in the annual financial statements package.)


More interesting things on Medium charities in a future instalment.




[i] Annual revenue is $250 000 or more, but less than $1 million.

[ii] Revised, February 2015. This revision applies for any compilations done on or after 1 July this year, but can be followed from now on.

[iii] Accounting Professional & Ethical Standards Board (APESB), www.apesb.org.au.

[iv] ‘Compilation Engagement’, APESB 315.2.

[v] Whether to issue a report is up to the practitioner [APESB 315.10.4], and if they don’t have to, why would they? (This was also the position in the superseded standard.)

[vi] The report will (or should) contain a description of the task (the ‘engagement’), your responsibility (‘those charged with governance’), their responsibility, and a disclaimer of any assurance of ‘the reliability, accuracy or completeness’ of the information you supplied. It may also contain a statement that they are not independent, and, if you have asked for (and your auditor has agreed) special purpose statements, some cautions because of that.