5.3 Review, Compilation, and Preparation Engagements

The SSARS Assurance Ladder

The 2026 AUD Blueprint groups preparation, compilation, and review under Statements on Standards for Accounting and Review Services (SSARS), performed by an accountant in public practice for nonissuers only. These are not miniature audits; they differ in objective, procedures, report, and assurance level. Solve nearly every SSARS question with three yes/no checks: Is a report issued? Is assurance provided? Is independence required?

Side-by-Side Comparison

A preparation engagement applies when the accountant is engaged to prepare financial statements but not to audit, review, or compile them. Each statement (or the financials as a whole) must include a statement that no assurance is provided; if the accountant cannot do that, a disclaimer must accompany the statements. Because there is no report, exam options asking where to disclose an independence impairment in a preparation "report" are distractors - no report exists.

A compilation engagement assists management in presenting financial statements. The accountant obtains and provides no assurance. The compilation report states the accountant did not audit or review the statements and expresses no opinion, conclusion, or any assurance. Independence is not required, but if the accountant is not independent, that fact must be disclosed in the report; the accountant may but need not describe the reasons for the impairment.

Review Engagements in Depth

A review engagement sits highest on the SSARS ladder. The accountant performs inquiry and analytical procedures to obtain limited assurance that no material modifications should be made for the statements to conform with the applicable framework (for example, GAAP or a special-purpose framework). The review report expresses a conclusion, not an audit opinion, and independence is required - if the accountant is not independent, a review engagement cannot be performed.

Typical Review Procedures

• Inquiring of management about accounting policies and significant estimates.
• Performing analytical procedures: comparing current amounts with prior periods, budgets, and expectations, and developing ratio expectations.
• Investigating relationships and items that appear unusual or inconsistent.
• Reading the statements for apparent departures from the framework.
• Obtaining a management representation letter (required in a review).
• Documenting communications about fraud or noncompliance that come to attention.

A review does not include obtaining an understanding of internal control, assessing fraud risk, testing controls, confirming balances, or observing inventory - those are audit-level procedures. The review report uses negative assurance language: the accountant is not aware of any material modifications that should be made. That is materially weaker than the positive assurance of an audit opinion ("the statements present fairly").

Management Responsibilities and Engagement Terms

For all three SSARS services, management remains responsible for the financial statements and for the design, implementation, and maintenance of internal control relevant to their preparation and fair presentation. The accountant may help prepare them, but management must accept responsibility. Each engagement requires an engagement letter (a written agreement) signed by the accountant and management (or those charged with governance).

Exam Traps

• Preparation: no assurance, no report.
• Compilation: report, but no assurance.
• Review: limited assurance (a conclusion), but no opinion.
• A review never requires tests of controls, confirmations, or audit-level evidence.
• Independence impairment kills a review, can be disclosed in a compilation, and is irrelevant to a preparation report.
• A SSARS review (AR-C 90) is not the same as an attestation review (covered in Section 5.4).

Report Wording You Should Recognize

The exam tests the gist of each report's conclusion language, not memorization of full templates:

The review's negative assurance ("not aware of") is weaker than the audit's positive assurance ("present fairly") and far stronger than the compilation's no assurance. Lining these three up is a classic SSARS multiple-choice trap.

Special-Purpose Frameworks and Required Supplementary Information

SSARS engagements may report on statements prepared under a special-purpose framework - cash basis, modified cash basis, tax basis, regulatory basis, or contractual basis (collectively often called other comprehensive basis of accounting). When such a framework is used, the report must describe it and, for a review or compilation report, the financial statements should be suitably titled (for example, "statement of assets and liabilities - tax basis") to avoid implying GAAP.

Changing the Engagement

A client may ask to step down from an audit to a review or compilation, or from a review to a compilation, before completion. The accountant evaluates the reason for the change. A change justified by a change in circumstances or a misunderstanding about the service is acceptable; a change made to avoid an audit scope problem or to conceal a likely modified opinion is not a reasonable basis to change. If the accountant agrees to the lower service, the report issued is the standard report for the lower-level engagement, with no reference to the original engagement or the procedures already performed.

Reporting on Comparative Statements

When a review of the current year is presented with a prior-year compilation (or vice versa), the report should address each period. If a predecessor accountant reported on the prior period and that report is not reissued, the successor refers to the predecessor's report in an other-matter paragraph describing the prior period's service, date, and any modifications.