ISRS 4410: The Standard for Today’s Compilation Engagements

Phil Cowperthwaite | January 22, 2015 | 1

Why compilations now? As more and more smaller entities become exempt from audit requirements, small- and medium-sized practices (SMPs) will need to focus more on providing other services if their businesses are to survive and prosper. In addition, demand for non-audit services, in particular accounting and compilation services, is growing, as evidenced by the results of recent IFAC SMP Quick Polls.

Small- and medium-sized entities (SMEs) often turn to professional accountants in public practice to provide financial reporting expertise. Assistance with preparation of annual historical financial statements is one common example. But ISRS 4410 (Revised) also provides the necessary flexibility for the practitioner to tailor the nature of the engagement to meet other needs, for example, the preparation of financial information for use by external parties, such as bank lenders, grant funders, in connection with a change of ownership, or simply for internal use by management.

Helping to meet the demands of this growing market was the release in March 2012 by the International Auditing and Assurance Standards Board (IAASB) of International Standard on Related Services (ISRS) 4410 (Revised), Compilation Engagements, effective for compilation reports dated on or after July 1, 2013. The standard, set out in an easy-to-read format, with objectives, requirements, and application and other explanatory material, can be used by professional accountants in public practice for a wide range of engagements for which assurance on the reported information is not required.

The IFAC SMP Committee monitored the development of the standard and submitted comment letters at all key stages, from project proposal through to the release of the final standard. At a recent meeting, the SMP Committee approved a project proposal to develop a publication to help practices market and perform compilation engagements. This followed a poll to investigate the need for the development of new resources and tools to support the implementation of IAASB standards.

Key features of an ISRS 4410 Compilation engagement: A compilation engagement is not an assurance engagement. While the practitioner applies accounting and financial reporting expertise to assist management with the preparation and presentation of financial information, the practitioner is not required to verify the completeness or accuracy of the information provided by management. However, users will often value the involvement of a professional accountant in compiling the financial information.

Let us look in more detail at some of the key features of the standard:

Scope of the Standard

The standard deals with the practitioner’s responsibilities for conducting and reporting on the compilation engagement. The accountants report, in the format prescribed by the standard, is the primary means through which the practitioner’s association with the compiled financial information is communicated. Recognizing that a practitioner’s involvement in assisting management with financial information may take many forms, the standard also helpfully sets out considerations to help the practitioner determine whether its application is appropriate to the circumstances.[1]

Selecting the Basis of Accounting

SMEs may face a variety of financial reporting demands. Therefore, flexibility to use an appropriate basis of accounting is needed when an accounting framework is not mandated. ISRS 4410 (Revised) allows for this, enabling practitioners to help clients select a framework that is appropriate for users of the information.

The standard does not, however, permit an “anything goes” approach. In particular, the practitioner is required to have sufficient understanding of both the entity and the basis of accounting to advise the client if the selected basis of accounting is inappropriate for the engagement,[2] and if the compiled financial information is materially misstated or misleading and propose appropriate amendments cannot be misleading.[3]


There is a focus on communication throughout the standard: from the engagement letter setting out roles and responsibilities, to communication of all significant matters to management, to a clear and concise practitioner’s report.[4] As with any engagement, effective communication is the key to success.

Financial reporting requires judgment. Management may benefit from the practitioner’s assistance in making important judgments, for example, in determining estimates for inventory obsolescence. The standard requires the practitioner to discuss with management all significant judgments for which the practitioner has provided assistance in the course of the engagement.[5] This communication is essential and must include sufficient detail for management to be able to take full responsibility for the compiled financial information.

Ethical Requirements

The practitioner must comply with relevant ethical requirements, and these include not knowingly being associated with materially false or misleading information.[6] The requirement for the practitioner to understand the entity’s business and operations and the basis of accounting sufficiently to perform the engagement speaks to that.

During the compilation, a practitioner may become aware that the records, documents, explanations, and other information, including significant judgments, are incomplete or inaccurate, in which case the practitioner is required to request additional or corrected information from management. Likewise, the practitioner may become aware of a material misstatement or an inadequate description of the basis of accounting in the compiled information, in which case the practitioner is required to recommend changes to management to rectify the situation. If in the rare circumstance management does not provide the additional information or agree to the change recommended, then the practitioner would have to resign from the engagement in order to avoid being associated with information known to be materially false or misleading. The practitioner either completes the engagement satisfactorily or else the practitioner must resign.


If a practitioner states compliance with ISRS 4410 (Revised), then a practitioner’s report must accompany the compiled financial information to help users of the compiled financial information understand the nature of the engagement. The report required by ISRS 4410 (Revised) clearly identifies the compiled financial information, sets out the respective roles of management and the practitioner, and states that no assurance is being given.

Learn more: To help practices provide Compilation, Review, Other Assurance and Related Services, IFAC and its member organizations provide a wealth of Audit and Assurance resources on the Global Knowledge Gateway.

Join the conversation below: As the SMP Committee goes about developing material to help practitioners market and perform compilation engagements, please share what you would like to see covered in the material. 

[1] ISRS 4410 (Revised), paragraph 3

[2] ISRS 4410 (Revised), paragraph 28

[3] ISRS 4410 (Revised), paragraph 34

[4] ISRS 4410 (Revised), Appendix 2 contains five illustrative reports.

[5] ISRS 4410 (Revised), paragraph 30

[6] ISRS 4410  (Revised), paragraph 21


Phil Cowperthwaite

Former Member, IFAC SMP Committee

Phil Cowperthwaite is a partner of Cowperthwaite Mehta, a ten-person firm in Toronto, Canada. His primary area of practice is providing assurance services to small and micro not-for-profit entities. Phil served on the International Auditing and Assurance Standards Board (IAASB) from 2006 to 2011, where he chaired, among others, the Task Force on compilation (ISRS 4410) and review engagements (ISRS 2400).


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Joanne Henstock January 29, 2015

Great summary of the compilation standard Phil -- valuable reading for all practitioners (big ones too!), as this space isn't always well understood. Looking forward to reading more on this topic and all the other tools in the professional accountants' "toolbox"! Joanne Henstock


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