Financial Statement Compilation: Definition, Standard, Deliverables and Tax Return
What is a financial statement compilation?
A compilation engagement consists of assisting a company in preparing its financial statements
based on the information it provides.
The accountant collects, classifies, summarizes and presents financial data in a structured format.
No audit procedures are performed and no opinion is expressed.
What is the applicable standard?
Compilation engagements in France are governed by professional standard NP 4410,
issued by the French Institute of Chartered Accountants.
This standard is directly inspired by the international standard ISRS 4410 – Compilation Engagements,
issued by the International Auditing and Assurance Standards Board (IAASB).
It defines the objective, scope, limitations and reporting format of the engagement.
It clearly states that the engagement is not an audit or a review, and that no assurance is provided.
What is the difference between a compilation, an audit and a review?
The main difference is the level of verification.
- Audit: detailed procedures and opinion.
- Review: limited procedures.
- Compilation: no verification of underlying data.
In a compilation, the accountant does not validate the figures.
What work is performed?
A compilation engagement in France, under professional standard NP 4410, includes the following work:
- Understanding the entity, its business and its environment.
- Collecting accounting and non-accounting information provided by management in order to prepare financial statements in accordance with French legal and regulatory requirements.
- Holding discussions with management and, where appropriate, designated staff.
- Obtaining a written representation letter from management confirming the completeness and accuracy of the information provided.
- Classifying and presenting financial information, including limited reclassifications and adjustments where necessary to comply with applicable accounting formats.
- Preparing the annual financial statements (balance sheet, income statement and notes where applicable) in the required format.
- Performing an overall reading of the financial statements to ensure that they are appropriately presented and free from obvious material inconsistencies.
What are the limitations?
The engagement does not include:
- verification of accounting records.
- audit procedures.
- inventory checks.
- third-party confirmations.
- internal control assessment.
It is not designed to detect errors or fraud.
What are the deliverables?
A compilation engagement produces two main outputs.
Financial statements
- balance sheet.
- income statement.
- notes to the financial statements
Compilation report
The compilation report:
- describes the nature of the engagement.
- confirms that no assurance is provided.
- states that the financial statements are based on information provided by management.
- does not include any opinion.
Does the engagement include the corporate tax return?
Not automatically.
A compilation engagement does not, by itself, include the preparation of the corporate tax return.
However, in practice, both services are often combined.
Who is this service for?
This service is suitable for international companies that:
- have an internal accounting team, a shared service center.
- are able to provide complete and reliable financial information to the accountant.
- need assistance in preparing financial statements in accordance with French legal and regulatory requirements;
- operate internationally and need alignment between local accounting and group reporting.
How much does it cost?
Fees depend on the volume of transactions, the quality of the accounting data provided, the complexity of the entity, and the number of entities involved. For a single entity, typical fees are as follows:
- Compilation only: €1,000 to €3,000.
- Compilation + corporate tax return: €1,500 to €4,000.
A tailored quote is usually provided after reviewing your accounting setup and reporting needs.
