The Accounting Historians Journal Vol. 11, No. 1 Spring 1984
Larry J. Rankin MIAMI UNIVERSITY
THE DEVELOPMENT OF COMPILATIONS AND REVIEWS
Abstract: The article reviews the significant events in the development of AICPA standards which led to the establishment of two types of CPA engagements on the financial statements of nonpublic businesses—compilations and reviews. As a part of this development, the article describes various CPA-user communication problems which resulted from unaudited financial statement engagements and lim-ited procedure engagements.
The American Institute of Certified Public Accountants (AICPA) in 1978 issued Statement on Standards for Accounting and Review Services No. 1 (SSARS #1),1 which provides two types of certified public accountant (CPA) engagements and reports on the financial statements of nonpublic businesses. These were compilations and reviews. The objective of a compilation by a CPA is to present man-agement's representations in the form of financial statements with-out expressing any assurances about the statements. The objective of a review by a CPA is to perform analytical and inquiry procedures which provide the CPA with a reasonable basis for expressing lim-ited assurance that no material modifications should be made to the statements in order for them to be in conformity with generally ac-cepted accounting principles.
Compilations and reviews replaced two types of CPA engage-ments on the financial statements of nonpublic businesses. These were unaudited financial statement engagements and certain limited procedure engagements. CPAs reported on both of these types of engagements by issuing an opinion disclaimer.
The purpose of this article is to review the significant events in the development of AICPA standards which led to the establish-ment of compilations and reviews. The article places particular em-phasis on various communication problems between CPAs and users with respect to unaudited financial statement engagements and certain limited procedure engagements. The article describes how the accounting profession responded to these problems by is-