Reviews, Compilations, and Preparation Engagements

Reviews, compilations, and preparations appear on roughly 10-15% of AUD exam questions, and questions center on the differences between the three engagement types. The pitfall is confusing the assurance levels with the independence rules. Remember: only reviews require independence and provide assurance. A detail candidates often miss: under SSARS 21 (AR-C 90), the review conclusion uses very specific negative-assurance wording ('I am not aware of any material modifications that should be made for the financial statements to be in accordance with [framework]'), and the report must state that a review is substantially less in scope than an audit. Also note that when a CPA has prepared the statements and is then engaged to compile them, SSARS 21 (AR-C 80) requires the compilation report -- the preparation legend alone is not enough once a compilation engagement is accepted.