PPC Guide to Compilation and Review Engagements: SSARS

Compilation and review engagements under SSARS are the two lower-assurance financial statement services governed by the AICPA’s Statements on Standards for Accounting and Review Services, codified in the AR-C sections of AICPA Professional Standards.¹ A compilation provides no assurance; a review provides limited assurance. The two engagements share a common framework under AR-C Section 60, but almost everything else about them differs: what you do, what you report, whether you have to be independent, and what has to be in your file. (A third, even lighter service, the preparation engagement under AR-C 70, sits alongside these but produces no report at all and is outside the scope of what follows.)

How Compilation and Review Differ

The difference is not a matter of degree along one line. These are structurally different engagements.

A compilation is governed by AR-C Section 80. Your role is to assist management in presenting financial information as financial statements. You do not verify anything. You are not required to make inquiries, perform analytical procedures, or test the numbers management gives you. You read the statements to catch obvious material errors and you issue a report that explicitly disclaims assurance.² Independence is not required.

A review is governed by AR-C Section 90. You perform procedures, primarily inquiries of management and analytical procedures, to obtain a basis for limited assurance. Your report says you are not aware of any material modifications that should be made for the financial statements to conform with the applicable framework.³ Independence is required. If independence is impaired, you cannot issue a review report.

The depth of understanding you need before starting also scales. For a compilation, you need enough knowledge of the entity’s business and accounting practices to read the financial statements intelligently. For a review, you need a deeper understanding of the industry, the entity’s operations, and the areas where the risk of material misstatement is elevated, because that understanding is what drives your analytical procedures.

Before You Start: Engagement Letter and Independence

Every SSARS engagement requires a written engagement letter signed by both the accountant (or firm) and management. This is a requirement of AR-C Section 60, which applies to all SSARS engagements and covers general principles including ethical requirements, professional judgment, and engagement partner responsibilities.⁴

The letter identifies the objectives of the engagement, the responsibilities of the accountant, and the responsibilities of management, including management’s obligation to prepare and fairly present the financial statements and to provide access to all necessary records and personnel. It also identifies the financial reporting framework, whether that is GAAP or a special purpose framework such as cash basis, tax basis, or a regulatory framework. In a compilation where management intends to omit substantially all disclosures, document that decision in the engagement letter upfront.

Independence sits at the top of the pre-engagement checklist because it is a threshold question that changes what you can do. For a review, you must be independent. Full stop. For a compilation, you do not have to be independent, but if you are not, your compilation report must explicitly disclose that fact. You are not required to state the reason for the impairment, only the fact of it. That disclosure exists so financial statement users are not misled into assuming independence was maintained when it was not.

What a Compilation Requires

In a compilation you need a general understanding of the entity’s business operations and the accounting principles used in its industry, enough to read the financial statements and consider whether they appear appropriate in form and content. The focus is presentational correctness, not verification.

You must read the compiled financial statements to identify obvious material errors, which means catching mathematical mistakes or clear departures from the applicable framework. If you become aware that the financial statements are materially misstated, you must ask management to provide corrected information. If management refuses, you withdraw. You cannot put your name on financial statements you know to be materially misleading.

Omitting Substantially All Disclosures

Management may elect to omit substantially all disclosures required by the applicable framework. When they do, your compilation report must include a separate paragraph stating that management has elected to omit substantially all disclosures, that the omitted disclosures might influence the user’s conclusions about the entity’s financial position and results of operations, and that the financial statements are accordingly not designed for those who are uninformed about such matters.⁵ You should not issue a compilation report on financial statements that omit substantially all disclosures if, in your professional judgment, the statements would mislead their users.

Omitting one or two specific notes while retaining substantially all other disclosures is a different situation. That is treated as a departure from the framework, not an election to omit substantially all disclosures, and the report addresses it as a departure.⁵

Special Purpose Frameworks

When the financial statements are prepared under a special purpose framework, such as cash basis, tax basis, regulatory basis, or a contractual basis, the compilation report must identify the framework and reference the fact that the statements are not prepared under GAAP.

What a Review Requires

A review is a meaningfully different engagement. You are performing procedures to obtain a basis for expressing limited assurance, and the work has several distinct components that all need to be executed and documented.

Determining Materiality

SSARS No. 25 introduced an explicit requirement to determine materiality for a review engagement.⁴ Materiality is not a new concept, but the requirement to explicitly determine and document a threshold, and to use it to inform the design and evaluation of your procedures, is a procedural step you cannot skip. Peer reviewers look for this documentation specifically.

Analytical Procedures

Design and perform analytical procedures tailored to identify unusual or unexpected relationships in the financial data. Typical approaches include comparing current-period figures with prior-period data, anticipated results, and industry averages. Ratio analysis is particularly effective for spotting significant fluctuations. When you identify unexpected variances, follow up with specific inquiries of management. The goal is to evaluate whether management’s explanations are consistent with the financial data and with your understanding of the entity.

Inquiries of Management

Review evidence comes substantially from inquiries directed at management and key financial personnel. These inquiries cover the entity’s accounting principles and practices, how transactions are recorded and summarized, and whether there have been changes in accounting methods. Specific topics you must address through inquiry:

Subsequent events that might require adjustment or disclosure
Pending or threatened litigation and claims that could create liabilities
Related party transactions, to ensure proper identification and disclosure
Management’s knowledge of any fraud or suspected fraud affecting the entity

When any of these inquiries surface information suggesting material misstatement, fraud, or noncompliance with laws and regulations, you must follow up with additional procedures.

Going Concern

If the applicable financial reporting framework requires management to evaluate the entity’s ability to continue as a going concern, you must perform review procedures addressing whether the going concern basis is appropriate, whether conditions or events raise substantial doubt, what management’s mitigation plans are, and whether the related disclosures are adequate.⁶

Even when the framework does not require a going concern evaluation, if you become aware of conditions or events raising substantial doubt about the entity’s ability to continue, you must inquire about the appropriateness of the going concern basis and management’s plans, and evaluate whether disclosures are adequate. If substantial doubt remains after considering management’s plans, include an emphasis-of-matter paragraph in your review report.⁶

Management Representation Letter

At the conclusion of every review, you must obtain a written management representation letter dated as of the date of your review report. It should confirm management’s responsibility for the fair presentation of the financial statements, that management has provided all relevant information and access to personnel, and that the statements are fairly presented under the applicable framework. Additional representations should address the completeness of minutes from board and shareholder meetings and the absence of unrecorded liabilities.

If management refuses to provide the representation letter, that is a scope limitation and you cannot complete the engagement.

Handling Suspected Misstatement

When you become aware of information suggesting the financial statements may be materially misstated, standard inquiries alone are not enough. Extend your procedures to determine whether a material misstatement exists. If management’s explanation for a fluctuation does not hold up, additional analytical work or targeted inquiries may be necessary. You are not required to evaluate the operating effectiveness of internal controls; the review is built on the plausibility of the financial data as tested through inquiry and analytics.

Reporting: Compilation Report vs. Review Report

The two reports serve fundamentally different purposes. Both must identify the entity, identify the financial statements covered, and specify the period.

The Compilation Report

A standard compilation report includes a statement of management’s responsibility for the financial statements, a statement that the accountant performed the compilation in accordance with SSARS, and a disclaimer of any assurance. It must explicitly state that the accountant did not audit or review the financial statements.⁵ If you are not independent, the report must include an explicit statement disclosing that lack of independence.

The Review Report

The review report is more structured. It includes sections addressing management’s responsibility, the accountant’s responsibility, and the accountant’s conclusion. The report states that the review was conducted in accordance with SSARS and describes the nature of review procedures, primarily analytical procedures applied to financial data and inquiries of management.

The conclusion paragraph expresses limited assurance in the form of negative assurance: based on the review, you are not aware of any material modifications that should be made to the financial statements for them to conform with the applicable framework. The report must also disclaim an audit opinion, making clear that no audit was performed and no audit opinion is expressed.

Modifications, Adverse Conclusions, and Emphasis Paragraphs

When the financial statements contain a departure from the applicable framework and management will not revise them, both reports require modification. In a compilation, the departure is described in a separate paragraph. In a review, the conclusion is modified with “except for” language, and the report describes the nature of the departure and, if practicable, quantifies the effect.

SSARS No. 25 introduced the concept of an adverse conclusion for reviews. When the effects of a misstatement are both material and pervasive, meaning they fundamentally undermine the financial statements as a whole, an “except for” modification is not sufficient, and you must express an adverse conclusion.⁴ Before SSARS No. 25, this option did not exist, and accountants generally withdrew from engagements in these situations.

An emphasis-of-matter paragraph draws attention to something that is appropriately presented or disclosed but important enough that users should not overlook it. A significant uncertainty about going concern is the classic example. An other-matter paragraph communicates information relevant to the user’s understanding of the engagement or the accountant’s responsibilities that is not presented in the financial statements themselves.

Documentation

The underlying principle is the same for both service levels: your file should be sufficient to enable an experienced practitioner, with no prior connection to the engagement, to understand the work performed. What that requires in practice scales sharply with assurance level.

For a compilation, the file must include the signed engagement letter, documentation of your understanding of the entity’s business and accounting principles, the final financial statements, and your compilation report. If you are not independent, document the communication to management about the lack of independence and the decision to disclose it. Retain communications about omitted disclosures as well.⁵

Review documentation is substantially more extensive. Retain records of the analytical procedures performed, including the calculations, comparisons, and your investigation of all significant fluctuations. Summarize all inquiries of management in the working papers with dates and the substance of responses, particularly inquiries about subsequent events, litigation, related parties, and fraud. The signed management representation letter must be in the file.⁶

Also document your determination of materiality, your assessment of independence, your evaluation of the suitability of the financial reporting framework, and any additional procedures performed to resolve matters suggesting material misstatement. The materiality documentation requirement, added by SSARS No. 25, is one peer reviewers look for specifically. Skipping it creates an easy finding.⁴

Quality Management Standards Taking Effect December 15, 2025

Two quality management standards affect every firm performing SSARS engagements starting with implementation dates of December 15, 2025: SQMS No. 1 at the firm level and SSARS No. 26 at the engagement level. If your firm performs only compilations, never audits or reviews, these standards still apply.

SQMS No. 1 requires each firm to design, implement, and operate a system of quality management tailored to its nature, size, and the complexity of its engagements. This replaces the former quality control standard (SQCS No. 8) and shifts from a policies-and-procedures approach to a risk-based quality management system. The firm must identify quality risks, design responses to those risks, and monitor whether those responses are working.

SSARS No. 26 implements engagement-level quality management requirements for SSARS engagements. It focuses on the engagement partner’s responsibility for quality, including ensuring that the engagement team collectively has the competence and capabilities to perform the work, exercising professional skepticism, and documenting compliance with the firm’s quality management system. For smaller firms where the engagement partner handles everything, this may not feel like a dramatic change in practice, but the documentation expectations are more explicit than before.

Firms that have already implemented SQMS No. 1 for their audit practice may find the transition straightforward for SSARS work. Firms that perform only compilations or reviews and have not yet built a quality management system face a meaningful implementation effort. The AICPA has published resources to help firms scale these requirements appropriately.⁷

1
AICPA & CIMA. AICPA SSARSs – Currently Effective
2
Wiley Online Library. Compilation Procedures
3
Wiley Online Library. Codification of Statements on Standards for Accounting and Review Services – AR-C Section 90A
4
AICPA & CIMA. AICPA Statement on Standards for Accounting and Review Services No. 25
5
American Institute of Certified Public Accountants. AR-C Section 80 – Compilation Engagements
6
American Institute of Certified Public Accountants. AR-C Section 90 – Review of Financial Statements
7
AICPA & CIMA. Preparation, Compilation, and Review Standards