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What is the difference between a preparation and compilation engagement?

In a preparation engagement, the accountant is literally preparing the financial statements based on information management provides (e.g. trial balances).

In a compilation engagement, management prepares the financial statements, and the accountant will read and help finalize the financial statements. The accountant is basically responsible for making sure the financial statements are in the appropriate format and free form obvious errors and misstatements.

For both engagements, independence is not required, and no assurance is provided.

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    No, the accountant doesn’t provide any assurance in a compilation engagement. Additionally, the accountant is not required to be independent, so it is probably a good thing that they aren’t providing any assurance.

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