Meaning of Preparation and Compilation in Accounting
Meaning of Preparation and Compilation in Accounting Both preparation and compilation of financial statements are accounting services performed by professionals, typically for entities that do not require an audit or review. While both terms involve the creation of financial statements, they have distinct definitions and responsibilities attached to them under accounting standards. The key difference between them lies in the level of involvement, responsibilities, and professional standards applicable to each. 1. Preparation of Financial Statements Definition Preparation of financial statements refers to the process in which an accountant or accounting professional helps management create financial statements directly from the entity’s books and records without performing any verification or providing any assurance. The financial statements are typically prepared for internal use or external reporting based on the accounting data provided by the client. Preparation engagements are gove...