Management's responsibility for compiled statements
How a compiler hands real ownership of compiled statements, and the judgements behind them, to management under ISRS 4410 (Revised).
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A compilation client often thinks of the finished set as "the accountant's statements". The owner hands over a box of slips or a rough trial balance, the firm hands back a bound set, and in the owner's mind the numbers now belong to the firm. That is the wrong way round, and it causes trouble the first time a bank, a buyer or the tax authority questions a figure.
Under ISRS 4410 (Revised) the statements are management's. The practitioner brings accounting and reporting expertise to help prepare them, but the records, the judgements and the final responsibility sit with the client. The practical question for a firm is how to make that true in fact, not only in the wording of the report.
Two roles, written down at the start
The IAASB's 2012 news release announcing the revised standard said that ISRS 4410 (Revised) clarifies the practitioner's role and responsibilities in a compilation engagement. That clarity cuts both ways. IFAC's article on the standard explains that the practitioner's report identifies the compiled financial information, sets out the respective roles of management and the practitioner, and states that no assurance is being given.
IFAC also explains that the practitioner is not required to verify the completeness or accuracy of what management provides, and that a compilation is not an assurance engagement. Management therefore cannot lean on the firm's name as if it were a check on the figures.
The engagement letter is where this starts. It should say who supplies the records, who chooses the accounting policies, who approves the final set, and that the firm will neither audit nor review anything. The report at the end repeats the same division, so nothing in it should come as a surprise to the director who signed the letter.
The judgements the firm helped with
The report wording is the easy part. The hard part is the decisions made along the way. In a small company the compiler often proposes the stock write-down, the allowance for doubtful debts, the useful lives of the delivery vehicles, or the accrual for a supplier invoice that arrived late. Management agrees because the accountant suggested it, and the judgement quietly becomes the firm's.
IFAC's article explains that ISRS 4410 (Revised) requires the practitioner to discuss with management all significant judgements for which the practitioner has provided assistance. It gives determining estimates for inventory obsolescence as an example, and says the communication must carry enough detail for management to take full responsibility for the compiled information.
"Enough detail" is the phrase to plan around. A file note reading "stock provision discussed with client" does not meet it. For each judgement, management needs to understand:
- what the judgement was and why it was needed (slow-moving lines, damaged goods, a discontinued range);
- the basis used and the information it rested on, such as the stock listing and the owner's own view of what will sell;
- what other reasonable answers were available;
- what the choice does to profit and to the statement of financial position.
Then management decides. If the owner disagrees, the figure moves to what management can support, and the firm considers whether it can still be associated with the result.
Wording that management has actually read
Two other parts of the set carry judgement that management must own: the accounting policies and the narrative.
In Achekam's Financials Studio, the standard policy wording is based on IFRS for SMEs and carries a label asking for review before issue, and staff can write their own policies where the client's circumstances call for it. Notes draw their figures from the mapped trial balance, and anything the trial balance does not hold is left as "[to be completed]". In a compilation, each of those placeholders is a question to put to management, not a gap for the firm to fill with a guess.
Where the firm has set up an AI key, AI writes narrative text such as the description of the business and the wording of notes. That text is checked in code and labelled "AI draft - review before issue". There is no separate accept step for each paragraph; the safeguard is the review stages and the partner's signature, and without a key standard wording is used. In a compilation the label matters even more. A description of the business that the director has never read is not management's description. Walk the client through it, or send it with the paragraphs marked for confirmation.
Letting the client confirm the draft
Once the judgements are discussed and the wording settled, the client should confirm the set itself. In Achekam, the client receives a link to a frozen copy of the draft statements, where they can comment, confirm or ask for changes, and their decision moves the set forward or sends it back. The link goes only to the client's authorised review contact, through the firm's own mail connector. If no connector is set up, nothing is sent and the record says so.
The frozen copy is the point. Management confirms the exact version it saw, not a draft that changed the next morning. A requested change sends the set back to the firm, the change is made, and the client confirms again. The full loop is described in how a client approves draft statements.
Records to keep on the file
By the end of the engagement the file should show responsibility passing to management at every point where it mattered:
- The signed engagement letter setting out both roles and the absence of assurance.
- A schedule of the significant judgements the firm assisted with, each showing its basis, the alternatives, the effect, and the name of the person in management who agreed it and when.
- The client's answer to every "[to be completed]" placeholder, with its source.
- A note of which policies and narrative paragraphs were standard or AI-drafted, and confirmation that management read them.
- The client's confirmation of the frozen draft, with any comments raised and how they were resolved.
- The practitioner's report as issued.
IFAC's article on ISRS 4410 (Revised) and today's compilation engagements explains why the standard matters to small practices and how it is structured, and is worth reading beside the firm's own methodology.
A test before you issue
Ask one question of every material number and every paragraph: could the client's director explain this to the bank manager without phoning the firm? If not, management does not yet own it. Go back, explain, and record the conversation. For the wider picture of a compilation from engagement letter to report, see the compilation engagement under ISRS 4410.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
