Compilations for banks and grant funders
How to scope a compilation when a bank, a grant funder or a buyer will read it, and how to keep any impression of assurance out of the pack.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A director phones to say the bank wants "signed financials" before it renews the overdraft. A non-profit needs statements for a donor's annual report-back. A buyer wants figures before signing for the shares. Each request reaches the firm as "please do the AFS", and each is easy to scope badly.
The risk is rarely the accounting. It is the gap between what the third party thinks it is getting and what a compilation actually provides. A credit analyst who sees the firm's letterhead may assume someone has checked the debtors. Nobody has, unless the engagement said so.
What a compilation can be used for
IFAC's article on ISRS 4410 (Revised) explains that a compilation engagement can be tailored to needs such as preparing financial information for bank lenders or grant funders, in connection with a change of ownership, or for internal use by management. The IAASB's 2012 news release on the revised standard noted that countless entities, especially small and medium-sized ones, look to accountants in public practice to help prepare and present their financial information.
A compilation for a lender is therefore an ordinary engagement. What the purpose changes is the scope: which information, on what basis, for which readers, and with what words around it.
Agreeing the readers and the basis
Before quoting, settle three things with the client, ideally with the third party's own request in writing:
- The intended users. The bank's credit department, a named donor, a prospective buyer and its advisers. Name them in the engagement letter.
- The information. A full set of annual financial statements, a statement of financial position at one date, an income and expenditure schedule set against a grant budget, or part-year management accounts. Funders often prescribe a format of their own.
- The basis of preparation. IFRS for SMEs, full IFRS, the entity's own policies, or a special-purpose basis the funder lays down. A grant report on a cash basis is a different product from general purpose statements, and the report must say which one it is.
If a funder's template asks the accountant to confirm that figures are "correct" or "true", stop there. That wording asks for comfort a compilation does not give.
When the funder really needs agreed-upon procedures
Sometimes the third party's real question is narrower than "what were the results?". It wants to know whether every payment from the grant account has an invoice, whether money went only to approved budget lines, or whether the covenant figure was taken from the ledger. That is a request for procedures and findings, not for compiled statements.
The IAASB states that a broad range of stakeholders, such as regulators, funding bodies and creditors, use agreed-upon procedures reports for a variety of reasons. Where specific checks are wanted, an engagement under ISRS 4400 (Revised) may fit better, alongside the compilation or instead of it. The difference is set out in agreed-upon procedures under ISRS 4400. Raising it early avoids the awkward moment when a funder rejects a compilation report because it does not answer the funder's question.
Engagement letter wording and partner review
The engagement letter turns scope into something enforceable. For a lender or funder compilation it should cover the purpose and the named users, the information and its basis, management's responsibility for the records and the judgements, and a plain statement that the firm will not audit or review the information and expresses no opinion or conclusion.
In Achekam, AI can draft an engagement letter's clauses or a proposal's sections, never the fees, and a person saves the draft. Achekam will not send a letter whose wording breaks the professional guardrails, and for audits and reviews it will not send one before a partner has reviewed it. A compilation letter for a bank still deserves a partner's reading before it leaves, because it is the document the bank will hold up if the relationship goes wrong.
When the work is done, the Studio builds the draft set from the mapped trial balance with every figure calculated in code, and the practitioner's report follows the level the firm selects: audit, independent review, compilation or none. Choose compilation, and check that the basis named in the report matches the basis agreed with the funder.
Sending the issued pack to the lender
After issue, clients often ask the firm to send the statements straight to the bank. An e-mail attachment loses control of the document the moment it leaves.
In Achekam, staff can share a vault document with a named person by an e-mailed link. The link can block downloading, require a code and be revoked, and every view and download is recorded. It lasts 7 days by default and the recipient needs no account. For a lender, that record answers a later question about which version the bank saw and when. The routine is described in sharing issued statements.
Send only on the client's written instruction, and send the complete set with the practitioner's report attached, never the figures on their own.
Keeping any impression of assurance out
IFAC's article explains that the practitioner's report identifies the compiled information, sets out the respective roles of management and the practitioner, and states that no assurance is being given. Everything that travels with the report should agree with it:
- No covering letter saying the statements "fairly present" the position or are "accurate".
- No firm letterhead on pages management prepared, unless the report is attached.
- No answers on a bank questionnaire that go beyond what the compilation covered.
- No informal comfort on the phone to the lender ("the debtors look fine to us").
- Where a funder's template demands assurance wording, a reply explaining what the firm can sign instead.
IFAC's discussion of ISRS 4410 (Revised) for today's compilation engagements explains how the standard is structured and why it matters to small practices.
Scope the purpose first and the product second. A compilation prepared for the right reader, on the agreed basis, with its limits stated everywhere it travels, is genuinely useful to a lender. One that leaves the lender guessing is a risk the firm carries for years.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
