For compiled financial statements

A compilation engagement letter with the terms the standard requires

A compilation is the one engagement where the standard tells you what the letter must say. Most of the work of writing it is not leaving anything out.

A compilation engagement letter records the terms on which an accountant puts financial statements together from what management provides, without auditing or reviewing them. In this edition the terms follow AR-C 80: the intended use of the statements, the basis of accounting, your responsibilities and management's, and the form of the report. The template below covers each one, free in Word and PDF.

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Compilation engagement letter

The full letter in Word and PDF, written for the United States against AR-C 80.

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Bookkeeping and tax letters are drafted from experience. A compilation letter is drafted from AR-C 80: AR-C 80 requires the terms in an engagement letter or other written agreement, signed by the accountant or firm and by management or those charged with governance. The standard lists what the terms must cover, and a practice inspection will look for each item.

The substance behind the list is simple. You put financial statements together from what management gives you; you do not audit or review them; management owns them, the numbers and the basis of accounting; and the report you attach says exactly that. The letter is where management agrees to it before you begin.

What the standard requires the letter to cover

Paraphrased, not quoted. Check the current text of AR-C 80 before relying on the wording.

1

The intended use of the statements

Who will read them and why — the owners, a lender, a tax return. The intended use decides whether the basis of accounting is acceptable, so it comes first.
2

The basis of accounting

Name it. Common choices are US GAAP, or a special purpose framework such as the income tax or cash basis, or the AICPA's FRF for SMEs. Management selects it and acknowledges that it is acceptable for the intended use.
3

Your objective and your responsibilities

To apply accounting expertise to compile the statements from management's information, in compliance with the relevant ethical requirements — and not to audit or review them or obtain assurance of any kind.
4

Management's responsibilities

For the financial statements themselves, for the accuracy and completeness of the records and information provided, and for the judgments needed to prepare them, including the ones you help with.
5

The form of the report

The Accountant's Compilation Report, what it will say, and that it goes with the statements whenever they are distributed. The standard expects the letter to describe the report before it exists.

The compilation engagement letter

Written for United States. The downloads are the same text, as a Word document to edit and a PDF to put on your letterhead.

[Firm letterhead]

[Date]

[Management / The Directors], [Entity name]
[Address]

Dear [Client contact],

Purpose and intended use

This letter sets out the terms on which we will compile the financial statements of [Entity name] for the period ending [date]. You have told us the statements are intended for use by [management / the owners / name of third party] for the purpose of [purpose].

Our responsibilities

We will compile the financial statements from the records, documents, explanations and other information you provide, in accordance with AR-C 80 and the ethical requirements that apply to us. A compilation is not an audit or a review. We will not verify the accuracy or completeness of the information you give us, and we will not express an opinion or a conclusion, or provide any assurance, on the financial statements.

Our work cannot be relied on to detect errors, fraud or illegal acts. If we become aware that the information is incomplete, inaccurate or otherwise unsatisfactory, we will ask you for further information, and if it is not provided we may withdraw from the engagement.

Your responsibilities

You are responsible for the financial statements; for selecting a basis of accounting that is acceptable for their intended use, which you have agreed will be [basis of accounting]; for the accuracy and completeness of the records, documents, explanations and other information you provide; for the judgments needed to prepare the statements, including those we assist with; and for giving us access to all the information we need.

Where the statements are to be given to a third party, you acknowledge that the third party is able to obtain further information from you, or has agreed the basis of accounting with you.

Our report

We will issue a Accountant's Compilation Report, which will state that we compiled the statements from information you provided, that you are responsible for them, and that we did not audit or review them or provide any assurance. You agree to include our report whenever the statements, or any document that says we compiled them, are distributed. The report may differ in form from this description if our findings require it.

Fees

Our fee is [amount] in US dollars, invoiced [when], payable within [number] days. Work outside this scope is charged at [rate] per hour and agreed with you first.

Confidentiality and your information

We keep your information confidential, hold it in accordance with applicable state privacy law, and retain our working papers for [number] years.

Agreement

Please sign and date a copy of this letter to confirm that these terms are agreed.

Yours sincerely,
[Name], [Firm name]

Acknowledged and agreed on behalf of [Entity name] by [Name, Title]:

Signature ______________________ Date ____________

Before you use this

Supplied as-is, with no guarantee. These templates are general information, not legal advice, and not a substitute for it. Have your own legal adviser review and adapt one to your practice and your jurisdiction before you put it in front of a client. FirmHello accepts no responsibility or liability for any use made of them.

Where compilation engagements go wrong

A lender reads it as assurance

The statements go to a bank without the report, or with it and nobody reads it. The letter's intended-use clause and the promise to attach the report are what protect you.

The basis nobody chose

The statements are prepared on a tax basis because they always have been. The standard wants management to select and acknowledge the basis, in writing, for this year's use.

A letter that predates the standard

A compilation letter written for a superseded standard misses items the current one requires. It is the first thing a practice inspection checks.

Other engagement letters

Accounting Accounting Audit Audit Bookkeeping Bookkeeping

Questions about compilation engagement letters

Is an engagement letter required for a compilation?

AR-C 80 requires the terms in an engagement letter or other written agreement, signed by the accountant or firm and by management or those charged with governance.

Does the accountant have to be independent?

AR-C 80 does not require independence, but an accountant who is not independent must say so in a final paragraph of the report.

Can the compilation share a letter with the tax return?

It can, provided the compilation has its own clearly separate section covering everything the standard requires. Many firms find two letters clearer, because the two engagements are governed differently.

How often should the letter be renewed?

Each year is the safe answer, and whenever the intended use, the basis of accounting or the users change. A letter that describes last year's purpose is weak evidence of what management agreed for this one.

What changed

October 17, 2026 Added an editable Word (.docx) copy of the letter beside the PDF.

The letter is the easy half

Sending it, getting it back signed, and finding it again in two years is the half that eats the week. That is what the portal is for.

No card and no sales call. If you would rather tell us about your firm first, use the longer form.