A preparation A professional service in which a CPA puts together financial statements (F/S), specified F/S elements, accounts, or items (eg, schedules), with no assurance provided. is a professional service in which accountants assemble financial statements (F/S). Because no procedures are performed to verify the accuracy or completeness of the information provided by management, a preparation engagement provides no assuranceAn objective professional service intended to provide users of information with confidence about the information presented..

(Choices B and C) To ensure that both parties (ie, management and the accountant) agree to their respective responsibilities regarding the preparation engagement, the terms of the engagement should be documented in a signed engagement letterA document signed by both the client and the accountant outlining the objectives, responsibilities, and terms associated with a specific engagement.. Because the applicable financial reporting frameworkThe rules according to which financial statements are presented (eg, GAAP, IFRS). is an essential element of those terms, it will be identified in the engagement letter.

(Choice D) To ensure that F/S users do not misinterpret the accountant's role in preparing the F/S, the accountant should include a statement on each page of the F/S indicating that no assurance is provided. If this is not possible, the accountant should issue a disclaimer stating that no assurance is provided, withdraw from the engagement, or upgrade the engagement to a compilationA professional service in which accountants apply their accounting and professional expertise to assist management in presenting financial statements (F/S) or elements, accounts, or items of F/S..

Things to remember:
Because a preparation engagement provides no assurance, an accountant will not verify the accuracy or completeness of the information provided. An engagement letter for a preparation should include the terms of the engagement, including the reporting framework to be used. Prepared financial statements should include a statement on each page that no assurance is provided.