Explain the Difference


In “So That’s Why It’s Called a Pyramid Scheme” ( JofA, Oct.00, page 91) , the article states that, “during a review and compilation engagement for a small client....”

Will you please explain what a review and compilation engagement is? I thought we only had three levels of engagements and not a mix-and-match set.

If in our own publication we cannot keep it straight, how can we hope that non-CPAs will be able to?

Stanley Balsky, CPA
Rutherford, New Jersey

Author’s reply: In the article, the Nebraska CPA who discovered a large embezzlement at a small client’s business ( page 91 ) could have more accurately described his work. Looking back at the procedures the CPA performed, we can see the engagement was really a compilation with additional procedures as permitted by AR section 100.11–.12 (of Professional Standards ). It would not have been a SSARS no. 1 review engagement unless the CPA issued a review report. As you know, it’s not uncommon to perform review-type procedures on selected areas of the financial statements in this particular set of circumstances.

The main point was that the fraud was so obvious it was uncovered even without a thorough audit.

Joseph T. Wells, CPA, CFE
Austin, Texas


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