TaxTMI 
TaxTMI 
GUIDANCE NOTE ON COMPILATION ENGAGEMENTS BY A COST ACCOUNTANT
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.... is a clear understanding between the management of the entity and the cost accountant regarding the terms of the engagement. Matters to be considered include the following: (i) Nature of the engagement including the fact that neither a cost audit nor a review will be carried out and that accordingly no assurance will be expressed. (ii) Fact that the engagement cannot be relied upon to disclose errors, illegal acts or other irregularities, that may exist. (iii) Nature of the information to be supplied by the management. (iv) Fact that management is responsible for the accuracy and completeness of the information supplied to the cost accountant for the completeness and accuracy of the compiled cost statements. (v) Cost Accounting Policy / Manual based on which the cost statement is to be compiled and the fact that it, and any known departures therefrom, will be disclosed by the management. (vi) Intended use and distribution of the cost statements. (vii) Form of report to be rendered regarding the cost statements compiled. An engagement letter will be of assistance in planning the compilation work. It is in the interes....
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....orm of its cost accounting records and the basis on which the cost statements are to be presented. The cost accountant ordinarily obtains knowledge of these matters through experience with the entity or inquiry of the entity's personnel. 2. Withdraw from Engagement in case additional information is not provided If the cost accountant becomes aware that information supplied by management is incorrect, incomplete, or otherwise unsatisfactory, the cost accountant should take necessary steps and measures to collect additional information and explanation from the management. If management refuses to provide such information, the cost accountant should withdraw from the engagement, informing the management of the reasons for the withdrawal. 3. Disclosure in case of misstatement The cost accountant should read the compiled information and consider whether it appears to be appropriate in form and free from obvious material misstatements. In this sense, misstatements include the following: (a) Mistakes in the application of the cost accounting principles. (b) Non-disclosure of the cost reporting framework and any known departures therefr....
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....) Cost Accountant's signature. The Cost Statements compiled by the cost accountant should contain a reference such as "Unaudited," or "Compiled without Audit or Review". Format of Cost Accountant's report for an engagement on compilation of cost statements is appended at Annexure II in the Guidance Note. Explanations for the purpose of this Guidance Note 1. For the purpose of this Guidance Note, Entity means, a person, partnership, organization or business that has a separately identifiable existence and including Government owned establishments. Entity includes non-profit organisations also. 2. For the purpose of this Guidance Note, Cost Accountant means a cost accountant or a firm of cost accountants holding valid certificate of practice issued by the Institute of Cost Accountants of India as per the provision of section 6 of the Cost and Works Accountants Act, 1959 and the regulations and rules framed thereunder. 3. For the purpose of this Guidance Note, a cost statement includes one or more of the following - a. Statement showing Quantitative Information in respect of cost object/s specified in the Compilation Engagement, showing det....
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....ject for which costs are ascertained. To the Board of Directors or the appropriate representatives of senior management: The Management has requested that we provide the following services: [The objective and scope of the compilation engagement] On the basis of information provided by the management, we will assist the management in compilation of cost statements for _________________(specify the period) of __________________(specify activity, contract, cost centre, customer, process, product, project, service or any other object) for which costs are ascertained for _____________ (Name of the entity). These cost statements will not include explanatory notes, other than a note describing the basis of compilation and summary of significant cost accounting policies. The purpose for which the cost statements will be used is to provide cost information in respect of an activity, contract, cost centre, customer, process, product, project, service or any other object for the period specified. The cost statements are compiled for use by the management of _____________ (Name of the entity). Use and distribution of the cost accountant's report will be as per the engagement let....
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....compilation engagement. Our Compilation Report As part of our engagement, we will issue our report attached to the cost statements, which will describe the cost statements of ______________(specify activity, contract, cost centre, customer, process, product, project, service or any other object) and the work we performed for this compilation engagement. The report will also note that the use of the cost statements is restricted to the purpose set out in this engagement letter, and that use and distribution of our report provided for the compilation engagement will be as per the engagement letter. We understand that the intended use and distribution of the cost statements, we have compiled is________________________(specify intended use) and that should this change, that management shall obtain from us prior permission in writing. We look forward to full cooperation from the management and we trust that they will make available to us records, documentation and other information required in connection with this engagement. Please sign and return the attached copy of this letter to indicate acknowledgement of the management, and agreement with, the arrangements for our ....