ISRS 4410 (Revised): How to Perform and Report a Compilation Engagement

What ISRS 4410 (Revised) covers and what it does not

A client hands you a trial balance, a bag of receipts, and a deadline. They need compiled financial statements for their bank. You aren't auditing anything. You aren't reviewing anything. You're applying accounting expertise to help management present their financial information in the form of financial statements.

ISRS 4410.7 defines the engagement: the practitioner applies accounting and financial reporting expertise to assist management in the preparation and presentation of financial statements in accordance with an applicable financial reporting framework, and reports as required by ISRS 4410. No assurance is expressed. The practitioner doesn't perform audit procedures, doesn't obtain evidence about assertions, and doesn't verify the accuracy of the information management provides.

ISRS 4410.A27 is explicit: you're not required to make inquiries of management to assess the reliability of the information they give you. You're not required to assess internal controls. You're not required to verify explanations. The information is management's. Your job is to apply accounting expertise to present it correctly.

But "not required to verify" does not mean "permitted to ignore obvious problems." ISRS 4410.32 creates an obligation when you become aware (during the engagement, without making specific inquiries) that the records, documents, explanations, or other information provided by management are incomplete, inaccurate, or otherwise unsatisfactory. And ISRS 4410.33 goes further: if you become aware that the financial statements may be materially misstated, you must bring this to management's attention and request additional or corrected information.

This is the tension at the heart of every compilation engagement. You don't investigate. But you can't close your eyes.

Establishing the engagement terms

ISRS 4410.21 lists what the engagement letter must contain. The required terms are more specific than most practitioners expect.

The engagement letter must describe management's responsibilities. Under ISRS 4410.21(b), management is responsible for the financial information provided to the practitioner, for the accounting policies selected and their consistent application, and for the preparation and fair presentation of the financial statements in accordance with the applicable framework. Management is also responsible for any decisions that involve judgment (classification, estimates, disclosure choices). The practitioner applies accounting expertise, but the financial statements are management's.

ISRS 4410.21(a) requires the practitioner's responsibilities to be described too. The key sentence: the practitioner will compile the financial statements based on information provided by management, using the practitioner's accounting and financial reporting expertise, and will not express an audit opinion or a review conclusion.

Two additional terms matter. First, ISRS 4410.21(c) requires a statement that the engagement cannot be relied upon to disclose errors, illegal acts, or other irregularities. Second, if the financial statements will include a restriction on distribution or use, this should be stated in the engagement terms (ISRS 4410.21(d)).

For Dutch practitioners, there's a practical consideration. Many clients approach compilation as "having their accounts done." They don't distinguish between a compilation engagement and bookkeeping. The engagement letter is the moment to make this distinction explicit. If the client expects you to also process transactions, reconcile accounts, and prepare tax returns, those are separate services that fall outside ISRS 4410. Define the boundary in writing.

What you actually do during a compilation

The work itself follows ISRS 4410.26 through ISRS 4410.31. You receive the client's records and information. You apply the applicable financial reporting framework (typically Dutch GAAP under RJ, or IFRS if the client requires it) to classify and present that information as financial statements.

ISRS 4410.26 requires you to obtain an understanding of several things before starting: the client's business and operations (enough to compile the statements), the applicable financial reporting framework (including its application to the client's industry), and the form and content of the financial statements under that framework. If the client operates in construction and you don't know that revenue recognition under RJ 221 differs from the default rules, the compiled statements will be wrong regardless of how neatly they're presented.

ISRS 4410.27 gives a specific instruction: read the compiled financial statements in light of your understanding of the framework and consider whether they appear appropriate in form. This isn't a review. You're not obtaining evidence. But if the balance sheet shows negative equity and no going concern note exists, you're expected to notice that and raise it with management.

Classification is where most of the practitioner's effort goes. The client gives you a trial balance. You map the accounts to the correct financial statement lines under the applicable framework. You apply the disclosure requirements. You ensure the statements are internally consistent (the cash flow statement ties to the balance sheet, notes cross-reference to the face of the statements, comparative figures are presented where required).

If management has selected accounting policies, you apply them. If management hasn't made a choice (for instance, depreciation method for a newly acquired asset category), ISRS 4410.A23 notes that you may assist management in determining appropriate policies, but the selection itself remains management's decision. Document the discussion and the decision.

Where bookkeeping ends and compilation begins

The standard doesn't address this directly, but the IAASB's basis for conclusions on ISRS 4410 (Revised) acknowledges the overlap. In practice, many Dutch accounting firms perform both for the same client. ISRS 4410.A6 addresses this: when the practitioner is also involved in preparing the accounting records, the compilation engagement starts from the trial balance or equivalent summary, not from the underlying transactions. The bookkeeping is a separate service. The compilation takes the output of that service and applies a financial reporting framework to present it as financial statements.

For small entities under RJ 396 (which covers the majority of non-Big 4 compilation clients in the Netherlands), the disclosure requirements are reduced but not eliminated. RJ 396 still requires specific disclosures on accounting policies, fixed assets, long-term liabilities, off-balance sheet commitments, and related-party transactions. Missing a required disclosure in compiled statements is the single most common quality finding in compilations reviewed by the NBA.

What happens when you spot something wrong

This is the section that matters most in practice. ISRS 4410.32 through 4410.34 create a graduated response framework.

ISRS 4410.32 applies when you become aware that the information management provided is incomplete, inaccurate, or otherwise unsatisfactory. "Become aware" is the operative phrase. You aren't looking for problems. But when a problem lands in front of you (the trial balance doesn't balance, a creditor appears on the debtor list, the fixed asset register includes an item the client told you was sold last year), you can't proceed as if you didn't notice.

Your first step under ISRS 4410.32 is to bring it to management's attention and request additional or corrected information. If management provides the correction, you proceed. If management refuses to correct or provide additional information, ISRS 4410.33 requires you to consider whether you can complete the engagement.

ISRS 4410.34 covers the hardest scenario: management won't correct something, and you believe the resulting financial statements would be materially misstated. You have two options. You can withdraw from the engagement, communicating the reasons to management and those charged with governance (ISRS 4410.34(a)). Or, if withdrawal is not possible under applicable law or regulation, you can complete the compilation but must describe the matter in the compilation report and state that the financial statements may be materially misstated (ISRS 4410.34(b)).

Worked example: compilation for a bank lending covenant

Client: Jansen Metaalbewerking B.V., a Dutch precision metalworking company with €12M revenue and 45 employees. Jansen's bank (ABN AMRO) requires compiled annual financial statements under Dutch GAAP (RJ) for covenant monitoring purposes. The applicable framework is RJ for small legal entities under RJ 396. Period: Financial year ended 31 December 2025.

1. Establish the engagement terms

Issue the engagement letter addressing the management board. Specify: the financial statements will be compiled under RJ for small legal entities, based on information provided by management. Clearly state that no assurance will be expressed, that the engagement cannot be relied upon to disclose errors or irregularities, and that the compiled financial statements are intended for ABN AMRO covenant monitoring and management's own use.

2. Obtain understanding of the business and framework

Jansen manufactures precision metal components for the automotive industry. Key accounting considerations: revenue recognition timing on long-lead orders (RJ 270 applies), valuation of work-in-progress at lower of cost and net realisable value (RJ 220), and a €2.1M bank loan with annual covenant testing on the current ratio (minimum 1.2) and solvency ratio (minimum 25%).

3. Receive records and compile the financial statements

Jansen provides the year-end trial balance (exported from Exact Online), the fixed asset register, loan agreements, and a schedule of work-in-progress. Map the trial balance to the RJ 396 financial statement format: balance sheet, profit and loss account, and notes. Apply the minimum disclosure requirements under RJ 396.

During compilation, you notice that Jansen classified a €180,000 investment in new CNC equipment (delivered November 2025, invoice dated December 2025) as an expense in the profit and loss account rather than as a fixed asset. The trial balance shows it in account 4500 (General Operating Expenses).

4. Address the misclassification

Under ISRS 4410.32, bring the CNC equipment classification to management's attention. The €180,000 should be capitalised under RJ 212 (tangible fixed assets) and depreciated over its useful life, not expensed. If expensed, the profit and loss account understates operating profit by €180,000 (before depreciation for the stub period), and the balance sheet understates total assets by the same amount. This would distort the solvency ratio the bank monitors.

Management agrees to reclassify. Capitalise the €180,000 as a tangible fixed asset and record depreciation for November and December 2025 (two months at the company's standard rate of 20% straight-line for CNC equipment: €180,000 / 5 years / 12 months x 2 = €6,000).

5. Finalise and issue the compilation report

Compile the final financial statements with the corrected classification. Verify internal consistency: the balance sheet balances, the profit and loss account reconciles to retained earnings, the notes cross-reference to face amounts. Issue the compilation report in accordance with ISRS 4410.40.

What this produced: A compiled set of financial statements under RJ 396, with one classification correction documented and resolved. The file shows the practitioner applied accounting expertise, communicated the misclassification to management (ISRS 4410.32), obtained a correction, and compiled the statements accordingly.

How to write the compilation report

ISRS 4410.40 specifies the mandatory elements of the compilation report. The report is shorter than an audit or review report, but every element serves a specific purpose.

The report must include a title, an addressee, and identification of the financial statements compiled (including the entity name, the period, and the applicable framework). It must contain a description of the practitioner's responsibilities, a description of management's responsibilities, and a statement that the practitioner has compiled the financial statements based on information provided by management using the practitioner's accounting and financial reporting expertise.

The critical sentence, required by ISRS 4410.40(j): "Since a compilation engagement is not an assurance engagement, the practitioner is not required to verify the accuracy or completeness of the information provided by management for the compilation, and accordingly, the practitioner does not express an audit opinion or a review conclusion on whether the financial statements are prepared in accordance with the applicable financial reporting framework."

ISRS 4410.40(k) requires a statement identifying the applicable financial reporting framework and, if the framework is a special-purpose framework, a description of that framework or reference to the note in the financial statements that describes it.

If the financial statements are prepared under a special-purpose framework or if there's a restriction on distribution, ISRS 4410.40(l) requires an emphasis paragraph drawing attention to this.

Practical checklist for your next compilation engagement

1. Send the engagement letter before starting any work. Include the four required elements from ISRS 4410.21: practitioner's responsibilities, management's responsibilities, limitations of the engagement, and any distribution restrictions. Don't combine compilation terms with bookkeeping or tax terms in the same letter.
2. Document your understanding of the business, the framework, and the form of the financial statements (ISRS 4410.26). Even a one-page memo is sufficient. The point isn't to produce a risk assessment. It's to show you understood what you were compiling.
3. When you spot something wrong, communicate it to management in writing and document the response. If management corrects it, file the correction. If they don't, follow the ISRS 4410.33 and 4410.34 escalation path before proceeding.
4. Include the full no-assurance statement in the compilation report (ISRS 4410.40(j)). Some practitioners abbreviate this. Don't. The sentence protects you when a bank or creditor misunderstands the nature of the engagement.
5. Obtain a management representation letter. ISRS 4410 doesn't explicitly require one, but ISRS 4410.A26 notes it may be appropriate. For any engagement where the compiled statements go to a bank, get it in writing.

Common mistakes

• Performing verification procedures without recognising the engagement type has shifted. If you're testing balances, confirming receivables, or inspecting documents for evidence, you've moved beyond compilation into review or audit territory. ISRS 4410.7 is clear: compilation involves applying accounting expertise to information provided by management, not verifying that information.
• Omitting the no-assurance statement from the report or burying it in boilerplate. The AFM has noted in practice that compiled financial statements are sometimes distributed to banks and creditors without a clear practitioner's report attached, creating an expectation gap.
• Continuing with the engagement when management refuses to correct a material misstatement. ISRS 4410.34 gives you two paths: withdraw or disclose in the report. Compiling statements you believe are materially misstated without doing either violates the standard.

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Further reading and source references

• IAASB Handbook 2024: The authoritative source for the complete ISRS 4410 (Revised) text.
• NBA Model Texts: The NBA's standard samenstellingsverklaring for Dutch-language compilation reports.
• RJ 396: Dutch GAAP for small legal entities, the most common framework for compilation engagements in the Netherlands.
• ISRS 4400 (Revised): Agreed-upon procedures engagements, the other related service standard alongside ISRS 4410.