When does independence matter for compilation, review, and preparation engagements?

For a review engagement, independence is required. If the accountant is not independent, the accountant should not perform the review. For a compilation, lack of independence does not automatically prevent the engagement, but it must be disclosed in the compilation report. Preparation engagements provide no assurance and do not turn into assurance engagements simply because financial statements are created.

The exam trap is to apply one independence rule to every service. Ask what report is being issued and what level of assurance is being provided. The more assurance the practitioner provides, the more independence becomes central to the engagement.