SSARS No. 21—Modern Guidance for Preparation of Financial Statements
The American Institute of Certified Public Account’s (AICPA) Accounting and Review Services Committee recently released the Statement on Standards for Accounting and Review (SSARS) No. 21. SSARS No. 21 intends to clarify and revise existing standards for reviews, compilations, and engagements to prepare financial statements and will significantly affect accountants in public practice who prepare financial statements for their clients. The AICPA believes SSARS No. 21 will help to modernize these standards and is a better fit for today’s electronic environment.
SSARS No. 21 supersedes all existing Accounting and Review (AR) sections in the AICPA Professional Standards with the exception of AR section 120, which is expected to be clarified in 2015. SSARS No. 21 is effective for periods ending on or after December 15, 2015, but early implementation is permitted.
SSARS No. 21 contains four sections:
- Section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services: This section will replace AR Section 60 of the AICPA Professional Standards and includes general principles for SSARS engagements.
- Section 70, Preparation of Financial Statements: This section relates to engagements in which the accountant is preparing financial statements with or without disclosures for a client but not performing an audit, review, or compilation on the financial statements. An accountant is required to emphasize on each page of the financial statements that no assurance is being provided. Accountants are not required to consider independence under this section.
- Section 80, Compilation Engagements: This section replaces AR Section 80 and applies when an accountant is performing a compilation engagement with a report that will be submitted to the client or other third parties. This section clarifies that a report is now required, and management-use compilations without a report are no longer permitted. This is significant as it eliminates the need for an accountant to determine whether he or she has prepared financial statements. Other changes to this section include:
- An engagement letter signed by both the accountant and the client’s management is now required.
- The standard compilation report is changed to one paragraph (previously three paragraphs), which must include the city and state where the accountant practices.
- Section 90, Review of Financial Statements: This section includes guidance and requirements for review engagements. This section of SSARS No. 21 is essentially a redraft of guidance for reviews included in SSARS No. 19, Compilation and Review Engagements. However, changes do include:
- An engagement letter must be signed by both the accountant and client management.
- Headings are to be included in the accountant’s review report.
- There are new requirements when using the work of other accountants.
- In certain cases, an emphasis-of-matter or other paragraph must be included.
If you would like more information about SSARS No. 21 or other audit and accounting services, contact the expert listed below at PYA, (800) 270-9629.
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