SSARS 21 – Changes to Compilation, Review, and Financial Statement Preparation Engagements

written by Aaron Spencer

Consistent with recent changes to other accounting and auditing pronouncements, the AICPA has clarified standards governing the accounting and review services performed by CPAs.  The clarity project addresses concerns with length and complexity of standards and make standards easier to understand and implement which should ultimately enhance engagement quality.  Along with the clarity project, SSARS 21 also brings with it some significant changes and addresses increasing difficulty in determining who actually has prepared financial statements.  New SSARS standards also adopt certain requirements which are more consistent with authoritative international standards.

Revised Compilation Standard

  • Accountant’s compilation report is required which is now shortened to differentiate between audit and review reporting
  • Engagement letter required
  • Can be applied to financial statements without disclosures if that fact is disclosed
  • Reporting when accountant is not independent if that fact is disclosed
  • Reporting known departures from GAAP or other reporting frameworks

The Preparation Engagement

  • This is a brand new level of service
  • Does not require a report, even when financial statements are to be used by third parties
  • Engagement letter required
  • Requires a legend on each page of the financial statements stating no assurance is being provided; preparation is considered a nonattest service
  • No consideration of independence is necessary
  • Can be applied to financial statements with or without disclosures
  • Accountant is not required to verify accuracy and completeness of information provided
  • Minimal documentation is required when compared with compilation service

Changes to Review Engagements

  • Minimal changes to authoritative guidance and service provided
  • New look to required review report including headings and the city and state of issuance
  • Engagement letter required

SSARS 21 is fully effective for calendar 2015 engagements, but early implementation has already been permitted.  The Whitlock Company would be happy to discuss these services with you in more detail to determine what makes the most sense for your business 417-881-0145.


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