Exploring SSARS 21: A Look at Preparation, Compilation and Review Services An Overview of the Changes and Impacts for Our Clients and Our Practice Insert.

Exploring SSARS 21: A Look at Preparation, Compilation and Review Services

An Overview of the Changes and Impacts for Our Clients and Our Practice

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Instructions To Firms Below are some suggestions when using this PowerPoint to update your team members on SSARS 21.• This PowerPoint is an overview of significant changes to

compilation and review engagements and an introduction to the preparation service. It should be used to augment your understanding of SSARS 21. Reviewing this is not a substitute for reading and understanding the actual guidance.

• Several slides have a comment note for you to consider the application based on your current practices and consider incorporating relevant examples.

Once you have tailored this PowerPoint to your firm’s current practices, delete this slide

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Objective

To provide an overview of changes resulting from SSARS 21• Overview• Effective Dates• AR-C 60 – General Principles• AR-C 70 - Preparation• AR-C 80 - Compilation• AR-C 90 - Review

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General Overview of SSARS 21

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SSARS 21

Supersedes all existing AR sections except for AR Section 120, Compilation of Pro Forma Financial

Information• Prospective financial information is currently codified in Attest Standards

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General Overview of SSARS 21

SSARS No. 21 is formatted into four separate sections:

• Section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services

• Section 70, Preparation of Financial Statements• Section 80, Compilation Engagements• Section 90, Review of Financial Statements

These sections have been codified with the prefix “AR- C” to denote them from the extant AR

sections.

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Effective Date

Effective for financial statement periods ending on or after December 15, 2015

Early implementation is permitted

Interim engagements can be performed in accordance with SSARS 21 or SSARS 19

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Section 60 – General Principles

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Section 60 – General principles for SSARS Engagements

Replaces AR Section 60, Framework for Performing and Reporting on Compilation and Review Engagements

Comply with the general principles in Section 60 in addition to the relevant sections based on whether the engagement is a preparation, compilation or review

Not expected to result in changes to existing practice

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Section 60 – General principles for SSARS Engagements

AR-C Section 60 includes requirements with guidance on: • Ethical requirements• Professional judgment• Conduct of the engagement• Engagement level quality control• Acceptance and continuance of client relationships and engagements

• Note to firms: Additional details about each of these requirements is included in the speaker notes. Firms may choose to add these details as additional slides

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Section 70 – Financial Statement Preparation

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New non-attest financial statement preparation service

Bright line between accounting services (preparation) and reporting services (compilation or review)

Financial statements may be provided to third parties

Section 70 – Overview

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Applies when engaged to prepare financial statements but not engaged to perform an audit, review, or compilation on those financial statements.

Does not apply when• engaged to merely assist in preparing financial statements• the financial statements are prepared as a by-product of another

engagement

The understanding with the client as to what the engagement entails is important.

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Examples of when AR-C 70 may apply• Preparation of financial statements prior to audit or review by

another accountant• Preparation of financial statements to be presented alongside

the tax return• Preparation of personal financial statements for presentation

alongside a financial plan• Preparation of a single financial statement• Using the information in a general ledger to prepare financial

statements outside of an accounting software system

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Examples of when AR-C 70 does not apply• Preparation of financial statements when the accountant is

engaged to perform an audit, review, or compilation of such financial statements

• Preparation of financial statements with a tax return solely for submission to taxing authorities

• Personal financial statements that are prepared for inclusion in written personal financial plans prepared by the accountant

• Financial statements prepared in conjunction with litigation services that involve pending or potential legal or regulatory proceedings

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Section 70 – Planning

An engagement letter signed by both the accountant and management or those charged with governance is required• Note to Firms: Add reference to location of preparation

engagement letters for SSARS 21

No determination about independence is required• The firm may want to maintain independence in case attest

services are requested in future• Note to Firms: Add reference to location of independence

policies or person to whom questions should be directed

Identify clients who may be interested in engaging us to perform preparation engagements.• SSARS 8 engagements• Accounting assistance

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Obtain an understanding of the financial reporting framework and significant accounting policies

Discuss significant estimates and judgments with clients• Client needs to understand• Client needs to accept responsibility

Prepare the statements using the records and explanations provided by management• Not required to verify the completeness or accuracy

of information

Section 70 – Fieldwork

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Section 70 – Financial Statements

Financial statements can be prepared with or without disclosures• Disclose that substantially all disclosures are omitted

If using a special purpose framework include a description

Financial statements can be prepared with a known departure but must be disclosed

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Section 70 – Legend/DisclaimerNo report is required, even if the financial statements are expected to be used by a third party

A legend is required on each page of the financial statements indicating, at a minimum, “no assurance is provided.” Examples:• No assurance is provided on these financial statements. • These financial statements have not been subjected to an audit,

review, or compilation engagement, and no assurance is provided on them.

• Other statements that convey that no assurance is provided on the financial statements are acceptable.

Note to firm: see speaker notes for additional considerations.

The legend can be shown as headers or footers.

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Section 70 – Legend/Disclaimer

The accountant or the accountant’s firm name is not required to be included, although it can be.• Note to Firms: Document firm policy if name will or will not

be included

Options if the legend is not included:• Issue a disclaimer• Perform a compilation engagement; or • Resign.• Note to Firms: Document which option the firm will pursue

if a legend is not included

Keep a copy of the statements in the workfiles

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Peer Review Requirements

Note to firms: determine whether you wish to review peer review requirements in your training session.

Firms that only perform preparation engagements are not required to enroll in AICPA PRP

A firm’s preparation engagements are included in the scope of a peer review when the firm either elects to enroll in the program or is already enrolled due to other engagements it performs

Changes are effective for peer reviews commencing on or after February 1, 2015

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Section 80 – Compilation Engagements

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Section 80 – Overview of Changes

Applies when the accountant is engaged to perform a compilation engagement

Some changes to the engagement letter and report

A report is always required

Management use only financial statements (SSARS 8 engagements) are no longer an option.

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Requires an updated engagement letter • Signature by both the accountant and the client is required.• Note to Firms: Document location of engagement letters

updated for SSARS 21

One change to engagement letter is that management’s responsibilities are clarified• Clients may be concerned that management’s responsibilities

have changed, but they have not. • Talking points available to help frame the conversation

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Section 80 – Fieldwork

No changes to procedures

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Supplementary information references, such as “See accountant’s compilation report” or “See independent accountant’s compilation report.” are allowed, but no longer required.• Note to Firms: Document firm’s policy regarding if the

reference will be used and communicate in training

Statements can be prepared with or without disclosures

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Section 80 – Reporting

A report is always required

Management use only financial statements (SSARS 8 engagements) are no longer an option. • Preparation engagement under AR-C 70 is an option• Or keep as compilation but with a report• Note to firms: Document process for communicating with clients

currently receiving SSARS 8 financial statements and discussing impact with them

Streamlined report

The city and state where the accountant practices is now required

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Section 90 – Review Engagements

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Section 90 – Overview of Changes

Some changes to the engagement letter

Some changes to the management representation letter

Some changes to fieldwork requirements

Review report has been updated

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Updated engagement letter• Signatures by both the accountant and the client are required.• Management’s responsibilities are clarified.• Language added regarding the form and content of the review

report expected to be issued.• Statement added that management agrees to

- Include the review report in any document containing the related financial statements

- Ask the accountant’s permission to do so• Considerations with respect to using a special purpose

framework• Note to Firms: Document location of engagement letters


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Section 90 - Fieldwork

Requirements regarding the performance of analytical procedures have been clarified. • Note to Firms: Add reference to updated policies for

performing analytical procedures in a review engagement

Inquiries are now presumptively required.

Reconciling the financial statements to underlying accounting records is now specifically required.

Management representation letter guidance is clarified.• Note to Firms: Document location of representation letters


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Supplementary information references, such as “See independent accountant’s review report.” is allowed, but no longer required. • Note to Firms: Document the firm’s policy for including

references to supplemental information

The concept of required supplementary information is introduced

• Defined as information that a designated accounting standard setter requires to accompany an entity’s basic financial statements with established authoritative guidelines for methods of measurement and presentation.

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Section 90 – Reporting

Updated report with headings and city and state of accountant’s practice location

Modification to the standard report in certain situations

Additional requirements for Emphasis of Matter or Other Matter paragraphs

Expanded communications with management or those charged with governance

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Financial Statement Users

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Start communicating with users about the new report formats for compilations and reviews.• Provide examples of standard reports

Users may be concerned that they are receiving something different. • Reports have been modified but there is

no change to the level of service or assurance previously provided.

Financial Statement Users

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Next Steps


Implementing The New Standards

We will begin implementing SSARS 21 during the planning stage of calendar year end engagements.• Start communicating management's

responsibilities and changes to compilation and review reports during our planning meetings

• Note to firms: Update these bullets with specific instructions you wish to give to your staff

Additional materials and documentation provided by the AICPA at AICPA.org/SSARS21


Reminders

Obtain signed updated engagement letters

Ensure you’re using the updated reports for compilations and reviews

Ensure you’re using the updated management letters for reviews

Talk to SSARS 8 engagements clients now to determine level of engagement

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Questions?

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Exploring SSARS 21: A Look at Preparation, Compilation and Review Services An Overview of the Changes and Impacts for Our Clients and Our Practice Insert.

Documents

ssars engagements arc

review services section

compilation arc

general principles arc

review engagements

existing practice

preparation arc

compilation of