Audit

Significant Changes Proposed to Review and Compilation Services

By Kevin Brubaker
June 30, 2009

The AICPA’s Accounting and Review Services Committee (ARSC) issued an exposure draft in April for public comment regarding proposed changes to Statements on Standards for Accounting Review Services (SSARS). Business owners engaging accountants to perform compilation and review services should become familiar with the proposed changes and their effect on future review and compilation services provided by CPAs. The changes to the SSARS literature are the most significant changes in more than 30 years. The following provides a brief outline of the most significant of the proposed changes:

 

CPA practitioners often encounter difficulty providing review-level services to clients due to the professional requirement to maintain independence. The proposed literature addresses this often difficult and blurred issue by allowing practitioners to perform review engagements when independence has been impaired due to the performance of a non-attest service specifically designed to help management prepare more reliable financial statements that are of higher quality. This change would allow practitioners to better serve clients in the areas of internal control, and not impede the accountants’ ability to perform review-level services for the client. The client would benefit from lowered costs (i.e., they would not have to hire two accounting firms), and would be able to receive better advice from the practitioner on complex or difficult issues.

The proposed changes to the literature also require enhanced documentation and reporting requirements for practitioners, and make establishing an understanding with the client through an engagement letter a requirement. This proposed change would enhance the understanding between CPAs and clients regarding services to be performed and would improve documentation of such services.

 

For compilation engagements, the most significant proposed change would allow accountants to disclose a general description of the reasons for a lack of independence in a compilation report.

 

Clients who engage CPAs for review-level or compilation-level services should be satisfied with the proposed changes to SSARS, because the changes seemingly will allow accountants the ability to provide more services with less controversy, enhancing the relationship between the client and CPA, and allowing accounting professionals to assist clients with the complexities of contemporary financial reporting. To read the exposure draft, go to tinyurl.com/d4wkx2. Comment letters are available at tinyurl.com/qtahgm. If the literature is ultimately adopted, Schneider Downs will keep your organization current on any resulting significant changes.