Newly approved SSARS will allow a new service, ‘preparation’. Will also require written & signed engagement letters.

Update – See also:

• Flash update on SSARS #21
• Effective date of SSARS #21 and ideas on how to use the early implementation option
• Sample compilation report under SSARS 21
• Sample accountant’s review report for SSARS 21
• New risk alerts for 2014/2015 are available
• Video overview of SSARS 21

In August, the Accounting and Review Services Committee approved the clarified SSARS. This rewrites the SSARS into the same clarified format we saw with the audit literature.

The biggest change is the introduction of a new service, called preparation, which will allow a CPA to issue financial statements without providing an accountant’s report or performing procedures on the information.

In highly condensed terms, a CPA can provide a preparation engagement when hired to prepare financials but not compile, review, or audit them. A specific legend will be required on each page of the financials. An engagement letter signed by the CPA and management will be required.

In a compilation, the report will be substantially revised to distinguish it visually from a review report; in addition to very different words, the two reports will look different. An engagement letter, signed by management and the CPA, will be required.

If you want a really rough word picture, the old SSARS 8 reporting approach will transition to a preparation engagement. There will be a bright line between preparation and compilation.

I think it is a very good thing to have an explicit requirement for a written, signed engagement letter for preparations and compilations. The old requirement of documenting an understanding created unnecessary problems.

The new document will be SSARS #21. It was approved in August and will be released in the fourth quarter of 2014.

Effective date will be years ending on or after 12/15/15. That translates into 12/31/15 financials for most entities.

Early application is allowed. So, prepare away!

More info:  Journal of Accountancy – Clarified, revised SSARS approved for reviews, compilations, and engagements to prepare financial statements