AICPA Consulting Standards – The Swiss Army Knife

By Charles Hall | Accounting and Auditing

Jun 13

Do your clients ever ask you to perform unusual services? When those requests come, do you ever struggle with which standards to follow or what the deliverable will be? Should you follow the Attestation Standards or the Auditing Standards, or maybe the SSARS–or are we forgetting something? Sometimes the answer lies in the Consulting Standards

Consulting Standards

Examples of Consulting Services

Here are three examples of consulting services:

  1. My client wants me to perform test counts of inventory, but he wants it done at a low cost. No third party will see the results of the engagement. 
  2. My client wants me to review their accounts payable internal controls, and he doesn’t need an audit or a formal attest engagement. 
  3. My client thinks fraud is occurring in his payroll, but she does not want an audit. 

Most CPAs are familiar with compilation and review standards (Statement on Standards for Accounting and Review Services) and audit standards (Statement on Auditing Standards). They also know about the attestation standards (Statement on Standards for Attestation Engagements), but many are not familiar with the consulting standards (Statement on Standards for Consulting Services).

Consulting Standards Primer

You might call the AICPA Consulting Standards the CPA’s swiss army knife. Many of the services you provide fall under these standards.

What services fall under the consulting standards? 

The consulting standards specifically address six areas:

  1. Consultations – e.g., reviewing a business plan
  2. Advisory services – e.g., assistance with strategic planning
  3. Implementation services – e.g., assistance with a merger
  4. Transaction services – e.g., litigation services
  5. Staff and other support services – e.g., controllership services
  6. Product services – e.g., providing packaged training services

CPAs often provide consulting services such as the following:

  • Consultations about complex transactions
  • Fraud investigation services
  • Internal control services
  • Bankruptcy services
  • Divorce settlement services
  • Controllership services
  • Business plan preparation
  • Cash management
  • Software selection
  • Business disposition planning

When can I use the consulting standards?

I recently posted about when you can use the consulting standards. If there is no third-party reliance on the report, consider the option.

Also, you can use the consulting standards in conjunction with other standards. For example, you could perform an agreed-upon procedures engagement, issuing an AUP report, and also provide the client with a second consulting report. Many times this is a good option. Too often CPAs put consulting type information (e.g., recommendations) in an AUP report. Since AUPs are designed in a “procedures, results” format, it’s best to address secondary issues in a separate consulting report. If you design your engagement in this manner, the results will be (1) an AUP report that addresses the agreed upon procedures and results, and (2) a consulting report that covers other considerations.

Characteristics of a Consulting Engagement

  1. Generally nonrecurring
  2. Usually, requires a CPA with specialized knowledge and skills
  3. More interaction with client
  4. Done just for the client (usually no third parties seeing the results)

Consulting Work Paper Requirements

The work paper requirements are minimal.

The understanding with the client can be oral or in writing (I recommend the latter). 

Keep in mind that the AICPA Code of Professional Conduct does require the CPA who performs a nonattest service (e.g., consulting) and an attest service (e.g., audit) to follow the independence guidance in the Code of Conduct. See 1.295 Nonattest Services of the Code.

The consulting standards do not require the CPA to prepare work papers, but you should do so anyway. The work papers are the link between your work and your report. Also, the general standards of the profession, contained in 1.300 of the AICPA Code of Professional Conduct, apply to all services performed by members. 1.300 says “Sufficient relevant data. Obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed.”

Consulting Reports

The report content and format are up to you and your client.

No Opinion or Accountant’s Report

For consulting engagements, the CPA does not issue an opinion or any other attestation report (e.g., agreed-upon procedures report). Consulting reports are usually designed for the client and not third parties.

Subject to Peer Review?

Work performed under the Consulting Standards is not subject to peer review.

Where Can I Find the AICPA Consulting Standards?

You can see the consulting standards here

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About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events.Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.