Preparation, Compilation & Review

The AICPA issues Statements on Standards for Accounting and Review Services, commonly referred to as SSARS.

These standards address the following services:

  • Preparation of financial statements (AR-C 70)
  • Compilations (AR-C 80)
  • Reviews (AR-C 90)

Of course the AICPA also provides the guidance for the conduct of audits. Those are found in the Statements on Auditing Standards, often referred to as SASs. Audits provide a high level of assurance, but they require more time to conduct. They are also more costly to clients. So CPAs will often use the SSARS to provide services in relation to financial statements that are not audited.

Review engagements provide limited assurance and mainly involve the CPA making inquiries of the client and using analytics to see if material misstatements are present.

Compilation engagements provide no assurance, but a compilation report is provided showing the CPA’s involvement in the service. The CPA simply reads the financial statements to see if everything appears to be appropriate. Compilations are an attest service (though they are nonassurance), meaning independence is to be considered. The CPA can lack independence and issue a compilation report, provided he or she discloses the independence impairement.

Preparation of financial statements is a nonattest, nonassurance service. CPA create financial statements and provide a disclaimer either on each financial statement page or on a separate disclaimer page that precedes the financial statements.

Disclosures are not required for preparation or compilation services, but notes to the financial statements can be provided, if the client desires this. Independence is not required for preparations and compilations.

Reviews are, for the most part, performed in reference to full-disclosure financial statements. Independence is required for a review engagement.

The SSARS provide cheaper alternatives for financial statement deliverables provided by CPAs. These services are, however, subject to peer review.