Do you desire to issue financial statements without a compilation report? Maybe you want a simpler method of providing financial statements to your clients, one that takes less time and has fewer restrictions? If yes, then get familiar with the new Preparation of Financial Statements option offered in SSARS 21. Here are a few questions and answers to help get you up to speed on the provisions of this new standard.
The client and third parties.
The guidance is applicable for periods ending on or after December 15, 2015, but can be early implemented–so it can be used now.
The AICPA Peer Review Board has stated that firms performing only preparation services are not required to enroll in the AICPA Peer Review program. Check with your state board to see if it requires enrollment (since a state board may require peer review, even though the AICPA does not).
She should bring the error to the attention of management and request a correction and/or additional information.
SSARS 21 does not preclude the accountant from performing a preparation of financial statements engagement on a bank’s prescribed form. The accountant, however, must comply with the rules specified in Section 70 of SSARS 21 such as including a disclaimer or including “no assurance is provided” on each page.
Yes, as long as all relevant preparation of financial statement guidance is followed. (See .A1 of Section 70.)
Yes and it must be signed by both the accountant and management or those charged with governance.
Yes. Click here for more information.
No. However, consider doing so anyway.
No. Departures must be communicated on the face of the financial statements or in a note.
I checked with the AICPA. It is okay to title the report with wording such as:
It may be best to use Accountant’s Disclaimer. Why? Some accountants believe the disclaimer is not a report; compilation, review, and audit engagements result in reports.
Also, .A20 of Section 70 of SSARS 21 includes a sample preparation of financial statements engagement letter that states “The financial statements will not be accompanied by a report.” So if you do call the disclaimer a “report,” make sure you amend your engagement letter accordingly.
SSARS 21 is silent on this issue. I checked with the AICPA, and they said it is permissible to include “See Accountant’s Disclaimer” on each page of the financial statements.
The example in SSARS 21 does not include a salutation (addressee). I checked with the AICPA, and they stated that a salutation can be included in the disclaimer.
Either on the face of the financial statements or in a selected note to the financial statements.
Example wording is as follows:
Substantially all disclosures ordinarily included in financial statements prepared on the tax basis of accounting are not included.
Yes. Use a label such as the following:
Selected Information–Substantially All Disclosures
Required by [the applicable financial reporting framework] Are Not Included
No assurance is provided on these financial statements.
The financial statements do not include a statement of cash flows.
Substantially all disclosures required by accounting principles generally accepted in the United States are not included.
To access my free SSARS 21 Preparation of Financial Statements slide deck, click here.
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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.
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