Preparation, Compilation & Review
Many accountants have asked, “When am I subject to SSARS 21?” This question often arises when a CPA provides bookkeeping services using a cloud-based accounting package such as Quickbooks. Bookkeeping or preparation of financial statements–which is it? Why the confusion? Well, once the bookkeeping is complete, the CPA or the client can print the financial statements–and we know that SSARS 21 is triggered when we are engaged to prepare financial statements.
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Bookkeeping or Preparation of Financial Statements
Suppose you enter the client’s monthly transactions in QuickBooks, and you reconcile the bank statements. Now you or the client can print the financial statements. Have you unintentionally wandered into a requirement to follow SSARS 21? Let me answer this question with another question.
Has your client engaged you to prepare financial statements? If yes, then SSARS 21 is in play. If not, then compliance is not required. The AICPA says, “the accountant has only been engaged to prepare financial statements when the client has ‘hired’ the accountant to do so.”
Using QuickBooks to provide bookkeeping services does not–necessarily–mean you have been engaged to prepare financial statements. But how can you be clear? When in doubt spell it out–in an engagement letter. Use an engagement letter for all client services–even nonattest work such as bookkeeping. When you provide bookkeeping services, and the customer has not “hired” you to prepare financial statements, make it clear that you are not engaged to provide financial statements. The AICPA’s 2016/17 Audit Risk Alert–regarding Preparation services–advises that you might include this sentence when you are not engaged to prepare financial statements: This engagement does not contemplate us preparing financial statements.
More Information About Preparation Services
For more a fuller explanation regarding whether the use of QuickBooks triggers SSARS 21, click here.