The SSARS 15, 16, and 17 changes are meant to be helpful and do not affect how we (accountants) deliver review and compilation services to our clients. Other than some language changes in engagement and representation letters, you should not notice the eliminations, additions, and clarifications in the standards.

“The structural changes and clarifications won’t change what we do, but they will assist us in better understanding the standards, which in turn will improve efficiency and directly benefit our clients,” explains Steve Bodine, an assurance and accounting principal with LarsonAllen.

Alterations were needed considering the compilation and review standards haven’t changed much since they were created 30 years ago. The last significant revision to the standards occurred in 2000, with the issuance of SSARS 8, Amendment to Statement on Standards for Accounting and Review Services, No. 1, Compilation and Review of Financial Statements, which recognized the service was computerized and no longer conducted using paper and pencil.

Breaking away from audit standards
SSARS 15, Elimination of Certain References to Statements on Auditing Standards and Incorporation of Appropriate Guidance Into Statements on Standards for Accounting and Review Services, eliminated references to audit standards by incorporating the following directly into the compilation and review standards:

• The full guidance for an other comprehensive basis of accounting (OCBOA)
• The hierarchy of generally accepted accounting principles (GAAP)
• The procedures to perform when there is a subsequent discovery of facts existing at the date of the report

Although the guidance does not alter the procedures most practitioners follow in performing these services, it provides a foundation for the development of continuing guidance—independent of audit standards.

While eliminating references to audit standards, the AICPA’s Accounting and Review Services Committee (ARSC) noted that certain audit standards were followed when performing compilations and reviews of financial statements, even though specific guidance in the SSARS did not exist. These practices created the need for SSARS 17, Omnibus Statement on Standards for Accounting and Review Services – 2008, which is effective for periods ending on or after December 15, 2008.

Going concern issues
SSARS 17 addresses going concern issues and requires the practitioner to address the topic by either inquiring about the possibilities in a review engagement or reacting to the indicators that may exist when performing a compilation engagement. For both compilations and reviews, a modification to the report for a going concern situation is unnecessary as long as the matter is adequately disclosed in the financial statements.

Subsequent events
SSARS 17 also addresses subsequent events. The standard requires the practitioner to inquire about the existence of subsequent events in a review engagement. For compilations, if the practitioner becomes aware of a subsequent event, the accountant must react. For both services, disclosure is required.

Clarifying the standards
Both SSARS 16, Defining Professional Requirements in Statements on Standards for Accounting and Review Services, and SSARS 17 take the first step in achieving clarity—the definition of terms.

SSARS 16 defines the terms “must” and “should.” When a procedure is described in standards and includes the term “must,” the practitioner has an unconditional requirement to perform the procedure. This term is used sparingly in the standards. The term “should” indicates a presumptively mandatory requirement, which may be overcome; however, if the presumption is overcome, the reason must be documented for both compilation and review engagements.

One example of a presumptively mandatory requirement involves reporting. If multiple services were performed, the accountant should report on the highest level of service. But if the financial statements exclude disclosures, the highest level that can be reported is a compilation. Accordingly, the accountant should document the justification for the omission and the lower level of service. Currently, there are more than 150 “should” requirements included in Section 100 of the Codification of the SSARS.

Other terms have been clarified in SSARS 17 including the replacement of “nonpublic” with the term “nonissuer” making it easier to determine whether SSARS applies. SSARS 17 also defines the terms “management” and “governance” and provides guidance on when “no report” compilations are appropriate. Unless members of governance are also considered members of management, “no report” compilations are not intended for them.

What’s next?
The ARSC is working on rewriting the standards in a more understandable format. This includes separating the compilation and review service requirements. In addition, a number of presumptive requirements are mixed with the guidance, which makes the identification of requirements difficult.