The Statement on Standards for Accounting and Review Services no. 19 (SSARS 19), Compilation and Review Engagements includes some major changes for Certified Public Accountants (CPAs) who perform compilations and reviews. One change is the wording for compilation and review reports along with new documentation requirements (including engagement letters) and other changes.
New Wording for Compilation and Review Reports
If you are a CPA who performs compilations and reviews, you will need to update the reports to reflect the new SSARS 19 wording. Using Intuit Statement Writer 2011 it is easy to modify the wording for a compilation (or review) report and save the revised report as a template for reuse in the future or for other clients. I created a new course for Intuit Academy, “Intuit Statement Writer 2011 – Your Financial Statement Solution” which includes details of exactly how to modify the compilation (or review) report for the new SSARS 19 wording and save it as a template for reuse. The course also includes detailed examples of how to prepare three different types of statements and reports:
- Example 1: Financial Statements with Compilation Report
- Example 2: Non Profit Organization
- Example 3: Financial Statements and charts/graphs for Management
Click here for a link to the course. You can watch the web seminar, get free CPE if you need it and download the PDF course manual to use as a reference. I wrote this blog post to provide an overview of the new features in Intuit Statement Writer 2011.
Here is an example of a compilation report with the new SSARS 19 wording for a report prepared on the income tax basis where the CPA is not independent:
Accountant’s Compilation Report
To the Board of Directors
I (We) have compiled the accompanying statement of assets, liabilities, and equity — income tax basis of «Client_Company_Name» (a corporation) as of «Report_Date», and the related statements of revenues, expenses and retained earnings–income tax basis for the year then ended. I (We) have not audited or reviewed the accompanying financial statements and, accordingly, do no express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting.
Management is (The owners are) responsible for the preparation and fair presentation of the financial statements in accordance with the income tax basis of accounting and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.
My (Our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management (the owners) in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.
Management has (The owners have) elected to omit substantially all of the disclosures ordinarily included in financial statements presented in accordance with the tax basis of accounting. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the Company’s assets, liabilities, equity, revenues, and expenses. Accordingly, these financial statements are not designed for those who are not informed about such matters.
I am (we are) not independent with XYZ Company.
This is only for reports of financial statements for periods ending after December 15, 2010. The actual wording of the compilation report should be modified as needed for the particular engagement. This is merely for illustration purposes. Comparison charts of the wording for the previous compilation (or review) report vs. the new wording is provided by The Journal of Accountancy here.
Documentation Requirements and Other Changes
Changes required to comply with SSARS 19 are discussed in a Journal of Accountancy article. The article provides details of the changes and requirements of SSARS 19 and how it impacts compilation and review engagements. According to the article, changes for compilation engagements include the following:
- Requirement to obtain a written understanding (for example, an engagement letter) for all compilation engagements.
- Modified documentation requirements.
- Allows accountants to disclose a description of the reasons for the lack of independence.
The Attestation Update — A&A for CPAs blog has several posts about the SSARS 19 documentation requirements for compilation and reviews. I would encourage you to read the posts if you need to comply with SSARS 19. It is very informative and helpful to understanding and complying with SSARS 19.
Special thanks to Paul Carlson for his assistance with this post.