SSARS No. 21
On October 23, 2014, the Accounting Review Services Committee issued Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification. SSARS No. 21 clarifies and revises the standards for reviews, compilations and engagements to prepare financial statements. It also includes significant revisions that affect the standards for accountants in public practice who prepare financial statements for their clients.
Summary of SSARS No. 21
SSARS No. 21 is effective for engagements on financial statements for periods ending on or after December 15, 2015 but early implementation is permitted. The clarified and revised standards supersede all existing AR sections except for AR section 120, Compilation of Pro Forma Financial Statements, which is expected to be exposed for public comment in clarified format in 2015 along with a proposed standard on compilation of prospective financial information, which is currently addressed in the attestation standards.
SSARS No. 21 is composed of four sections, as follows:
- Section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services, is intended to help accountants better understand their professional responsibilities when performing engagements in accordance with SSARSs.
- Section 70, Preparation of Financial Statements, applies when the accountant is engaged to prepare financial statements but is not engaged to perform an audit, review or a compilation on those financial statements.
- Section 80, Compilation Engagements, applies when the accountant is engaged to perform a compilation engagement.
- Section 90, Review of Financial Statements, applies when the accountant is engaged to perform a review of financial statements.
Substantive changes to standards for compilations, reviews, or engagements to prepare financial statements are as follows:
- Section 70 does not require a report – even when the financial statements are expected to be used or provided to a third party.
- Section 70 requires either a legend on each page of the financial statements stating that no assurance is being provided or a disclaimer.
- The accountant is required to obtain an engagement letter signed by both the accountant and the client’s management for all reviews, compilations, and engagements to prepare financial statements.
- Section 80 eliminates the need for the accountant to determine whether he or she has prepared financial statements by eliminating the submission requirement.
- Section 80 always requires a report. Financial statements that the accountant is engaged to prepare but that are not intended for third-party use would fall under Section 70.
SSARS No. 21 is available on the Compilation and Review Standards page or an Executive Summary is available.
Also available is a SSARS No. 21 fact sheet is available highlighting additional provisions of the Statement.
See more on the background of SSARS No. 21 at the ARSC Clarity Project page.
The AICPA has created the following helpful resources:
- Mapping of Interpretations to AR sections and AR sections 110, 200, 300, 400, and 600 to SSARS 21 and/or AICPA Guide Preparation, Compilation, and Review Engagements
- Comparison of engagement letter requirements – SSARS No. 19 vs. SSARS No. 21
Introduction to SSARS No. 21
Michael Glynn, Senior Technical Manager- Audit and Attest Services, provides an overview of Statement on Standards for Accounting and Review Services No. 21.More on AICPA TV
The AICPA has the following publications available or under production.
AICPA Resources - CPE and Webcasts
The AICPA has the following CPE courses and webcasts available or under production:
- Preparation, Compilation and Review Staff Essentials – new 17-hour curriculum comprised of 9 courses that total 17 hours of CPE eligible credit. There are two series in the curriculum program that can be purchased separately as listed below.
- CPE – Annual Update for Preparation, Compilation, and Review Engagements
- Webcast (archive) – Understanding the SSARS 21 Clarification and Revision