Much of the recent conversation surrounding SSARS 21 has been about Section 70 — Preparation of Financial Statements. In this post, we’ll take a look at Section 80 — Compilation Reports.
What changed? What’s the same?
First, here’s a short video to give you an overview (and the secret to the most expeditious way to issue compilation reports).
What’s the Same?
So what is the same (when comparing SSARS 21 compilation guidance with SSARS 19)?
- Compilations are still a nonassurance service (the CPA is not verifying anything)
- Compilations are an attest service
- The accountant must prepare an engagement letter
- The accountant must read the financial statements
- The accountant must report any material departures from the reporting framework
- The accountant must report the omission of notes (if they are omitted)
- Selected disclosure is permissible
- The accountant’s lack of independence should be noted in the compilation report
What’s different (when comparing SSARS 21 compilation guidance with SSARS 19)?
- Compilation report language and formatting (see example below)
- The engagement letter must be signed by the accountant and the client
- The preparation of financial statements is a separate nonattest service (and the compilation engagement letter should refer to the preparation service as such)
Here is the relevant sample paragraph from Illustration 1 of the compilation engagement letters in Section 80 of SSARS 21:
You are also responsible for all management decisions and responsibilities and for designating an individual with suitable skills, knowledge, and experience to oversee our preparation of your financial statements. You are responsible for evaluating the adequacy and results of the services performed and accepting responsibility for such services.
The standard SSARS 21 compilation report follows:
Management is responsible for the accompanying financial statements of XYZ Company, which comprise the balance sheets as of December 31, 20X2 and 20X1 and the related statements of income, changes in stockholder’s equity, and cash flows for the years then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America. I (We) have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. I (we) did not audit or review the financial statements nor was (were) I (we) required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, I (we) do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements.
[Signature of accounting firm or accountant, as appropriate]
[Accountant’s city and state]
Notice the sample report has no report title. It also is not addressed to anyone. For a comparison of the new compilation report with the SSARS 19 (old) report, click here.