Thursday, November 11, 2010


The Accounting and Review Services Committee approved SSARS 19, Compilation and Review Engagements, on December 30, 2009. This standard becomes effective in 35 days; are you ready?

SSARS No. 19 is effective for compilations and reviews of financial statements for periods ending on or after December 15, 2010—that is, for 2010 calendar year-ends and later. Following is how the statement will affect your compilation and review engagements.

What SSARS No. 19 Does

Some of the more significant provisions of SSARS No. 19 include the following:

• Allows, but does not require, accountants to explain why they’re not independent in a compilation report.
• Separates the compilation requirements from the review requirements.
• Introduces the term review evidence into the review literature. Review evidence is defined as information the accountant uses to provide a reasonable basis for obtaining limited assurance.
• Provides guidance on how the accountant obtains limited assurance when performing review procedures.
• Requires tailoring review procedures for a particular engagement based on the accountant’s knowledge of the client, understanding of the client’s industry, and awareness of the risk that the accountant may knowingly fail to modify his or her report on materially misstated financial statements.
• Discuses the concept of materiality in the context of review engagements.
• Requires a written communication, (i.e. an engagement letter) documenting the understanding with the client regarding the services to be performed.

Documentation Requirements

In addition to the engagement letter, SSARS No. 19 requires the accountant to document the following items:

• Significant, unusual matters considered by the accountant during the performance of the compilation procedures, including their resolution.
• Analytical procedures performed, for review engagements, including management’s response to the accountant’s inquiries regarding fluctuations or relationships that are inconsistent with other information or that differ from expectations by a significant amount; additional review procedures performed and the results of those procedures; significant matters covered in the accountant’s inquiry procedures; significant findings or issues or unusual matters and their disposition; and the client representation letter.
• Communications regarding fraud or illegal acts that came to the accountant’s attention while performing the compilation or review engagement.

Reporting Changes

SSARS No.19 changes the language in standard compilation and review reports and provides illustrations of both types of reports. As previously noted, an accountant may now choose to include language in the accountant’s compilation report describing the reason the accountant is not independent. This disclosure would be added to the final paragraph of the report. There is no prescribed language the accountant must use in the report. Although accountants aren’t required to include the reason(s) for independence impairment, if disclosure is made, it must include all reasons independence is impaired.

Be sure that you and your staff are familiar with the new requirements of SSARS No.19 so you will be ready when the standard is effective.

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