In October 2011, the Auditing Standards Board (ASB) reached a major milestone in its project to redraft all of the auditing sections in Codification of Statements on Auditing Standards
(contained in Professional Standards
), with the release of Statement on Auditing Standards Nos. 122-124
. The clarified auditing standards are designed to make the standards easier to read, understand, and apply.
The Accounting and Review Services Committee (ARSC) has concluded that by undertaking a similar clarity project, the ARSC would serve the public interest by having all of the professional literature for audits, reviews, and compilations drafted using the same conventions. In addition, the resulting clarified compilation and review standards would be easier to read, understand, and apply.
In May 2010, the ARSC approved a project to revise all existing compilation and review standards in the Codification of Statements on Standards for Accounting and Review Services
(AR sections of the AICPA’s Professional Standards
) substantially using the drafting conventions adopted by the ASB in clarifying the auditing literature.
The ARSC has determined, however, that there would be certain differences between its clarity drafting conventions and those adopted by the ASB. Specifically, the ARSC has determined to not include specific application guidance with respect to governmental entities and smaller, less complex entities. Accordingly, the ARSC has commenced redrafting the Statements on Standards for Accounting and Review Services (SSARSs) in accordance with those conventions, which include the following:
- Establishing objectives for each clarified AR section
- Including a definitions section, where relevant, in each clarified AR section
- Separating requirements from application and other explanatory material
- Numbering application and other explanatory material paragraphs using an A- prefix and presenting them in a separate section that follows the requirements section
- Using formatting techniques, such as bulleted lists, to enhance readability
While the ARSC’s primary goal is to clarify the standards for compilation and review engagements and issue standards that are appropriate for American accountants, the ARSC will consider harmonizing with International Standard on Related Services (ISRS) No. 4410, Engagements to Compile Financial Statements
and International Standard on Review Engagements (ISRE) No. 2400, Engagements to Review Financial Statements
In January 2013, the ARSC voted to withdraw the exposure draft of the proposed SSARSs Association With Unaudited Financial Statements; Compilation of Financial Statements; and Compilation of Financial Statements – Special Considerations
. The decision to withdraw the exposure draft was in response to comments contained in the 92 comment letters that were received on the exposure draft. The compilation proposal would have revised the applicability of the compilation standard but would have retained the compilation service as an attest service. The association proposal addressed the accountant’s responsibilities when a member is associated with financial statements that have not been compiled, reviewed or audited. The exposure draft proposed that certain legends, notations or disclaimer language would be placed on or with the financial statements when the accountant prepares financial statements but has not compiled, reviewed, or audited the financial statements. After reviewing the comment letters at its meeting in January 2013, the ARSC noted that certain commenters suggested that the compilation service be positioned as a nonattest service consistent with the positioning of preparation of financial statements. A second concern was confusion between the proposed standards and the views of many respondents that they needed to be combined and simplified. The ARSC immediately began work on a new proposal that will respond to these major concerns.
The ARSC’s current timeline with respect to its project to clarify the SSARSs is as follows (please note that the timeline is subject to change):
August 2013 –
ARSC to consider comments received on the draft proposed SSARSs Review of Financial Statements
and Review of Financial Statements – Special Considerations.
The ARSC will also consider drafts of
the proposed SSARSs Framework for Performing and Reporting on Compilation and Review Engagements, Compilations of Prospective Financial Information,
and Compilations of Proforma Financial Information.
The current timeline indicates that the clarified SSARSs would be effective for compilations and reviews of financial statements for fiscal years (and interim periods within those years) beginning on or after December 15, 2014. Early implementation would be permitted (that is, for engagements performed for calendar year 2015 financial statements and interim periods within that calendar year).
The AICPA continues to work towards finalizing the Clarity Project. All current Exposure Drafts are always available in the AICPA.org Research Area.
Also available is an informational page on the Proposed Revisions to the Ethics and Compilation Standards and how they are inter-related.