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 at cpa2biz.com 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.