For example: A CPA is engaged to compile the financial statements for a client for the years ended Dec. However, that would be confusing to the client and to third-party users of the compiled financial statements.
The one caveat is that if CPAs decide to disclose the reasons for an independence impairment, they are required to disclose all reasons. The CPA may feel that a third-party user, such as a banker, may be more inclined to rely on compiled financial statements when the user knows that the CPA was heavily involved in the financial reporting process. However, that same user may be less inclined to rely on compiled financial statements when he or she is aware that the compiling CPA is an owner of the business.
While it is true that the CPA is not independent because of the performance of the accounting services, that only tells part of the story and is potentially misleading to users. Many CPAs have concluded that they would generally opt to not include the reasons since a user may take an inappropriate and unintended level of assurance from compiled financial statements if the user believes that the CPA did more work in the preparation of the financial statements.
First, it is an option, not a requirement. Second, if practitioners choose to disclose the reason, they must disclose all reasons. Early application is allowed for this disclosure for any reports issued after Dec. The standard explains that through analytical procedures, inquiries and other specific procedures, based on professional judgment, practitioners will accumulate review evidence sufficient to provide a reasonable basis for obtaining limited assurance that no material modifications will need to be made to the financial statements.
The standard also emphasizes the fact that practitioners should tailor review procedures to meet the circumstances, and that practitioners should focus on areas where there is a greater risk of misstatements. The exposure draft also would have permitted the performance of a review while the practitioner was not independent because of the performance of certain non-attest services related to internal control. However, respondents met this with considerable comments, positive and negative.
So, to give the issue proper attention, the committee decided to readdress it in The economic environment has changed dramatically during the past 30 years, as have the needs of financial statement users. With the restructuring of compilation and review standards in SSARS 19, practitioners will be better prepared to respond to those needs.
Jeffrey L. Email : msc ficpa. Main navigation. Clarified Preparation, Compilation and Review Standards. Below are the standards and related interpretations that are current as of June 1, The following standards have been superseded but are available for historical purposes only. Original Standard No. Association of International Certified Professional Accountants. Final Standard Vs. Draft The final standard differs from the exposure draft in two major ways: First, the Accounting and Review Services Committee decided to retain the concept of limited assurance rather than moderate assurance.
However, after the exposure draft was issued, the International Audit and Assurance Standards Board began looking to revise the international review standard from moderate to limited. The other major difference is that the non-independent review is not part of the final standard.
The ARSC received a number of comments on this proposal and decided to defer this issue after holding further meetings with key stakeholders. Next Steps Most of us will rely on third-party providers of practice aids that we have used in the past.
But be aware that it is still our responsibility to understand the new professional standard and its intent. It will not be sufficient to blindly rely on outside practice aids. It is our responsibility to conduct the compilation and review engagements in accordance with new standards.
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