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Engagements to prepare financial statements under SSARS No. 21
In the coming year organizations and individuals will have an opportunity to engage their public accountant to prepare financial statements without an accountant’s report being issued with those financial statements. In October 2014, the American Institute of CPAs (AICPA) issued Statement on Standards for Accounting and Review Services (SSARS) No. 21. Prior to SSARS No. 21, when an accountant in public practice prepared financial statements for a client and submitted those statements to the client, the client had to engage the accountant to compile the financial statements. The accountant was usually required to issue an accountant’s compilation report with those statements.
SSARS No. 21 provides a framework for clients to engage their public accountant to prepare financial statements without issuing a report on those statements. This is useful for clients whose accountant prepares interim financial statements or prepares financial statements that will not be used by an outside party. Even for financial statements that will be used by an outside party this option may still be practical. When an accountant issues a compilation report with financial statements, the accountant provides no assurance on those financial statements. The accountant is not providing any assurance when the accountant is engaged under SSARS No. 21 to prepare financial statements. The client needs to determine if outside users of the financial statements require or want an accountant’s compilation report.
SSARS No. 21 requires the accountant to obtain an engagement letter from the client for the preparation of the financial statements. Depending on the financial statements, there are several disclaimers that must be made on the face of the statements, in the notes to the financial statements or on a disclaimer page. SSARS No. 21 is effective for reviews, compilations and engagements to prepare financial statements for periods ending on or after December 15, 2015. However, the AICPA is allowing early implementation of SSARS No. 21.
Ask your public accountant about the preparation of financial statements under SSARS No.21 and if it is a practicable option for your financial reporting needs and requirements.