When is SSARS No. 19 Applicable?
SSARS No. 19, Compilation and Review Engagements, applies to any engagement for a non-public entity in which financial statements are submitted to the entity. Submission is defined as both preparation and presentation of the financial statements. Here are some examples of submission of financial statements and when at least compilation procedures are necessary:
• Performing an accounting service in a CPA’s office by inputting financial information from check copies, deposit slips and bank statements into a software system, making general journal entries, printing financial statements and delivering them to a client.
• Performing a controllership service at the client’s office by analyzing its general ledger, making general journal entries, printing financial statements for discussion with client personnel.
• CPA receives a disk or email containing the accountant’s review copy of a client’s general ledger. The CPA analyzes transactions, makes general journal entries and prints financial statements for mailing to the client.
• CPA inputs data into a software system, makes adjusting journal entries and prints and delivers a trial balance that contains summary totals for assets, liabilities, revenues and expenses.
In each of these circumstances, had client personnel printed the financial statements or trial balance from the embedded features in the accounting software, the accountant would have prepared but not presented the statements or trial balance. The accountant, therefore, would not have submitted the financial information and SSARS No. 19 would not have applied. Other services that would not be considered submission of financial statements and not subject to SSARS No. 19 performance and reporting standards include:
• Preparing tax returns
• Performing various tax consulting services
• Performing various accounting services
o Proposing adjusting journal entries
o Preparing a working trial balance without summary totals
o Providing various bookkeeping services
o Designing a financial statement format for a client
o Preparing or installing a descriptive chart of accounts
o Recommending software
Peer reviewers have challenged the preparation and presentation rule many times. Post a comment and tell readers of any such experiences you may have had.
by Larry Perry, CPA, CPA Firm Support Services, LLC - Larry has over 40 years experience as a CPA practitioner, author of accounting and auditing manuals, author and presenter of live staff training seminars and author of webcast and self-study CPE programs. He is co-founder of CPA Firm Support Services, LLC (www.cpafirmsupport.com), an organization providing resources, training and consulting to smaller CPA firms. Larry writes a weekly blog on AccountingWEB.com focusing on small audits, reviews and compilations. He is currently developing documentation manuals and handbooks for small audits, reviews and compilations and related electronic practice aids.