3 Answers to Common SSARS No. 21 Questions
The National Football League’s Denver Broncos will have a new head coach in the upcoming season, Gary Kubiak, a former quarterback and later assistant coach for Denver who most recently was offensive coordinator for the Baltimore Ravens. Kubiak brings a new offensive playbook featuring zone blocking schemes and play-action passing to his new team.
Broncos quarterback Peyton Manning has been playing at an All-Pro level for the vast majority of his career. Now he will need to learn Kubiak’s system – and quickly. It’s a challenge for Manning, but he knows that his new coach’s system has proven successful and can improve the Broncos’ chances of winning games.
Despite its lack of physical aggression, the accounting profession has quite a bit in common with these developments in the world of professional football. Consider this: Like Manning, you’ve been doing your job as an accountant at a high level for quite a while and you know what you’re doing when it comes to compilations and write-up work at your clients. Now Statement on Standards for Accounting and Review Services No. 21 has been issued and represents a new playbook for accountants in public practice who prepare financial statements.
SSARS No. 21 represents a major improvement to the standards and can improve the delivery of your firm’s services. However, just as Manning faces challenges with Kubiak’s system, you may be facing some challenges in understanding SSARS No. 21 and may have questions about its implementation.
The AICPA’s Private Companies Practice Section Center for Plain English Accounting (CPEA) has received a number of queries on this very issue. As a result, the Center has aggregated frequently asked questions about SSARS No. 21 as well as the team’s answers and published them in a recent report, available to CPEA members. Below are three of those questions and responses:
1) Q: The accountant is involved in a bookkeeping engagement to assist the client with the preparation of financial statements by entering journal entries into the client's accounting software. If the accountant then remotely prints the financial statements at the firm’s office for a client meeting, is the accountant required to follow the requirements of section 70 of SSARS No. 21?
A: With the issuance of SSARS No. 21, accountants no longer have to be concerned with the implications of submitting financial statements and “tripping” into the SSARSs. If the client did not engage the accountant to prepare financial statements, the requirements of section 70 of SSARS No. 21 do not apply.
2) Q: If financial statements are prepared by the accountant as a by-product of another engagement (for example, an engagement to prepare a tax return), is the accountant required to follow section 70 of SSARS No. 21 and include any special disclaimer or “no assurance” statement on those financial statements?
A: No. The accountant is only required to perform the preparation engagement in accordance with section 70 of SSARS No. 21 when engaged to prepare financial statements. Therefore, because the accountant was not engaged to prepare the financial statements, there is no requirement to include a statement on each page of the financial statements indicating that no assurance is provided on the financial statements.
3) Q: If the accountant is engaged to prepare financial statements that omit substantially all disclosures, where does the accountant disclose that substantially all disclosures are omitted?
A: The accountant should disclose the omission in the financial statements either on the face of the financial statements or in a note to the financial statements. The disclosure can be made in the financial statement title.
Implementing SSARS No. 21 will take time, so firms should begin early. The AICPA Financial Reporting Center features a webpage containing helpful SSARS No. 21 resources. Additionally, the Center for Plain English Accounting has tools to help its members implement accounting, auditing, review, compilation and quality control standards- including SSARS No. 21.
For a limited time, three Center for Plain English Accounting reports (including SSARS No. 21: Frequently Asked Questions and Answers) are available for free to all. Visit learncpea.org to give the Center for Plain English Accounting a try today.
Robert Durak, Director- Center for Plain English Accounting, American Institute of CPAs.
Peyton Manning courtesy of Jeffrey Beall via Wikipedia.