SSARS 19: The new standard for compilation and review reports
Frequently asked questions


What is a SSARS?

SSARS stands for Statements on Standards for Accounting and Review Services.  SSARS 1 was issued by the AICPA in December 1978.  The AICPA sets the rules under which it's members can issue reports on financial statements.  "Compilation" and "Review" are the terms used to describe the reports that are allowed to be issued on statements that are not "Audited".  Our firm only issues compilation and review reports (no audits).  SSARS 19 represents the most significant new requirements under SSARS since SSARS 1 was issued over 30 years ago.

What are the "significant new requirements" of SSARS 19?

SSARS 19 requires that we obtain an engagement letter before we prepare and issue financial statements.  This includes compilation and review reports, as well as financial statements issued for management use only.
We may not be considered "independent" if we perform certain  services in preparing your accounting records (see below).  We are required to disclose any "lack of independence" in the compilation report.  A review report may not be issued if we are not independent.
If we change the type of engagement we are performing, we are required to get a new engagement letter.

What do you mean by "independence"?

Independence is a complex subject.  In order to be considered independent, CPA's are not allowed to be part of client management or ownership, or perform functions that would ordinarily be performed by management.  AICPA rules pertaining to independence are here.
Here are some examples of when independence would or not be impaired in the performance of bookkeeping services:

Independence Would Not Be Impaired

Independence Would Be Impaired

  • Record transactions for which management has determined or approved the appropriate account classification, or post coded transactions to a client's general ledger.

  • Prepare financial statements based on information in the trial balance.

  • Post client-approved entries to a client's trial balance.

  • Propose standard, adjusting, or correcting journal entries or other changes affecting the financial statements to the client provided the client reviews the entries and the member is satisfied that management understands the nature of the proposed entries and the impact the entries have on the financial statements.

  • Determine or change journal entries, account codings or classification for transactions, or other accounting records without obtaining client approval.

  • Authorize or approve transactions.

  • Prepare source documents.

  • Make changes to source documents without client approval.


What is an engagement letter?

SSARS 19 requires us to "document our understanding with the client in writing".  The engagement letter is used for that purpose.

Why is the engagement letter so long?

We are also required to have a peer review every three years.  As part of the peer review, we are required to document the system of Quality Control within the firm.  The engagement letter is written in such a way as to ensure compliance with our system of Quality Control, AICPA Independence rules, and SSARS 19 requirements.  All CPA firms are subject to these rules.  

Has the wording of the report changed?  How will it read?

Because of independence issues, we expect most, if not all, of the Compilation reports we issue to include a paragraph stating that we are not independent.  This is  because we usually prepare the coding of transactions and prepare journal entries without client approval.  As an alternative, we can prepare "Management use only" financial statements.  Management use only financial statements will be clearly marked as such, and the client will agree not to distribute them to third parties.
An example of the new compilation report for an income-tax basis company is here.

 

Account→ability

capable, responsible, professional

our firm is a member of the following professional organizations:


American Institute of CPA's


Council of Petroleum Accountants Societies

 

Texas Society of CPA's