Accounting and Review Services Committee issues new standards, interpretation.

The AICPA's Accounting and Review Services Committee has issued Statement on Standards for Accounting and Review Services No. 10, Performance of Review Engagements (No. 060663CPA06), and Statement on Standards for Accounting and Review Services No. 11, Standards for Accounting and Review Services (No. 060710CPA06).

SSARS No. 10 amends SSARS No. 1 by expanding on previously provided guidance on analytical procedures, inquiries and other review procedures; by providing inquiries regarding fraud in a review engagement; by requiring representations regarding fraud in the management representation letter; and by clarifying and providing guidance regarding documentation in a review engagement. The new standard is effective for reviews of financial statements for periods ending on or after Dec. 15, 2004.

SSARS No. 11 establishes a SSARS hierarchy. The statement, effective upon issuance, is beneficial to practitioners by making them aware of the appropriate literature and the various publications' standing in the SSARS hierarchy. In addition, it addresses a technical correction to SSARS No. 2, Reporting on Comparative Financial Statements (AICPA, Professional Standards, vol. 2, AR sec. 200). The statement amends SSARS No. 2 (AR sec. 300.27, footnote 9) to conform with the guidance found in Statement on Auditing Standards No. 58, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 508.74, footnote 29), as amended, which states that a successor auditor may name the predecessor auditor if the predecessor auditor's practice was acquired by, or merged with, that of the successor auditor.

To obtain copies of SSARS 10 or 11, contact the AICPA Service Center (see page 11; $14.50 member/$17 non-member).

In addition to the two new standards, ARSC also has issued an interpretation of SSARS 10 to provide guidance as to the steps the accountant should take to perform the required communication when, during performance of a compilation or a review engagement, the accountant suspects that a fraud or an illegal act may have occurred.

The interpretation can be viewed on the AICPA Web site at www.aicpa.org/members/div/auditstd/interp_ar_9100_26.htm.

Finally, ARSC also created an issues paper entitled "Analytical Procedures in a Review Engagement." The issues paper was developed in response to several comment letters received on the exposure draft that eventually became SSARS No. 10. Those comment letters expressed confusion as to the development and subsequent documentation of expectations with respect to analytical procedures in a review engagement. The issues paper provides accountants with information that may help them understand certain requirements related to the use of analytical procedures in review engagements, including the development of expectations, and how the use of analytical procedures should be documented in those engagements.

For the issues paper, visit www.aicpa.org/members/div/auditstd/issupap_2004_05_ssars10.htm.