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A new day: SSARS 19 ushers in new compilation review standards.

When it comes to the new compilation and review standards in SSARS 19, there are two major questions:

What do we need to know?

By when do we need to take action?

Implementation Dates

The new standard is effective for compilation and review reports issued on financial statements for periods ending on or after Dec. 15, 2010. Early implementation is not allowed except for changes that affect reports that the accountant is not. independent. The accountant is now allowed to disclose in the report the reasons for nonindependence.


Major Issues

This compilation and review standard contains the most significant changes since 1978. It affects all of us that issue any compilation and review reports on financial statements. It also could have a significant affect on your peer review.

Non-Independent Reports

Reports now can disclose why the accountant is not independent. CPAs always had been permitted to perform compilations when not independent but were prohibited from including in the report an explanation regarding the lack of independence.

As of Jan. 2010, those of us who issue compilation reports that state we are not independent have the option to include the reasons why we are not independent.

The following are some general rules, and it is suggested that if" you are planning on utilizing this standard, be sure you have appropriately researched the application of the new standard:

* Again, stating in the report why we are not independent is optional.

* We do not have to always state why we are not independent once we have done it. It can be done on any, but not all, reports issued for a client from now on.

* There is no standard wording for the nonindependence reasons, though SSARS 19 gives examples, including:

a) I had a direct financial interest in the company.

b) An individual of my immediate family was employed by the company

c) I performed certain accounting services (may include a specific description of services) for the company

* All of the reasons for nonindependence must be stated.

* This standard is applicable for compilations only Review reports have been excluded at this time. However, watch for future standard changes that may affect review reports.

All Compilation/Review Reports

Mandatory engagement letters for all compilation and review engagements are required. The standard offers examples of these.

* Documentation requirements for both compilations and reviews. This is a major change. For compilations, the documentation will need to cover what work was performed to meet professional standards. This does not mean that you document accounting services to "get the books right," as we all do on most compilations. It means we document situations that are unusual and needed to satisfy the compilation standards.

* A discussion of how the accountant obtains limited assurance through the performance of review procedures.

* Introduction of the term "review evidence" to the review literature.

* A discussion of tailoring the review procedures based on the accountant's understanding of the client's industry knowledge of the client and awareness of the risks that he or she may unknowingly fail to modify the review report on materially misstated financial statements.

Other Changes

Materiality is discussed regarding review engagements. Guidance is given regarding factors such as the user of the financial statements and other considerations.

Also, the standards for compilations and review engagements have been separated. Issues such as "extent of knowledge required" are defined within the compilation versus review standards.

Final Standard Vs. Draft

The final standard differs from the exposure draft in two major ways:

First, the Accounting and Review Services Committee decided to retain the concept of limited assurance rather than moderate assurance. The committee had proposed to use the term "moderate assurance" to describe the level of assurance that the accountant aims to obtain in a review engagement to harmonize with the terminology used in the international review standards.

However, after the exposure draft was issued, the International Audit and Assurance Standards Board began looking to revise the international review standard from moderate to limited.

The other major difference is that the non-independent review is not part of the final standard. The ARSC received a number of comments on this proposal and decided to defer this issue after holding further meetings with key stakeholders.

Next Steps

Most of us will rely on third-party providers of practice aids that we have used in the past. But. be aware that it is still our responsibility to understand the new professional standard and its intent. It will not be sufficient to blindly rely on outside practice aids. It is our responsibility to conduct the compilation and review engagements in accordance with new standards.

In California, peer review is now mandatory and it is the responsibility of the reviewer to insure they have met the new standard. Following a third-party practice aid may not be sufficient. So it is recommended that you obtain sufficient CPE to make sure you understand the new SSARS standard.

Thad Scott, CPA, CFE is a sole practitioner in Fresno. He can be reached at The AICPA contributed to this report.

want more?

More SSARS 19 information and resources are available at, including:

White Paper: Significant Change to Compilation Reporting When Independence is Impaired

Executive Summary

RELATED ARTICLE: Education Foundation Has SSARS 19 Covered for You

Check out these upcoming SSARS-related offerings at

Compilation and Review:

Current Issues

Aug. 25--SFO

Sept. 28--San Jose

Oct. 19--Orange County

Dec. 3--Burbank

Jan. 26, 2011--San Diego

Compilation and Review:

Basic Review and Update

June 8--Lake Tahoe CE Week

June 14--Channel Counties

Oct. 22--Bakersfield

Nov. 12--Los Angeles Airport

Jan. 7, 2011--San Francisco

Advanced Compilation and Review

July 19--Fresno

Aug. 6--Monterey CE Week

Aug. 19--Burbank

Sept. 2--Redding

Sept. 20--San Diego Area

Dec. 8--SFO and webcast

Accounting and Auditing Update

May 20--San Francisco

June 1--Burbank

Aug. 31--Fresno

Oct. 26--San Luis Obispo CE Week

Dec. 16--Palm Springs CE Week

Feb. 15, 2011--Sacramento

April 20, 2011--San Francisco

April 27, 2011--Orange County

Practical Financial Accounting and Auditing Update

May 28--Bakersfield

July 14--San Diego CE Week

Nov. 15--San Francisco and webcast

Jan. 13, 2011--Los Angeles Airport

Jan. 25, 2011--San Joaquin Valley

Essential Documentation and Review of Working Papers

July 7--Sacramento

Aug. 10--San Fernando Valley

Nov. 19--San Diego Area

Dec. 10--San Joaquin Valley

Accounting and Auditing Conference

Oct. 26--Burbank
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Title Annotation:Statements on Standards for Accounting and Review Services
Author:Scott, Thad
Publication:California CPA
Geographic Code:1U9CA
Date:Mar 1, 2010
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