Personal Financial Statements Guide — AICPA Audit Guide

Updated for the new Risk Assessment Standards as of May 1, 2007, this Audit and Accounting Guide summarizes applicable practices and delivers "how-to" advice for handling almost every type of financial statement. It describes relevant matters, conditions, and procedures unique to personal financial statements, and illustrates treatments of financial statements and reports to caution auditors and accountants about unusual problems.

Introduction

Background Information

1.01   The purpose of this Guide is to assist the accountant in applying professional standards to engagements involving personal financial statements.

1.02 Statement of Position (SOP) 82-1, Accounting and Financial Reporting for Personal Financial Statements (AICPA, Technical Practice Aids, ACC sec. 10,350), states that personal financial statements should present assets at their estimated current values and liabilities at their estimated current amounts and describes in detail the principles for such presentations. (SOP 82-1 is reproduced in Appendix F of this guide.)

1.03   Some procedures are common to all personal financial statement engagements; for example,

• A decision is made whether to accept a prospective client.
• An understanding is reached with the client regarding the type of service to be rendered.
• Ordinarily information is gathered.

Accountants may be engaged to compile, review, or audit personal financial statements.

1.04 Accountants may also be asked to report on specified elements, accounts, or items of a personal financial statement. In those circumstances the guidance provided by AU section 623, Special Reports (AICPA, Professional Standards, vol. 1); AT section 101, Attest Engagements (AICPA, Professional Standards, vol. 1) and 201, Agreed-Upon Procedures Engagements (AICPA, Professional Standards, vol. 1); or AR section 110, Compilation of Specified Elements, Accounts, or Items of a Financial Statement (AICPA, Professional Standards, vol. 2) should be followed as applicable.

Acceptance of Clients

1.05 Before accepting an engagement involving personal financial statements, the accountant should evaluate certain aspects of the potential client relationship.1 In general, the accountant may wish to consider —

• Facts that might bear on the integrity of the prospective client.
• Circumstances that present unusual business risk.
• His or her ability to serve the prospective client.
• The effect of a lack of independence on the type of report he or she may appropriately issue in compliance with professional standards.
• Whether available accounting records or other data provide a sufficient basis for providing the services requested.

1.06 Consideration of the character and reputation of the individual helps to minimize the possibility of association with a client who lacks integrity. The extent of the accountant's inquiries before acceptance might depend on his or her previous knowledge of the client and the nature of the client's financial activities. The accountant maywant to consult predecessor accountants or auditors,2 attorneys, bankers, and others having business relationships with the individual regarding facts that might bear on the integrity of the prospective client. This does not suggest that, in accepting an engagement, the accountant vouches for the integrity or reliability of a client. However, prudence suggests that an accountant be selective in determining his or her professional relationships.

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