Advanced Update for Compilation, Review and Accounting Services

• Chapter 1 - Compilations and Reviews – Introduction and Background
  • Learning Objectives
  • Accounting and Review Services Committee
  • Definitions
    • Submission of Financial Statements
    • Those Charged with Governance
    • Management
    • Third Party
    • Issuer
    • Nonissuer
    • Financial Statement
    • Compilation of Financial Statements
    • Review of Financial Statements
  • Authoritative Guidance
    • SSARS
    • Interpretative Publications
    • Other Compilation and Review Publications
  • Statements on Standards for Accounting and Review Services
    • Statements Issued
    • Codification
  • Interpretations of SSARS
    • Interpretations of AR Section 100: Compilation and Review of Financial Statements
    • Interpretation of AR Section 200: Reporting on Comparative Financial Statements
    • Interpretation of AR Section 300: Compilation Reports on Financial Statements Included in Certain Prescribed Forms
    • Interpretation of AR Section 400: Communications between Predecessor and Successor Accountants
    • Interpretation of AR Section 600: Reporting on Personal Financial Statements Included in Written Personal Financial Plans
  • Technical Practice Aids
    • .01 Compiled Financial Statements Not Adjusted
    • .02 Inquiries for a Review Engagement
    • .04 Financial Statements Marked as “Unaudited”
    • .08 Supplementary Information
    • .09 Application of SSARS 3 to Certain Companies Required to File With Regulatory Bodies
    • .10 Review of Financial Statements Included in a Prescribed Form
    • .11 Computer Generated Financial Statements
    • .12 Use of Other Comprehensive Basis of Accounting (OCBOA) for Interim Financial Statements and Generally Accepted Accounting Principles (GAAP) for Annual Financial Statements
    • .14 Uncertainties/Going Concern Problems
    • .15 Consistency
    • .16 Reference to Accountant’s Report in Notes to Financial Statements
    • .18 Bank Engaged a CPA Firm to Compile a Financial Statement of Another Entity
    • .19 Issuance of an Audit Report on Financial Statements Which Have Already Been Reviewed . 1-25 .20 Reissuance When Not Independent
    • .24 Issuing a Compilation Report with Substantially All Disclosures Omitted After Issuing a Report on Financial Statements Containing Full Disclosure
  • Questions
• Chapter 2 - Current Engagement Environment
  • Learning Objectives
  • Introduction
  • Resources
  • Standards for Compilation and Review Engagements
  • Overview of Guidance on Compilation Engagements
    • Financial Statement Compilations for Financial Statements
    • Performance Requirements
    • Standard Compilation Reports
    • Common Modifications to Compilation Reports
    • Compilations of Specified Accounts, Elements, or Items of Financial Statements
    • Compilations of Pro Forma Financial Information
  • Overview of Guidance on Review Engagements
    • Performance Requirements
    • Standard Review Report
    • Common Modifications to Review Reports
  • The U.S. Business Environment
    • Small Business Confidence
    • Implications of the Current Economy
  • Summary
• Chapter 3 - Recent SSARS Developments
  • Learning Objectives
  • Introduction
  • Resources
  • New Standards
    • AR Section 20 (SSARS No. 16) – Defining Professional Requirements in Statements on Standards for Accounting and Review Services
    • Omnibus SSARS
  • Interpretations Related to International Accounting and Reporting
    • Interpretation No. 24
    • Interpretation No. 30
  • Interpretation No. 31
  • Proposed SSARS
  • Summary
  • Question 1
  • Question 2
• Chapter 4 - Current Practice Issues
  • Learning Objectives
  • Introduction
  • Resources
  • Bookkeeping Engagements
    • OCBOA Task Force
  • Accountants Engaged to Prepare Financial Statements
  • SQCS No. 7 (Codified as QC Section 10) – A Firm’s System of Quality Control
    • Overview
    • Engagement Quality Control Review
    • Degree of Responsibility Imposed
    • Documentation and Communication
    • Elements of a System of Quality Control
  • Summary
  • Questions
• Chapter 5 - New Accounting Guidelines and Peer Review Deficiencies
  • Learning Objectives
  • Introduction
  • Resources
  • Common Deficiencies in Peer Reviews
    • Financial Reporting
    • SSARS Procedures and Documentation
  • New Accounting Guidelines
    • FASB Statement No. 160
    • FASB Statement No. 161
    • FASB Statement No. 162
    • FASB Interpretation No. 48
  • Summary
  • Questions
• Chapter 6 - Accounting Issues in Compilations and Reviews
  • Learning Objectives
  • Case 6-1: Is There a Gap in GAAP?
  • Case 6-2: Katrina Wreaks Havoc
  • Case 6-3: To Disclose or Not to Disclose – That is the Question!
  • Case 6-4: Retainer Required
  • Summary
  • Questions
• Chapter 7 - Engagement Administration Issues
  • Learning Objectives
  • Case 7-1: Walk the Line
  • Case 7-2: A Non-Independent Solution?
  • Case 7-3: Is There a Cure for This?
  • Case 7-4: Independence Day
    • Scenario 1
    • Scenario 2
    • Scenario 3
  • Case 7-5: Who is Suitable?
  • Case 7-6: How Many Firms Do We Need?
  • Case 7-7: Know thy Client!
  • Copyright AICPA * Unauthorized Copying Prohibited v Case 7-8: The Bite is Worse than the WOOF!
  • Summary
  • Questions
  • Appendix – Ethics Interpretation 101-3, Performance of Nonattest Services
    • Engagements Subject to Independence Rules of Certain Regulatory Bodies
    • General Requirements for Performing Nonattest Services
    • General Activities
    • Specific Examples of Nonattest Services
• Chapter 8 - Engagement Performance Issues
  • Learning Objectives
  • Case 8-1: Analyze This!
  • Case 8-2: Living in a Material World
  • Case 8-3: Building a Better Mouse Trap
  • Case 8-4: Did I Omit Something?
  • Case 8-5: Can You Verify This?
  • Case 8-6: Document Everything!
  • Case 8-7: The Library Fund
  • Case 8-8: A Loan by any Other Name…
  • Case 8-9: What Internal Controls?
  • Case 8-10: I See Nothing!
  • Summary
  • Questions
  • AR Exhibit A: Analytical Procedures in a Review Engagement
    • Expectations
    • Example 1 – Expected Increase in Revenue
    • Example 2 – Expected Decrease in Revenue
    • Example 3 – No Significant Change in Revenue or Expenses Expected
    • Conclusion
• Chapter 9 - Compilation and Review Reporting Issues
  • Learning Objectives
  • Case 9-1: Point of Departure
  • Case 9-2: Let Me Restate That!
  • Case 9-3: Does This Concern You?
  • Case 9-4: Daily Supplements
  • Case 9-5: Prescription for Trouble
  • Summary
  • Questions
• Chapter 10 - OCBOA Financial Statement Issues
  • Learning Objectives
  • Case 10-1: You Make the Call
  • Case 10-2: A Tax Shortcut?
  • Summary
  • Questions
• Chapter 11 - On the Horizon
  • Learning Objectives
  • Introduction
  • Resources
  • Adopting International Financial Reporting Standards
  • SSARS Pipeline
    • The ARSC Clarity Project
    • Reliability
    • Requirement to Obtain Engagement Letters
    • Recodification
  • FASB Pipeline
    • FASB Accounting Standards Codification
    • Fair Value
    • Transfers of Financial Assets
    • Income Tax Convergence Project
    • Contingencies Project
  • International Review and Compilation Standards
  • Summary
• Chapter 12 - Latest Developments
• Appendix A - SSARS 17, Omnibus Statement on Standards for Accounting and Review Services – 2008
• Appendix B - Codification of Statements on Standards for Accounting and Review Services as of February 2008
• Appendix C - Accounting and Review Exhibits
• Appendix D - Accounting and Review Appendixes
• Appendix E - Accounting and Review Topical Index
• Appendix F - Technical Inquiries: Compilation and Review Engagements as of February 2008
• Appendix G - AICPA Compilation and Review Alert – 2008/09
• Appendix H - QC Section – Statements on Quality Control Standards

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Chapter 1 - Compilations and Reviews – Introduction and Background

Learning Objectives

• Be aware of the Accounting and Review Services Committee

• Understand the definitions contained in SSARS

• Recognize the relative authority of the guidance for compilations and reviews

• Be aware of the Statements on Standards for Accounting and Review Services and related interpretations

• Understand the purpose of AICPA Technical Practice Aids

Accounting and Review Services Committee

Compilation and review engagements are governed by Statements on Standards for Accounting and Review Services (SSARS), which are issued by the Accounting and Review Services Committee (ARSC). ARSC is a senior technical committee of the AICPA charged with developing

...procedures and standards of reporting by CPAs on the types of accounting and review services a CPA may render in connection with unaudited financial statements or other unaudited information of an entity that is not required to file financial statements with a regulatory agency in connection with the sale or trading of its securities in a public market. This charge shall not include any of the responsibilities of the Accounting Standards Executive Committee.

ARSC is an outgrowth of a subcommittee of the Auditing Standards Board (ASB) created in 1975 to reconsider existing pronouncements applicable to a CPA’s association with unaudited financial statements of nonpublic companies.

The charge above specifically limits the scope of the ARSC’s authority to unaudited financial statements and unaudited information of nonpublic entities. Statements on Auditing Standards (SAS) issued by the ASB continue to provide guidance to CPAs who perform services in connection with audited financial statements of nonpublic entities.

Definitions

Submission of Financial Statements

Presenting to a client or third parties financial statements that the accountant has prepared either manually or through the use of computer software.

Those Charged with Governance

The person(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity. This includes overseeing the financial reporting process. In some cases, those charged with governance are responsible for approving the entity’s financial statements (in other cases, management has this responsibility). In some entities, governance is a collective responsibility that may be carried out by a board of directors, a committee of the board of directors, a committee of management, partners, equivalent persons, or some combination thereof. Those charged with governance are specifically excluded from management, unless they perform management functions as defined below.

Management

The person(s) responsible for achieving the objectives of the entity and who have the authority to establish policies and make decisions by which those objectives are to be pursued. Management is responsible for the financial statements, including designing, implementing, and maintaining effective internal control over financial reporting.

Third Party

All persons, including those charged with governance, except for those members of management as defined above.

Issuer

An issuer is defined in section 3 of the Securities Exchange Act of 1934 [15 U.S.C. 78c], the securities of which are registered under section 12 of that Act (15 U.S.C. 78l), or that is required to file reports under section 15(d) [15 U.S.C. 78o(d)], or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.

Nonissuer

All entities except for those defined as issuers.

Financial Statement

A presentation of financial data, including accompanying notes, derived from accounting records and intended to communicate an entity’s economic resources or obligations at a point in time, or the changes therein for a period of time, in accordance with generally accepted accounting principles (GAAP) or an OCBOA. Reference in the SSARSs to GAAP include, where applicable, an OCBOA. Financial forecasts, projections and similar presentations, and financial presentations included in tax returns are not financial statements. Appropriate GAAP financial statement titles:

• Balance sheet

• Statement of income

• Statement of comprehensive income

• Statement of retained earnings

• Statement of cash flows

• Statement of changes in owners’ equity

• Statement of assets and liabilities (with or without owners’ equity accounts)

• Statement of operations

• Statement of revenue and expenses

• Statement of financial position (condition)

• Statement of activities

• Summary of operations

• Statement of operations by product lines

Appropriate OCBOA financial statement titles:

• Balance sheet – cash basis

• Statement of assets and liabilities arising from cash transactions

• Statement of assets, liabilities, and stockholders’ equity – income tax basis

• Statement of revenue collected and expenses paid

• Statement of revenue and expenses – income tax basis

• Statement of income – statutory basis

• Statement of operations – income tax basis

A financial statement may be, for example, that of a corporation, a consolidated group of corporations, a combined group of affiliated entities, a not-for-profit organization, a governmental entity, an estate or trust, a partnership, a proprietorship, a limited liability partnership (LLP), a limited liability company (LLC), a segment of any of these, or an individual. The method of preparation (for example, manual or computer preparation) is not relevant to the definition of a financial statement.

Compilation of Financial Statements

Presenting in the form of financial statements information that is the representation of management (owners), without undertaking to express any assurance on the statements. (The accountant might consider it necessary to perform other accounting services to compile the financial statements.)

A compilation differs significantly from a review or an audit of financial statements. A compilation does not contemplate performing inquiry, analytical procedures, or other procedures performed in a review. Additionally, a compilation does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; tests of accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, the examination of source documents (for example, cancelled checks or bank images); or other procedures ordinarily performed in an audit. Therefore, a compilation does not provide a basis for expressing any level of assurance on the financial statements being compiled.

Review of Financial Statements

Performing inquiry and analytical procedures that provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statements for them to be in conformity with GAAP or, if applicable, with an other comprehensive basis of accounting (OCBOA). (The accountant might consider it necessary to compile the financial statements or to perform other accounting services to enable him or her to perform a review.)

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