Defining Professional Requirements in Statements on Standards for Accounting and Review Services - SSARS No. 16

Effective upon issuance, this SSARS defines the levels of responsibilities that accountants have in compilation and review engagements. It also explains the use of two categories of professional requirements identified by specific terms to describe the degree of responsibility they impose on accountants. They are:

• Unconditional requirements
• Presumptively mandatory requirements

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Defining Professional Requirements in Statements on Standards for Accounting and Review Services

Introduction
.01 This statement sets forth the meaning of certain terms used in Statements on Standards for Accounting and Review Services(SSARSs) issued by the Accounting and Review Services Committee (ARSC) in describing the professional requirements imposed on accountants performing a compilation or review.

Professional Requirements
.02 SSARSs contain professional requirements, together with related guidance, in the form of explanatory material. Accountants performing a compilation or review have a responsibility to consider the entire text of a SSARS in carrying out their work on an engagement and in understanding and applying the professional requirements of the relevant SSARSs.

.03 Not every paragraph of a SSARS carries a professional requirement that the accountant is expected to fulfill. Rather, the professional requirements are communicated by the language and the meaning of the words used in the SSARSs.

.04 SSARSs use two categories of professional requirements identified by specific terms to describe the degree of responsibility they impose on accountants. They are as follows:

• Unconditional requirements. The accountant is required to comply with an unconditional requirement in all cases in which the circumstances exist to which the unconditional requirement applies. SSARSs use the words must or is required to indicate an unconditional requirement.

• Presumptively mandatory requirements. The accountant is also required to comply with a presumptively mandatory requirement in all cases in which the circumstances exist to which the presumptively mandatory requirement applies; however, in rare circumstances, the accountant may depart from a presumptively mandatory requirement provided that the accountant documents his or her justification for the departure and how the alternative procedures performed in the circumstances were sufficient to achieve the objectives of the presumptively mandatory requirement. SSARSs use the word should to indicate a presumptively mandatory requirement.

If a SSARS provides that a procedure or action is one that the accountant "should consider," the consideration of the procedure or action is presumptively required, whereas carrying out the procedure or action is not. The professional requirements of a SSARS are to be understood and applied in the context of the explanatory material that provides guidance for their application.

Explanatory Material
.05 Explanatory material is defined as the text within a SSARS (excluding any related appendixes or interpretations1) that may:
• Provide further explanation and guidance on the professional requirements, or
• Identify and describe other procedures or actions relating to the activities of the accountant.

.06 Explanatory material that provides further explanation and guidance on the professional requirements is intended to be descriptive rather than imperative. That is, it explains the objective of the professional requirements (where not otherwise self-evident); it explains why the accountant might consider or employ particular procedures, depending on the circumstances; and it provides additional information for the accountant to consider in exercising professional judgment in performing the engagement.

.07 Explanatory material that identifies and describes other procedures or actions relating to the activities of the accountant is not intended to impose a professional requirement for the accountant to perform the suggested procedures or actions. Rather, these procedures or actions require the accountant's attention and understanding; how and whether the accountant carries out such procedures or actions in the engagement depends on the exercise of professional judgment in the circumstances consistent with the objective of the standard. The words may, might, and could are used to describe these actions and procedures.

Application
.08 The provisions of this section are effective upon issuance.2

This Statement titled Defining Professional Requirements in Statements on Standards for Accounting and Review Services was adopted unanimously by the assenting votes of the seven members of the Accounting and Review Services Committee.

Accounting and Review Services Committee
(2007–2008)

AICPA Staff

Note: Statements on Standards for Accounting and Review Services (SSARSs) are issued by the AICPA Accounting and Review Services Committee (ARSC), the senior technical body of the Institute designated to issue pronouncements in connection with the unaudited financial statements or other unaudited financial information of a nonpublic entity. Rule 202, Compliance With Standards, of the Institute’s Code of Professional Conduct requires an AICPA member who performs either a compilation or a review (the accountant) to comply with standards promulgated by the ARSC. The accountant should have sufficient knowledge of the SSARSs to identify those that are applicable to his or her compilation or review and should be prepared to justify departures from the SSARSs.

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