By: Jay Sciuto, CPA, Partner Statement on Standards for Accounting and Review Services (SSARS) No. 19, Compilation and Review Engagements, is the most significant change to the compilation and review standards since their inception in 1978. The below is a summary of the changes implemented:
Review engagement process: The standard discusses tailoring review procedures based upon the accountant’s understanding of the client’s industry, knowledge of the client, and the risk that he or she may unknowingly fail to modify the accountant’s review report on financial statements that are materially misstated. The standard directs the accountant to focus the analytical procedures and inquiries in those areas where the accountant believes there are increased risks of misstatements. Likewise, a review now requires the accumulation of review evidence to provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements.
Materiality: Previously, materiality was addressed only in the audit standards. SSAR No. 19 discusses financial statement materiality in the context of a review engagement.
Documentation: The standard requires enhanced documentation for both compilation and review engagements. For compilations, SSARS No. 19 requires the accountant to prepare documentation in sufficient detail to provide a clear understanding of the work performed. For reviews, SSARS No. 19 made several enhancements to the documentation requirements including documentation of significant findings and management responses to inquiries and analytical review tests.
Engagement letters: The standard requires an engagement letter for both compilation and review.
Compilation reports: The standard removes the prohibition against allowing an accountant to include a description in the accountant’s compilation report regarding the reasons for an independence impairment.
SSARS No. 19 is effective for compilations and reviews of financial statements for periods ending on or after December 15, 2010.
Jay Sciuto is a partner in Tate & Tryon’s audit and assurance services department and can be reached at jsciuto@tatetryon.com.
