SSARS No. 21 is effective for engagements on financial statements for periods ending on or after Dec. 15, 2015. Early implementation is permitted.
In October 2014, ARSC issued SSARS No. 21, which supersedes all outstanding SSARSs through No. 20, except SSARS No. 14, Compilation of Pro Forma Financial Information, as amended (AICPA, Professional Standards, AR Sec. 120). SSARS No. 14 is currently being redrafted and will be issued as a separate clarified SSARS when finalized.
One of the biggest changes in the issuance of SSARS No. 21 is the introduction of a new level of service, the financial statement preparation service, AR-C Section 70, Preparation of Financial Statements. This service is for accountants who are in public practice and are engaged to prepare financial statements.
An engagement to prepare financial statements is a nonattest service and does not require a determination about whether the accountant is independent of the entity. However, it is important to note that the performance of nonattest services for attest clients could impair independence.
♦ An accountant is required to comply with AR-C Section 60, General Principles for Engagements Performed in Accordance With Statements of Standards for Accounting and Review Services (AICPA, Professional Services).
♦ In an engagement to prepare financial statements, the engagement partner is required to possess the competence and capabilities to perform the engagement and competence in financial reporting, appropriate to the engagement circumstances.
♦ As a condition for accepting an engagement to prepare financial statements, the accountant is required to:
• determine whether preliminary knowledge of the engagement circumstances indicate that ethical requirements regarding professional competence will be satisfied.
• determine whether the financial reporting framework selected by management to be applied in the preparation of the financial statements is acceptable.
♦ Additionally, as a condition for accepting an engagement to prepare financial statements, the accountant is required to obtain the agreement of management that it acknowledges and understands its responsibility:
• for the selection of the financial reporting framework to be applied in the preparation of financial statements.
• for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
• for preventing and detecting fraud.
• for ensuring that the entity complies with laws and regulations applicable to its activities.
• that each page of the financial statements will include a statement indicating that no assurance is provided on the financial statements, or the accountant will be required to issue a disclaimer that makes clear that no assurance is provided on the financial statements.
• the accountant should agree upon the terms of the engagement with management or those charged with governance, as appropriate. The agreed-upon terms of the engagement should be documented in an engagement letter or other suitable form of written agreement that is signed by both the accountant and management of those charged with governance, as appropriate.
Above are the highlights of the financial statement preparation service. Please refer to AR-C Section 70, Preparation of Financial Statements, for specific requirements.