Life after SSARS no. 19: compilations and reviews of financial statements.

• Author: Glynn, Michael P.

Statement on Standards for Accounting and Review Services No. 19. Compilation and Review Engagements was issued in December 2009 and is effective for compilations and reviews of financial statements for periods ending on or after Dee. 15, 2010. It's not an overstatement to say that SSARS No. 19 represents the most significant revision of the compilation and review literature since SSARS No. I was issued in December 1978.

The Effective Date

Some GPAs have mistakenly concluded that after the. 15 2010, SSARS No. 19 was the rule of the land and that they could disregard the pre-SSARS No. 19 literature.Not so fast. SSARS No. 19 is effective for compilations and reviews of financial statements for periods ending on or after Dee.15.2010. That means if a CPA is engaged in June 2011 to compile financial statements for the year ended June 30.2010 the CPA would follow the pre-SSARS No 19 literature including the reporting requirements. However, for calendar 2010 and for financial statements dated after that, the CPA would follow the requirements of SSARS No 19.

If CPAs are engaged to compile or review financial statements for a period after the effective date of SSARS No. 19 and for a period prior to the effective date of SSARS No. 19, they may issue the SSARS No. 19 report for all periods. For example: A CPA is engaged to compile the financial statements for a client for the years ended Dec. 31, 2010. 2009. 2008 and 2007. and the client needs separate reports for all four years. Technically, the CPA should issue the SSARS No. 19 report for 2010 and the pre-SSARS No. 19 report for the prior three years. However, that would be confusing to the client and to third-party users of the compiled financial statements. In these instances, the CPA may issue SSARS No. 19 reports for all of the periods.

New Compilation Reporting Option

Prior to SSARS No. 19. when CPAs compiled financial statements for a client with respect to whom the accountant was not independent, they were required to disclose the fact that their independence was impaired in their compilation report, but were precluded from disclosing the reasons for the independence impairment. This was generally accomplished by including the following as the last paragraph of the accountant's compilation report: "We are not independent with respect to XYZ Company."

However. SSARS No. 19 revised the reporting standards for compilation engagements to provide CPAs with the option of disclosing the reasons for...