A makeover for compilations: new standards also proposed on preparation and association with financial statements.

Author:Glynn, Mike
 
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Three proposed standards were exposed for public comment by the AICPA Accounting and Review Services Committee (ARSC) on Oct. 23.

The proposed standards are as follows:

* A proposed, revised compilation standard that would provide requirements and guidance to an accountant when engaged to perform a compilation engagement on historical financial statements.

* A new preparation standard that would provide requirements and guidance when an accountant is engaged to prepare financial statements for a client but has not been engaged to perform a compilation, review, or audit with respect to those financial statements.

* A new association standard that would provide requirements and guidance when an accountant agrees to permit the use of his or her name in a report, document, or written communication that also includes financial statements with respect to which the accountant did not issue a compilation, review, or audit report. The accountant may or may not have prepared the financial statements.

Comments on the proposed standards, which are written in clarity format, are requested by May 2. Comments should be addressed to Mike Glynn, CPA, at mglynn@aicpa.org. The entire proposal is available at tinyurl.com/0794byc.

The proposed revised compilation standard would modify the applicability of the compilation literature. Currently, AR Section 80, Compilation of Financial Statements, applies when an accountant is engaged to report on compiled financial statements or submits financial statements to the client or to third parties. Submission is defined as "prepares and presents." Whereas submission worked well as a trigger for the compilation service when Statement on Standards for Accounting and Review Services (SSARS) No. 1, Compilation and Review of Financial Statements, was issued in December 1978, cloud computing and other applications have made it difficult to determine who (or what) has prepared the financial statements.

A good example is a situation where an accountant performs bookkeeping services for a client. The accountant has access to the client's cloud-computing system and makes a few journal entries to record payroll tax payments, sales tax payments, and depreciation expenses for a given period. The company's internal bookkeeper records certain recurring expenses such as utilities and office expenses. At the end of each month, the bookkeeper prints out a copy of the financial statements for presentation to the board of directors. Did...

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