Making a statement: applying SSARS 21 to your practice.

• Author: Dauberman, Mark E.

With Statement on Standards for Accounting and Review No. 21 (SSARS 21) going into effect for periods ending on or after Dec. 15, there are some new alternatives to choose from when associated with a client's financial statements.

The Report

Before SSARS 21, if the accountant was not engaged to perform an audit or a review, a compilation was required when the accountant was engaged to report on compiled statements or when submitting financial statements to a client or third parties.

Under SSARS 21, the accountant will perform a review or a compilation only when engaged to do so, and each of these engagements will result in the issuance of a report. Neither of these engagements was changed in a substantive manner with the most significant changes affecting the reports.

The compilation report is a single paragraph with no headings, requiring an additional paragraph when:

* Financial statements are prepared in accordance with a special purpose framework;

* Substantially all disclosures are omitted;

* Independence is impaired;

* The financial statements are known to contain a departure from the applicable framework; or

* The financial statements are accompanied by supplementary information.

The review report now includes headings to indicate management's responsibilities and the accountant's responsibilities and conclusions. Along with the accountant's signature, the report will include the accountant's city and state. In addition, an emphasis-of-matter or other-matter paragraph is required when:

* Financial statements are prepared in accordance with a special purpose framework;

* A reference to a departure from the applicable framework on comparative statements is required to be changed;

* Prior period financial statements that were audited are being presented on a comparative basis;

* The financial statements are known to contain a material departure from the applicable framework;

* The financial statements were revised by management due to a subsequently discovered fact that became known to the accountant after the report release date resulting in a revised report that differs from the original;

* The financial statements are accompanied by supplementary information; or

* The applicable framework calls for required supplementary information.

Preparation Engagement

The most significant change to SSARS is the introduction of the preparation engagement, performed when the accountant prepares financial statements for a client. A preparation...