MATERIAL CHANGES TO THE REVIEW.

• Author: Anikouchine, Gail H.

In early 2020, the AICPA, in conjunction with the Accounting and Review Services Committee (ARSC), issued Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and/dverse Conclusions. SSARS 25 primarily amends AR-C Sec. 90, which relates to review services.

The issuance of SSARS 25 aligns with an overarching goal of minimizing differences with the International Standard for Review Engagements (ISRE) 2400, which has been part of a decades-long convergence project. In addition, SSARS 25 aligns some review practices with audit principles to provide consistency in areas that should apply equally regardless of the level of assurance provided.

What follows are the three significant changes to review services in SSARS 25.

Determining Materiality

For a long time, the review report has included a statement in the conclusion paragraph "not aware of any material modifications"; however, the accountant performing the review had no explicit requirement to calculate a threshold of materiality. To support the statement in the review report, many practitioners did calculate the threshold in a manner similar to that used for auditing financial standards. Now, such a calculation will be required and aid in providing evidence to support the review conclusion.

Further, the accountant needs to apply materiality to design the procedures and to evaluate the results of those procedures. The accountant is required to design and perform analytical procedures and inquiries of all material items on the financial statements, including the disclosures. During the review, the accountant will need to assess the need to recalculate materiality if the accountant becomes aware of information obtained during the review process that would have changed the initial calculation had such information been known.

Independence

The desire for the accountant performing a review engagement to be independent was reaffirmed with SSARS 21. While the requirement to use the word "independent" in...