SSARS Exposure Draft

The Accounting and Review Services Committee (ARSC) has issued an Exposure Draft Proposed Statement On Standards For Accounting And Review Services, The Use of the Accountant’s Name in a Document or Communication Containing Unaudited Financial Statements That Have Not Been Compiled or Reviewed (Amends Statement on Standards for Accounting and Review Services No. 19, Compilation and Review Engagements [AICPA, Professional Standards, vol. 2, AR sec. 60 par. .51-.55]). You have until April 29, 2011 to comment on this proposed amendment.

The amendment would be effective for unaudited financial statements that have not been compiled or reviewed for periods ending on or after December 15, 2011.

The proposed SSARS would create new paragraphs in AR section 60, Framework for Performing and Reporting on Compilation and Review Engagements to cover the accountant’s responsibilities when he or she permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed.

This proposed SSARS would establish:

• a requirement that prior to permitting the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed the accountant should read the financial statements and other information in the document and consider whether such financial statements and other information appears free from obvious material misstatements and from material inconsistencies with other knowledge or information that the accountant may have obtained.
• a nonreporting option when the accountant permits the use of his or her name in a document or written communication containing unaudited financial statements that have not been compiled or reviewed provided that the accountant requests that the client clearly indicate that the unaudited financial statements were not compiled or reviewed by the accountant.

You may obtain a copy of the proposed SSARS from the AICPA website http://www.aicpa.org/.

New Publication
Our newest publication is the Quarterly Accounting and Auditing Reference Guide, Issue 3. Focusing on accounting, auditing and reporting issues with wide practice applications, this reference aid will benefit non-governmental accountants in public accounting and private industry. Available now at www.cpafirmsupport.com/home/OurServices/tabid/65/Default.aspx

Become a subscriber.
Subscribers have access to more detailed updates, Become a subscriber by going to http://www.cpafirmsupport.com/ and clicking on “Join Us.”

Engagement Planning for Going Concern Issues

Here are some practical questions accountants and auditors may wish to incorporate in the planning documentation of every audit and review engagement for the foreseeable future.

• Does the accountant’s or auditor’s understanding of the client’s business and industry reveal any information contrary to the going-concern assumption? Such information may include current and expected recurring operating losses, cash flow problems, defaults on debt obligations, inability to obtain financing or renewals of existing credit lines, an industry significantly affected by the recession, customers and vendors with going-concern problems, decreasing assets valuations, statutory noncompliance, and external matters such as lawsuits, loss of franchise, dealership or licenses, etc.
• Does management have any concerns about the entity’s ability to continue in business for at least a year or possibly longer?
• What are management’s plans to mitigate any revealed threat to continued existence?
• Are management’s plans realistic and are they capable of carrying them out?
• What procedures will be necessary for the engagement team to evaluate management’s plans to overcome going-concern problems?
• What effects are the going-concern issues likely to have on the basis of preparation of the entity’s financial statements?
• What effects are the going-concern issues likely to have on the accountant’s or auditor’s report?
  
  

The FASB is still deliberating on its proposed statement, Going Concern, which was issued 10/9/08. The planning suggestions above will facilitate compliance with the final SFAS and with existing SAS No. 59. You can download a copy of the proposed statement from the Exposure Drafts section of www.fasb.org .