SSARS-21, Agreed-Upon Procedures
On October 23, 2014, the Accounting Review Services Committee issued Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification. SSARS No. 21 clarifies and revises the standards for reviews, compilations, and engagements to prepare financial statements. It also includes significant revisions that affect the standards for accountants in public practice who prepare financial statements for their clients.
SSARS No. 21 is effective for engagements on financial statements for periods ending on or after December 15, 2015, but the early implementation is permitted. The clarified and revised standards supersede all existing AR sections except for AR section 120, Compilation of Pro Forma Financial Statements, which is expected to be exposed for public comment in a clarified format in 2015 along with a proposed standard on a compilation of prospective financial information, which is currently addressed in the attestation standards.
SSARS No. 21 is composed of four sections, as follows:
- Section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services, is intended to help accountants better understand their professional responsibilities when performing engagements in accordance with SSARSs.
- Section 70, Preparation of Financial Statements, applies when the accountant is engaged to prepare financial statements but is not engaged to perform an audit, review or a compilation on those financial statements.
- Section 80, Compilation Engagements, applies when the accountant is engaged to perform a compilation engagement.
- Section 90, Review of Financial Statements, applies when the accountant is engaged to perform a review of financial statements.
Substantive changes to standards for compilations, reviews, or engagements to prepare financial statements are as follows:
- Section 70 does not require a report – even when the financial statements are expected to be used or provided to a third party.
- Section 70 requires either a legend on each page of the financial statements stating that no assurance is being provided or a disclaimer.
- The accountant is required to obtain an engagement letter signed by both the accountant and the client’s management for all reviews, compilations, and engagements to prepare financial statements.
- Section 80 eliminates the need for the accountant to determine whether he or she has prepared financial statements by eliminating the submission requirement.
- Section 80 always requires a report. Financial statements that the accountant is engaged to prepare but that are not intended for third-party use would fall under Section 70.
An agreed-upon procedures (AUP) engagement is one in which a licensed CPA firm is engaged by a client to issue a report of findings based on specific procedures performed on a specific subject matter. The agreed upon procedures must be performed in accordance with the American Institute of Certified Public Accountants AT Section 201. The user takes responsibility for the adequacy of the procedures. In this engagement, the accountant does not express an opinion or negative assurance. Instead, the report should be in the form of procedures and findings.
Because the clients require that findings be independently derived, the services of a licensed CPA firm are obtained to perform procedures and report the findings. The specified parties and the licensed CPA firm agree upon the procedures to be performed based on what all parties believe are appropriate. Because the needs of the specified parties may vary widely, the nature, timing, and extent of the AUP may vary as well; consequently, the specified parties assume responsibility for the sufficiency of the procedures since they best understand their own needs. The licensed CPA firm’s report on AUP should be in the form of procedures and findings.