Understanding the New SSARS 24
Understanding the New SSARS 24
From The Asset September/October 2018
By Jim Pursley, CPA
Accounting professionals practicing in the United States have new guidance to follow when performing compilation and review engagements. The major components of Statements on Standards for Accounting and Review Services 24 (SSA RS 24) are effective for financial statement periods ending on or after June 15, 2019. However, as noted below, a component of the standard is effective upon issuance (May 2018). The following is a summary of the new standard.
Amendments to AR-C Section 60
AR-C Section 60 is the General Principles section of SSA RS. Within AR-C Section 60, SSA RS 24 provides a definition to the term “fair presentation framework” and amends the definition of “financial reporting framework.” More significantly, the amendment to AR-C Section 60 adds explanatory language precluding an accountant from performing areview engagement if they will be accepting responsibility for the design, implementation, and maintenance of internal controls of the reporting entity. Although an accountant can generally accept these responsibilities, they are considered management functions and would impair independence in the review engagement.
Amendments to AR-C Section 90
AR-C Section 90 relates to the Review of Financial Statements section of SSA RS. A number of changes to review engagements are included in SSARS 24, as follows:
- Management’s disclosure of all information relevant to use of the going concern assumption is included in the financial statements within the management representation letter.
- There are a number of supplemental performance and reporting requirements in relation to consideration of going concern issues for financial reporting. The intent is to synergize the review standards with the relevant audit standards for going concern issues provided under AU-C Section 930, Interim Financial Information.
- The accountant is precluded from referencing within a component entity’s reviewed financial report to another accountant’s audit or review report on the reporting entity’s financial statement when the reporting entity uses a different financial reporting framework. However, the accountant can apply specific review procedures to determine if the reporting criteria for each of the entities is materially consistent or perform review procedures to obtain evidence supporting material adjustments to convert the component entity’s financial statements to the reporting entity’s financial statements in order to avoid the preclusion.
- The accountant is precluded from referencing another accountant’s audit or review report if the other accountant’s report includes a restriction on use of such report.
- When an accountant references another accountant’s audit or review report, they must now communicate that the other accountant understands their own independence and ethical requirements as it pertains to the engagement.
- The required language in the review report has been revised to be consistent with the report examples provided
in exhibit C of AR-C Section 90. This change is considered a technical correction to the requirements, but
not a change to the illustrative report examples in the original AR-C Section 90. This change was made effective as of the date of issuance of SSA RS 24.
Creation of a New AR-C Section 100
A significant portion of SSARS 24 was the creation of AR-C Section 100. This new section addresses circumstances when an accountant is engaged to perform a compilation or review engagement in accordance with SSA RS when either 1) the financial statements are prepared under a financial reporting framework generally accepted in another country, or 2) the engagement is to be conducted under both SSA RS and another set of compilation and review standards (such as international standards). The primary objectives of the standard, when the above circumstances are present, are to appropriately consider the acceptance, planning, and performance of the engagement, and reporting on the financial statements. The new AR-C provides illustrations of compilation and review reports intended to be used by those inside or outside the United States.
It is recommended that practitioners evaluate their review procedures, reports, and management representation letters in regards to the more significant changes to AR-C 90 Section of SSA RS 24. There may need to be immediate action taken if the review report wording does not agree with the newly issued reporting requirements. In addition, it will be important to become familiar with, and implement, the new AR-C 100 Section for international reporting as it applies to your reporting entity by the effective date. A link to the full text of SSA RS 24 can be found at aicpa.org.