Compilation & Review Standards

In December 2009, the AICPA’s Accounting and Review Services Committee (ARSC) issued Statement on Standards for Accounting and Review Services no. 19, Compilation and Review Engagements, which is effective for compilations and reviews of financial periods ending on or after December 15, 2010 (calendar year 2010 entities).

Since the majority of our business focuses on compilation standards, I am going to focus on the changes that are on tap for compilation engagements only.

The most significant change on tap for compilation engagements starting in 2010 is the fact that accountant has the option of disclosing the reasons for an independence impairment in a compilation report.    Note that this not a requirement, it is just an option.   Typically, an accountant would not be considered to be independent if he or she posted adjusting entries into the client’s accounting system (versus simply proposing them to the client).   This is a fairly common practice and although it does impair the accountant’s independence, it may not be as much of a concern (from the user’s perspective) as an independence impairment caused by the accountant having a material financial interest in a client.

Some of the other changes to note are that there is now a requirement to document management’s understanding of the engagement (typically done in the form of an engagement letter) and some enhanced requirements for documentation related to any findings or issues that may arise during the course of the compilation engagement.

Additionally, the compilation report has been updated.   To see a comparison of the pre-SSARS no.19 compilation report to the new report, go to    Enter 20102466 in the search box to find the article and scroll down to the to find Exhibit 1.

If you have any questions or would like more information, please contact:
Joanne Shaver, CPA

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