July 1999 Issue

AICPA to Allow CPAs in Non-CPA Firms to Issue Compilations

By James L. Craig, Jr., CPA

The AICPA Council passed a resolution at its May meeting to permit CPAs in non-CPA firms to issue compilation reports under the AICPA's Statements on Standards for Accounting and Review Services. The resolution revises the language of Rule 505, Form of Organization and Name, to eliminate the requirement for compilation reports to be issued by CPA firms. It adds the requirements that non-CPA organizations assign the ultimate responsibility for providing compilation services to a CPA and that a CPA must be responsible for each business unit that performs compilation services. Compilation reports issued by a CPA in a non-CPA firm must be signed by the responsible CPA in his or her name and not in the name of the firm or organization.

Observers at the spring meeting said that council members expressed the opinion that compilation services performed in non-CPA firms must be subject to peer review. The current AICPA bylaws address enrollment in peer review programs at the firm level and would have to be changed to require CPAs issuing compilation reports in their individual names to also be subject to peer review. The AICPA will ask the council at its fall meeting to authorize a membership vote to change the bylaws to require peer review of all compilation services performed by AICPA members.

The change in Rule 505 has no practical effect until the individual licensing jurisdictions also make the change. The National Association of State Boards of Accountancy (NASBA) and AICPA joint Uniform Accountancy Act Committee is working on changes to the UAA that would be consistent with the changes to Rule 505. Changes to the UAA of this magnitude are subject to due process, and an exposure draft is anticipated later this year.

Legislation pending in the New York State Legislature to change the accountancy licensing requirements does not reflect the changes in Rule 505. Under that legislation, as under the existing statute, only CPA firms will be able to issue compilation reports, which are considered an attest service.

In addition to the proposed revision to Rule 505, NASBA reported in its monthly newsletter that the NASBA/AICPA UAA Committee voted to consider language that would delete compilations as an attest service. This would keep compilations as a service that only licensed CPAs can perform but not remove it from the attest services definition. The resolution passed by the council made no mention of the change to remove compilations as an attest service. The issue was discussed at informal, nonbinding regional meetings of the council earlier in the year (See the April issue of The Trusted Professional).