September 2000

Final SSARS 1 Amendments Near Vote

The AICPA’s Accounting and Review Services Committee (ARSC) considered the NYSSCPA’s comments in revising its proposed amendments to Statement on Standards for Accounting and Review Services 1 (SSARS 1) at its July meeting. The proposed amendments would permit CPAs to issue management use only financial statements without complying with SSARS compilation as long as third parties would not be using them and there existed a “writing” between the CPA and the client that identifies the nature of the services provided.

As reported by James A. Woehlke in the August 2000 Trusted Professional, the NYSSCPA advised that the amendments should only require a written understanding between the client and the CPA as to the nature of the services rendered and a restrictive legend on the financial information submitted that clearly indicates internal management use only. They also suggested that the ARSC clarify the definition in the proposal of “submission of a financial statement.”

Andrew M. Cohen, who sits on ARSC, indicated that the Society’s comments were carefully considered during the July meeting.

“Originally we were looking at requiring either an engagement letter prior to performing the service or a management letter from the CPA following delivery of the service,” Cohen said. “However, our current thinking is to drop the management letter option in favor of a required engagement letter, preferably signed by management. We’re also considering using the word ‘preparation’ rather than ‘generation’ of management use only financial statements in the definition of financial statement submission.” Cohen indicated that ARSC would discuss these proposals again at its August meeting and vote on its adoption in September.

“Looks like we got just about everything we wanted in the new SSARS amendment,” former NYSSCPA president and task force member George Foundotos commented.

NYSSCPA Accounting and Auditing Oversight Committee Chair Brian A. Caswell believes the “new SSARS changes will allow CPA firms to be associated with financial statements that do not meet GAAP or OCBOA but still provide useful information of high quality.”

These amendments to SSARS 1 will provide a means for CPA firms in price sensitive markets to offer a professional quality service to clients who do not want GAAP or OCBOA financial statements for their internal use. According to Caswell, such engagements are currently available from non-CPAs and, knowingly or unknowingly, from many large and small CPA firms. “Now CPA firms will have an option to be associated with management use only financials under these new standards,” Caswell indicated, “though many will likely prefer to continue issuing compilation reports.” w