If you’ve heard me talking at Digital CPA or other events, you know how excited I am about SSARS-21, the Statement on Standards for Accounting and Review Services No. 21, which creates a bright line between delivering reporting and accounting services for clients.
Many claim this is the most significant non-audit standard change of the past 35 years. To say the least, this new standard is being positively received by firms that are providing strategic client accounting services (which have many titles such as BPO, Virtual Controller or CFO services).
Over the past few years, I have had a number of passionate discussions with firm leaders who felt constrained in providing BPO services due to the requirements of the compilation standard. This has all changed with the new Preparation of Financial Statements Standard outlined in Section 70 of SSARS-21. Firms now will be able to provide outsourced accounting services under this Financial Statement Preparation Standard. It’s a real game-changer, which I believe over time will drive more firms to provide client accounting services. Technology has demonstrably changed how financial statements are put together and is one of the key drivers behind the growth of client accounting.
There are many things firms need to think about as they move to adopt SSARS-21. One is how they position client accounting and BPO services versus compilation services. Firms also will need to update their engagement letters and how they provide these services.
A key element of the Financial Preparation Standard under Section 70 is the legend requirement, in which firms must state that no assurance was provided. However, firms also should think about making an affirmative statement in the legend regarding the service they are providing. In a recent Digital CPA webcast, we discussed a number of examples related to this legend. We also plan to be sharing more firm best practices related to the legend requirement and other implementation elements of SSARS-21 over the coming months.
SSARS-21 provides firms a great opportunity to rethink how they are providing their client accounting services. Over the past few years, client accounting has reemerged as one of the most strategic practice areas of the firm. We believe this is clearly one of the greatest growth opportunities for firms today, thanks to cloud computing, and firms are now in a great position to deliver upon the promise of being their clients’ trusted advisor through these services.
How do firms know which standard they should use when preparing financial statements?
Make clear at the onset what your firm is being engaged to do – and not do.
When does a compilation need to be completed?
Only when an accountant is hired to perform a compilation engagement.
What legend needs to appear if attest services aren’t required?
A statement on each page of the financial statements stating, at a minimum, that no assurance is provided.
Does the legend need to be signed?
It’s not required but there’s no reason not to.
What if an accountant prepares financial statements bearing the disclaimer legend, and a client includes the statements in a report to investors? Does the legend need to be included in that report?
Yes. The legend needs to remain on the financial statements in all cases in which they are reproduced.
How are you planning to reposition and recalibrate your accounting services to take advantage of the SSARS-21 opportunity?