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State Board Report

July 2014

The AICPA Accounting and Review Services Committee (ARSC) is expected to vote in August to release their new combined Statements on Standards for Accounting and Review Services (SSARS 21) – Preparation of Financial Statements: Compilation Engagements and Association with Financial Statements, reported NASBA Director-at- Large Janice Gray (OK), a member of ARSC, at the Regional Meetings. ARSC had met on May 20-22, but did not vote to issue the standards at that time. Ms. Gray had asked the NASBA Regional Directors to issue a Focus Question to the State Boards on their support of the proposed standards, and while about a third of the Boards replied that they had reviewed the ARSC proposals, only a few said they had some concerns. The ARSC had modified their original proposals based on comments received from the State Boards at the 2013 Regional Meetings, as well as through other communications. It was decided that a practitioner has to relay his independence in a compilation engagement and a simple disclosure legend stating no CPA has provided assurance must be placed on the financial statements in a preparation engagement.

Chas J. McElroy, chair of ARSC Clarity Task Force, told the NASBA audience that a chart providing examples will be added to the standards to define when preparation standards apply and when they do not. “I think this is an improvement in practice,” Mr. McElroy observed. The ARSC had sent out an exposure draft on association with financial statements, but after they looked at the comments received, they decided to pull it back because they did not feel they had it right, he reported.

“There is no assurance in compilation or preparation, but we need to make sure those numbers are right and used appropriately,” Mr. McElroy said. Ms. Gray commented, “I think the market will continue to drive the compilation service. Prep will be good for clients who just need assistance with certain things. But I think when a client takes something to the bank that says there is no CPA assurance, the bank is going to ask: Where is the compilation report we used to get?” She reported ARSC had considered eliminating the term “compilation,” but it is embedded in states’ laws and professional literature.

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