Welcome, welcome. The next area we’re gonna
talk about is Statements on Standards for Accounting and Review Services and there’s
all these exciting changes in this area called SSARS. This stands for Statements on Standards
for Accounting and Review Services. These are different types of services that
we can perform on a nonpublic entity. Nonpublic is a company that’s stocks, bonds are not
publicly traded. So 1933, 1934 Federal Security Regulations Act talks about basically what’s
considered a public company. Certain trader on a national exchange or certain amount of
assets, certain number of shareholders things like that.
In this area Statements on Standards for Accounting Review Services, basically what we’re looking
at is we’re saying that a CPA can be associated with financial statements for different types
of engagements. Now there used to be two engagements, reviews in compilations then under the ARSC,
Accounting Review Services Committee by the AICPA, they said you know what, let’s restructure
this because there’s too much confusion because we know that in an audit.
Remember we’ve talked about an audit. We are giving an opinion, an audit report. In our
opinion the statements refer to above and blah, blah, blah. That’s looking at either
public or nonpublic companies but there you’re giving something called positive assurance
then we have other situations where we’re given what we call limited or negative assurance.
We have situations where we’re giving no assurance and people in the past would look at a compilation
where you’re giving no assurance and they would think that it meant more than it really
did. We came out with these rules in order to really clarify that’s why it’s called Clarified
Standards. If you think back, remember we talked about
the Clarified Standards for auditing for basic doing an audit. Same thing here they wanted
to come up with these Clarified Standards to look similar to the ASB, Auditing Standards
Board Rules but here this relates to statements on Standards for Accounting Review Services.
This relates to different types of services that we can perform. The main reason too is
to make it easier to read, to understand and to apply the rules. Therefore, these rules
we’re talking about now relate for example to nonpublic entities.
What we’re gonna be looking at under SSARS are three different types of engagements and
let me give you a quick overview of where we’re gonna be going. Hang on to your seats
and then we’ll go into the detail, nitty-gritty detail of looking at the reports and so on.
Let’s come on over, what we’re looking at is SSARS, three different types of engagements.
This one is called the preparation of financial statements. It’s gonna be covered by ARC 70
and what’s happening here is in the past someone would ask us, “Hey, can you prepare some financial
statements for me that someone else is going to audit, review, or compile.” Well we didn’t
really have any standards that told us how to do it that’s why we created these under
ARC 70 is preparation of financial statements. Basically, it says, hey, you’re using QuickBooks
and someone wants you to print out these financial statements that someone else is going to do
work on. That would be covered by SSARS. If you’re gonna prepare the statements and then
you’re gonna do the work, it’s not covered because the work itself would be covered under
SSARS. But if you’re gonna prepare the statements
given to someone else to do then we have certain standards that say “Hey, here’s what you’re
gonna do.” We have a compilation where in this case we’re giving no opinion no assurance,
however, we’re assembling or compiling these things in the form of financial statements.
We have to read them and do a little bit more work here so you’ll see in a few minutes what
has to happen here as far as what kind of work we’re gonna have to do is understanding
and reading as well so we’ll look at that later.
Over here is a review and what’s happening with the review, now you’re giving some sort
of limited or negative assurance because in this case we’re saying, “Hey, I didn’t do
an audit but I’m not aware of any problems with these statements.” You’re not saying
that they’re not perfect, hey, because they’re far from perfect. The only thing perfect,
my wife, ask her. But they’re not perfect, however, we’re giving limited or negative
assurance saying, “I can’t say it happened but I’m not aware of any adjustments or modifications
in order for these statements to be in conformity with that financial reporting framework or
GAAP or OCBOA,” or whatever framework we’re using which we’ll talk about later.
What happened here is now we have standards that tell us how to prepare these statements
so someone can work on them. Here we’re saying that the old report used to have three paragraphs.
The new report is gonna be one paragraph because with three paragraphs it made it look like
we were getting some assurance when we really weren’t. Here, reviews change very lightly
but they gone into a little bit more detail, clarification a little bit more and changing
a few rules and making certain things requirements. That’s where we’re gonna be going over the
next several minutes and it’s pretty darn exciting.