OSCPA addresses non-independent reviews in response to ARSC Accounting and Review Services exposure draft
The AICPA Accounting and Review Services Committee’s (ARSC) proposed Statement on Standards for Accounting and Review Services (SSARS), "Accounting and Review Services," may present the most sweeping changes to SSARS since SSARS 1 was first issued in 1979. In responding to the exposure draft, OSCPA’s Accounting & Auditing Committee addressed many concerns, including opposition to allowing “non-independent” reviews.
A controversial update, the proposal would allow for the first time independence impairments for review engagements when the CPA is assisting with client accounting.
The Ohio Society’s Accounting and Auditing Committee said, “Our committee believes it would be difficult to remain objective when reviewing our own work. There is value in independence which we believe increases the reliability of the review report and financial statements.”
The letter continued, saying, “If non-independent reviews are allowed, the chair of our Peer Review Committee intends to urge the AICPA peer review committee to make it mandatory to select both an independent and non-independent review engagement when performing engagement peer reviews of non-audit firms.”
In drafting the proposed standards, ARSC considered recommendations from AICPA’s Private Company Practice Section (PCPS) Reliability Task Force, responding to their concerns for smaller business owners, users of small business financial statements and CPAs that serve smaller entities.
Among the other significant changes are:
- The introduction the new terms such as moderate assurance, review evidence and review risk to the review literature to harmonize with international review standards
- A discussion of materiality in the context of a review engagement
- A requirement that an accountant establish an understanding with management regarding the services to be performed through a written communication, that is, an engagement letter
- The establishment of enhanced documentation requirements for compilation and review engagements
The deadline to comment was July 31. The proposed effective date is for compilations and reviews of financial statements for periods beginning on or after Dec. 15, 2010.
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LAST UPDATED 8/5/2009