AICPA REVAMPS COMPILATION AND REVIEW STANDARDS
New York -- The American Institute of CPAs is getting ready to roll out its long-awaited update of compilation and review standards for CPAs, Statement on Standards for Accounting and Review Services No. 21 one of the most significant revisions in non-audit standards in the last 35 years.
SSARS No. 21 represents the AICPA's Accounting and Review Services Committee's efforts to clarify and revise the standards for members in public practice who perform reviews, compilations and engagements to prepare financial statements. Approved by the Accounting and Review Services Committee in August, SSARS No. 21 creates a bright line between accounting (preparation) services and reporting (compilation or review) services, adapting the older standards for the current electronic and cloud-based practice environment.
The basic standard for accountants who have prepared and submitted financial statements to their clients was issued as SSARS No. 1 in 1978, according to ARSC chair Michael Brand, a partner with the firm of Johnson, Feigley, Newton & Brand in Athens, Ala. "Back then, accountants prepared paper financial statements, bound them with their firm's covers and mailed them or handed them to their clients," Brand said in a statement. "It made sense, for many years, that because these were submitted by the CPA, the CPA should, at a minimum, issue a compilation report on those financial statements. However, in today's electronic environment, especially cloud applications where the client and CPA are working on the accounting together and sometimes in real time, it's impossible to segregate who prepared the financial statements. Section 80 of SSARS No. 21 totally eliminates the need for such arbitrary and irrelevant decisions by making the compilation literature apply when the accountant is engaged to perform a compilation service."
In addition, to help firms that are asked by their smaller clients to prepare financial statements when that client does not need a compilation or review report, SSARS No. 21 includes a new preparation standard. Section 70 does not require an accountant's name or report to be associated with the preparation of the financial statements, but it does not prohibit a CPA from doing so.
COSO TO UPDATE RISK MANAGEMENT FRAMEWORK
New York -- The Committee of Sponsoring Organizations of the Treadway Commission, also known as COSO, is planning a project to review and update its decade-old Enterprise Risk Management - Integrated Framework.
The framework is widely used by management to improve an organization's ability to manage uncertainty and to consider how much risk to accept as it strives to increase stakeholder value.
COSO hopes to enhance the framework's content and relevance so organizations around the world can get better value from their enterprise risk management programs. COSO also intends to develop tools to help report on risk information and review and assess the application of enterprise risk management.
"When you look at the framework, it's more than 10 years old, and there has been a lot of development in risk management -- new thinking, an evolution of terms and some new ideas that have come out, "said COSO chair Robert Hirth, in an interview with Accounting Today. "We want to take advantage of all that good thinking, and challenge it against our framework, or challenge our framework against all that new thinking, and then ultimately come to a conclusion as to what parts of it should be revised and what parts should stay the same."
As with the updated Internal Control Integrated Framework that COSO released last year, PwC will be the principal author, and PwC will update the ERM integrated framework under the COSO board's leadership.
The new framework may also reflect some of the lessons learned from the failure of risk managers to properly take into account risks in areas such as sub-prime mortgages before the financial crisis.
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