Digital cpa webcast ssars21 - external use

Digital CPA WebcastNew Era for Financial Preparation Services Driven by Major Standard Change

January 30, 2015

ModeratorCPA.com is a subsidiary of the AICPA

• Empowering CPAs and Businesses for the Digital Age

Erik Asgeirsson, President and CEO, CPA.com• Industry leader with over 20 years of experience

leading technology organizations• Consistently recognized as one of Accounting

Today’s “Top 100 Most Influential People”• BS Electrical Engineering, George Washington

University, and MBA in Finance, NYU Stern School of Business

Guest Panelists

Michael P. Glynn, CPA, CGMASenior Technical Manager, Audit and Attest Standards Group, AICPA

4ACCOUNT-ability Plus, LLC Achieving Accounting and Auditing Excellence

Alan W. AndersonAl has over 25 years of experience in the accounting profession. After working primarily as a partner and National Director of Audit in the firm of McGladrey and Pullen, LLP and with the American Institute of CPAs as Senior Vice President of Member and Public Interest, Al founded ACCOUNT-ability Plus headquartered in Minneapolis.

Al’s experience in the world of auditing reaches far and wide. This includes helping to standardize the global audit approach of McGladrey and Pullen, overseeing the AICPA’s technical audit and accounting standards, including self-regulation and the CPA examination and implementing paperless solutions.

Al represented the AICPA on –

Financial Accounting Standards Advisory Council

(FASAC) Committee of Sponsoring Organizations (COSO) International Federation of Accountants (IFAC) International Innovation Network (IIN) Enhanced Business Reporting Consortium (EBRC)

Al also has been frequent speaker at conferences nationally and internationally

Digital CPA Webcast Series – Building a community of digital CPAs who embrace change and the transformational effects of technology on today’s practice

• New Era For Client Accounting: Impact of SSARS No.21

January 30th

• April 30th • July 16th • September 22nd

Upcoming in 2015

Agenda

New Era for Client Accounting Services

Review of Section 70 - Preparation of Financial Statements

Panel Discussion

New Era for Client Accounting

8Client Accounting vs Write-up Services

1. Traditional Firm Write-up• Compiling financial statements for banks and other users• Not necessary for firm to specialize • Low margin usually non strategic area of the firm

2. Premium Based Client Accounting Services• Leveraging capabilities driven by cloud computing• Specialization is key to firm success• Described as BPO, Back Office, Virtual Controller or

Virtual CFO• Major growth area for firms and very strategic

Virtual Controllership

Collaborative Advisory

Services – Virtual CFO

Write-Up

Wide Spectrum of Service Levels for Client Accounting

Business Process Outsourcing

Advisory

Transactional

Firm Service Spectrum

Specialize in Client Industry VerticalsHealthcareNot-For-Profit

TechnologyProfessional Services

Property ManagementCharter Schools

RetailFranchises

1990

2000

Today

Recalibrate Accounting Services

Today’s Opportunity

Cloud based

Integrated

Paperless

Dashboards

Real Time

Small Businesses push work back to

firms to focus more on their business

Role of Firms ReducedQuickBooks introduced

to small businesses Don’t let it be client driven!

Changing Firm Value Proposition

Val

ue

AutomationToday Tomorrow

Tru

sted

A

dvi

sor Tr

ust

ed

Ad

viso

r G

row

th

Specialization

Business Insights

Commoditization of low end

Higher Margin

Low margin/fee pressures

Automation Of Services

TransactionalDecline

Transactional Bookkeeping

Need to Review Positioning & Delivery of Client Accounting Services

Key Areas:• Revise Positioning and description services

• Write-up & Compilation Service • Client Accounting & BPO Services

• Value of CPA Firm

• Updating of Engagement Letters

• Updating of Service Delivery• Legend requirement is an

OPPORTUNITY to highlight firm value

Review of Section 70 - Preparation of Financial Statements

Clarify Project GoalsSame as ASB’s Clarity Project Goals

Address concerns over length and complexity of standards

Make standards easier to read, understand and implement

Lead to enhancements in engagement quality

Same format and drafting guidelines

No inclusion of special considerations for smaller, less complex entities or governmental entities

SSARS No. 21 represents the ARSC’s efforts to clarify and revise the standards for reviews, compilations, and engagements to prepare financial statements

Statement on Standards for Accounting and Review Services - SSARS No. 21

Effective for financial statements for periods on or after December 15, 2015

Early implementation is permitted

15

SSARS No. 21

Supersedes all existing AR sections except for AR Section 120, Compilation of Pro Forma Financial Information, which is expected to be exposed for public comment in clarified format in 2015 along with a proposed standard on assembly/compilation of prospective financial information.

Prospective financial information is currently codified in Attest Standards

16

Section 70 – Preparation of Financial Statements

Intended to be short and easy to apply• Only 22 requirement paragraphs and 19 application paragraphs

Applies when the accountant is engaged to prepare f/s but not engaged to perform an audit, review, or compilation on those f/s• Does not apply when the accountant has been engaged to

merely assist in preparing financial statements or when the accountant prepares financial statements as a by-product of another engagement


Does not apply when the accountant prepares financial statements:• Solely for submission to taxing authorities,• For inclusion in written personal financial plans prepared by the

accountant,• In conjunction with litigation services that involve pending or

threatened legal or regulatory proceedings, or• In conjunction with business valuation services.

Professional judgment will need to be applied as to when the accountant is engaged to prepare financial statements.


Does not require the accountant to consider whether he or she is independent

Requires an engagement letter signed by both the accountant and management/those charged with governance

Can be applied to f/s with or without disclosures


If the financial statements omit substantially all disclosures – disclose the omission in the financial statements

If the financial statements contain a known framework departure – disclose in the financial statements• May be on the face of the financial statements or in a note• Do not prepare financial statements if omission of disclosures or

other known framework departures are done to mislead users


Report is not required – even if financial statements are expected to be used by a third party

Requires a legend on each page of the f/s stating that no assurance is being provided• If management refuses or cannot include the legend, the accountant could

issue a disclaimer report, perform a compilation engagement, or resign.• Ensures that users are able to readily identify that the accountant is

providing no assurance with respect to the financial statements.• Software vendors are expected to include in their software


If the accountant is unable to include a statement on each page of the financial statements, the accountant is required to • Issue a either a disclaimer that makes clear that no

assurance is provided on the financial statements or• Perform a compilation engagement in accordance with

section 80 of SSARS No. 21.


An example of a disclaimer : • The accompanying financial statements of XYZ Company as

of and for the year ended December 31, 20XX, were not subjected to an audit, review, or compilation engagement by me (us) and, accordingly, I (we) do not express an opinion, a conclusion, nor provide any assurance on them.

• [Signature of accounting firm or accountant, as appropriate]• [Accountant’s city and state]• [Date]


When preparing financial statements in accordance with a special purpose framework/OCBOA, the accountant is required to include a description of the financial reporting framework on the face of the financial statements or in a note to the financial statements.

Comparison of Compilation and Preparation Service Compilation Preparation

When does the standard apply? Engaged to compile

Engaged to prepare

Is an engagement letter required? Yes Yes

Is the accountant required to determine if he or she is independent of the client?

Yes No

If the accountant is not independent, is that fact required to be disclosed?

Yes N/A

Does the engagement require a report? Yes No1

May the financial statements go to users outside of management?

Yes Yes

May the financial statements omit notes? Yes Yes 1legend required that no assurance provided.

Compilation and Preparation SSARSs

Results in a bright line between accounting services and reporting services.

Accountant no longer has to be concerned about whether the financial statements would be used internally or by third parties.

Panel Discussion

28

SSARS21: Most Significant Non Audit Standard Change in

the Past 35 Years

29Legend Requirement is an Opportunity• Firms Should note not only what it is not (audit, review, or compilation)

but what it is (high quality standard based financial statement):

• Financial Statement Preparation Service Provided By XX Firm under auspices of Professional Standards Provided By The AICPA.

• Firms need to highlight to both their clients and the key users (such as banks) that as a CPA Firm they are providing the client accounting service based on the AICPA Professional Standards and have professional continuing education, professional conduct and code of ethic requirements which differentiate them from non-CPA firms providing similar services

Comments from CPAs

• Catches up to a changing world – in terms of technology and the types of services (finance-and-accounting outsourcing, or FAO) that CPA firms want to offer their clients

• Allows CPA firms to provide CFO/controller services without the need to provide compilation report which is not be requesting

• Some feel it levels the playing field for CPA firms against non-CPA firms

• Sets the stage for Client Accounting to become as significant as audit and tax services, and will drive more firms into this area

31Need to Re-Position Description of Services

• Clients don't necessary know what they want

• Positioning of services and value

• Differentiate your firm from non-CPA firms

Need to Re-Educate Banks on Service Offerings

Change in mindset

Change in product

33

Additional Questions From Firms1. Future for compilations?

2. Why should firms implement SSARS No. 21 early?

3. Who will be most interested in this change?

4. How does a firm handle GAAP exceptions?

5. From Attendees??

34

Closing Comments on SSARS 21 Impact

New Standard For Cloud-Based Practice Environment

Provides a bright line between accounting and reporting services

Provides opportunity for firms to highlight increased value via legend requirement• Opportunity to build high-end, premium based client accounting service supported by

standard

High Interest Among Client Accounting and BPO Firms• Many are early adopting• Importance of Repositioning Write Up and Client Accounting Services

Firms and Clients have been asking for it – some for a very long time

Tools & Resources

Helpful Information and Resources

Dedicated ARSC Clarity page on AICPA Website at http://www.aicpa.org/InterestAreas/FRC/Review/Pages/ARSCClarityProject.aspx• Will be updated frequently

Developments in Review, Compilation, and Financial Statement Preparation Engagements – 2014/2015

http://www.aicpa.org/InterestAreas/FRC/Review/Pages/ARSCClarityProject.aspx



DIGITAL CPA Conference 2015December 7-9Red Rock Casino, Resort & Spa – Las Vegas

Client Advisory Services Workshops

CPA.com Blog

Slideshare.net/CPAcom

38

Thank you!#DigitalCPA