Digital cpa webcast ssars21 - external use
Transcript of 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
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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
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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
Section 70 – Preparation of Financial Statements
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.
Section 70 – Preparation of 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
Section 70 – Preparation of Financial Statements
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
Section 70 – Preparation of Financial Statements
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
Section 70 – Preparation of Financial Statements
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.
Section 70 – Preparation of Financial Statements
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]
Section 70 – Preparation of Financial Statements
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
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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
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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??
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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
DIGITAL CPA Conference 2015December 7-9Red Rock Casino, Resort & Spa – Las Vegas
Client Advisory Services Workshops
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Thank you!#DigitalCPA