Engagement Essentials

SOLUTIONS

CHAPTER 1

Case 1-1 Solutions

1.    Should the services provided by Sherman CPA firm from 1981 to 1991 have been performed in accordance with Statements on Standards for Accounting and Review Services (SSARSs)?

Prior the issuance of SSARS No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification (AICPA, Professional Standards), in 2014, SSARSs required that the accountant perform a compilation engagement when he or she was either (1) engaged to perform a compilation engagement, or (2) submitted financial statements to management or third parties. Submission was defined as “prepares and presents.”

During this period, Sherman CPA would have been required to perform a compilation in accordance with SSARSs with respect to the year-end financial statements, because Sherman prepared and presented those financial statements.

2.    Should the services provided by Sherman CPA from 1991 to 2006 have been performed in accordance with SSARSs?

During this time period, SSARSs still required accountants to perform compilation engagements when they submitted financial statements to management or third parties. However, although the reading of monthly financial statements would not constitute submission, Sherman would have to make a determination, using professional judgment, as to whether the input of monthly adjustments constituted preparation of financial statements. If Sherman determined that he prepared financial statements, then he would ...