Wiley Practitioner's Guide to GAAS 2023, 2nd Edition

62AT-C 395 Management's Discussion and Analysis¹

• Scope
• Definition of Term
• Objectives of AT-C 395
• Requirements: Examination
  • Acceptance
  • Performance
  • Reporting
• Requirements: Review
  • Acceptance
  • Performance
  • Reporting
• Illustrations

SCOPE

AT-C 395 applies when a practitioner is engaged by a public entity that prepares Management's Discussion and Analysis (MD&A) in accordance with the rules and regulations adopted by the Securities and Exchange Commission (SEC) (or a nonpublic entity following the same requirements) to perform either an examination or a review of MD&A. A practitioner engaged to perform agreed-upon procedures on MD&A should follow the guidance in Section 210. (AT-C 395.02) The SEC adopted requirements for MD&A in 1974 to have management provide a narrative explanation of the financial statements. The idea was to allow the user to see the company's financial position and operating results through management's eyes. Practitioners should refer to item 303 of SEC Regulation S-K and its interpretations. (AT-C 395.04)

Two levels of service are possible—an examination or a review. A review report is restricted as to use and is not intended to be filed with the SEC. An examination report is intended for general use, but at this stage, whether there will be a significant demand for this service is unknown. The SEC does not require a practitioner's report on MD&A—the narrative presentation is management's responsibility and not a part of the audited financial statements. ...