Our starting point is to address the word should.
Update – SSARS 19 had been replaced by SSARS 21. The entire body of knowledge has been revised. See:
- Flash update on SSARS #21
- Newly approved SSARS will allow a new service, ‘preparation’. Will also require written & signed engagement letters.
- Sample compilation report under SSARS 21
- Sample accountant’s review report for SSARS 21
- Video overview of SSARS 21
- New risk alerts for 2014/2015 are available
As I said in the discussion on compilations, when the word should is used in the SSARS literature it identifies a presumptively mandatory requirement. When you see the word should, then you have to comply with that requirement unless:
- you have a really, really good reason not to do so, and
- you document in the workpapers why you did not comply, and
- you show you have complied with the objective of that requirement through some other means.
That is a pretty high hurdle to clear.
The discussion of documentation for a review starts out saying that the accountant should have enough documentation to give a clear understanding of what was done. This specifically includes the nature, timing, extent, and results of what you did along with what review evidence was obtained and where you got that evidence.
SSARS 19 goes on to explain two things that documentation accomplishes:
- It gives the principal support for the accountant saying the review was performed in accordance with the SSARS.
- It gives a principal support for the accountant’s conclusion that the financial statements don’t need any material modifications.
It’s time for a little tangent. Remember that third bullet point above for how to get around a should requirement? (the comment that said you don’t have to comply with that requirement if the workpapers show that you have complied with the objective of the requirement some other way.) By explaining what documentation accomplishes, the SSARS has given the objectives for accumulating that documentation.
If you decide not to comply with one of the should items, then you can look at the two previous bullet points to see the hurdle your workpapers have to clear – you have to show you complied with the SSARS and you have to show why you believe the financial statements don’t need any material modifications. Wow. If you decide not to follow some of the subsequent requirements, you have a mighty tall hill to climb for your alternate route.
Next, the specific requirements for a review.