New level of service from CPAs – “Preparing” financial statements

In October 2013, one of the accounting rule setters issued a proposal which creates a new level of service for CPAs. This will be called preparation of financial statements.

Such service will not be subject to the same rules that govern compilations, reviews, or audits.

When the client organization and CPA agree to this approach, the accountant can issue a set of financial statements without any cover report from the accountant. 

The accountant will not be obtaining any assurance on the financial statements and users should not infer any assurance.

I think this will be a big deal.

Technical description

This is called an exposure draft. It was issued by the Accounting and Review Services Committee of the AICPA, which is the official group who sets these rules. The exposure draft can be found at the following link:

Some details

The accountant doesn’t have to do any work to verify any of the information is correct. Paragraph 3 of the exposure draft says an accountant

…is not required to verify the accuracy or completeness of the information provided by management or otherwise gather evidence to express an opinion or a conclusion on the financial statements or otherwise report on the financial statements.

A few other key items from the exposure draft:

The financials are prepared from information provided by management.

Each page of the financial statements needs to include a comment there is no assurance on the financials provided by any CPA. Two example comments are in the Application and Other Explanatory Material section (AOEM):

No CPA provides any assurance on these financial statements.


These financial statements have not been audited or reviewed, and no CPA expresses an opinion or a conclusion nor provides any assurance on them.

If the accountant identifies any deficiencies or inaccuracies in the client provided information or there is obviously some missing info, the accountant needs to request management provide corrected or additional information.  In other words, if something jumps out at the accountant, then the accountant needs to have management fix it.

Omitting substantially all disclosures is allowed.

The AOEM section distinguishes between preparing financial statements and bookkeeping (see paragraph A1). This ED applies to ‘preparing’ but not bookkeeping.

The difference is in the nature of services. Doing something like preparing bank recs or depreciation schedules, drafting the notes, or proposing adjustments such as depreciation or deferred taxes would be ‘preparing’.  Merely doing the bookkeeping entries would not make the accountant’s services subject to this exposure draft.

The effective date is proposed as financial statements for years ending on or after 12-15-15. That translates to calendar year 2015 reports.  Early implementation is allowed.

Additional posts:

  • Mandatory signed engagement letters
  • Revisions to compilation reports.

1 thought on “New level of service from CPAs – “Preparing” financial statements”

  1. Pingback: Proposed revision to compilation rules, including new reports | Attestation Update - A&A for CPAs

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