THE IMPLICATIONS OF AMERICAN EXPRESS ON SSARS
As with many of the changes taking place in the accounting profession today, it started with American Express Tax and Business Services. You remember the Miller case. Stephen Miller, a CPA, prepared financial statements and tax returns for clients of his employer, American Express Tax and Business Services (TBS). When TBS began promoting the fact that Miller was providing accounting service to the public as a CPA, the Florida State Board of Accountancy decided to discipline Miller. The board said he was holding himself out as a CPA and thereby, according to Florida law, was practicing public accounting in an unlicensed firm. In the resulting court case, the Florida Board lost on the basis that Miller's right to free speech was being infringed upon by limiting his ability a make a truthful statement, namely, that he was a CPA. The Supreme Court refused to grant a writ of certiorari and Florida was left with an inoperable law.
As a result, earlier this year the Florida legislature redefined the practice of public accounting. Many of the changes appear to be right out of the new model UAA. CPAs are to be regulated under a practice act versus a title act, as was done previously. The holding out requirements have been eliminated. CPAs will have to choose between having an active or inactive license. Only CPAs practicing in licensed firms subject to special rules and regulations will be able to perform audit or attest functions. Most importantly, the language of the law specifically addresses the right of licensees in nonaudit firms to prepare basic financial statements. As a result of a consent decree, the new structure creates a fourth level of financial reporting entitled, "Assembled Financial Statements" that is available to all CPAs, regardless of where they practice or are employed.
Enter the AICPA Accounting and Review Services Committee. At a meeting on July 10, 1998, the committee met with representatives of the Florida Institute of CPAs who were assisting the Florida board in implementing the new legislation. ARSC concluded that the change in the Florida law "altered the regulatory scheme for a growing segment of CPAs that offer services to the public in nontraditional firms." Determining that this change is complex and far reaching, the ARSC supported the following approach:
* Revise the applicable section of SSARS No. 1 to make it engagement driven (a CPA issues a SSARS report when engaged by the client to do so, and not just because a financial statement is issued).
* Revise the wording of the SSARS compilation report to include a description of the procedures performed in a compilation engagement.
* Promote and market compilation as a service that provides added value to users.
* Develop guidance for CPAs who elect not to follow SSARS No. 1 when preparing financial statements. The guidance would include obtaining a written understanding with the client, attaching a transmittal letter to the financial statements, and reemphasizing the CPA's responsibility to adhere to the AICPA Code of Professional Conduct.
Acknowledging that the above is both controversial and complex, the ARSC will seek guidance from the AICPA Board of Directors. In fact, the following week the AICPA board discussed the ARSC's conclusions, raised several concerns, and asked the committee to look at various alternatives. It was to consider the matter further in September. Meanwhile, the committee's work on developing three exposure drafts to cover other practice issues is being put on hold.
There may be more than developments in Florida driving these proposed changes. In discussing plain paper statements in an interview with The CPA Journal published earlier this year, Dan Guy, former AICPA vice-president, indicated a clear preference for making compilations engagement driven. Perhaps the ARSC views the Florida situation as an opportunity to get things right. However, it also runs the risk of getting back to the same situation that led to the invention of SSARS in the first place. *
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