SSARS review: what are CPAs doing?

The introduction of Statement on Standards for Accounting and Review Services (SSARS) number 1, Compilation and Review of Financial Statements, was heralded by some certified public accountants (CPAs) as a significant change in accounting practice. The SSARS no. 1 required CPAs to issue compilation or review reports on financial statements of nonpublic clients instead of unaudited disclaimers. A questionnaire, sent to 300 CPA firm partners, investigated what procedures of SSARS reviews have been found effective in obtaining the limited assurance required; 70 responses were received. A list of procedures that might be used in a SSARS review engagement were included in the questionnaire, and CPAs were asked to rate each procedure's cost-effectiveness in meeting the objectives of a SSARS review engagement. There were 4 procedures customary to audits that are used by some practitioners in SSARS reviews: 1. Study and evaluate internal accounting control. 2. Observe client's physical inventory. 3. Examine client-prepared bank reconciliations. 4. Confirm cash balances directly with banks. Study and evaluation of internal control were thought to be very important in performing a review. The lower rating of analytical review procedures compared to inquiry procedures rating suggested the need for clarification by the accounting and review services committee.