
Not much going on here (that’s a first…)
◦ A few interpretations have been issued related to
auditing pension information
◦ The ASB is currently evaluating some recent changes to
the international standards on which the AICPA audit
standards are based
◦ A task force of the AICPA Government Expert Panel is
currently working on a new chapter for the AICPA State
and Local Government Audit and Accounting Guide
related to auditing pension data (rumor has it that the
chapter is over 100 pages long so far)
◦ This would be a good time to do a refresher on what the
AICPA Clarity Standards say about using the work of a
specialist
2
Employer Concerns:
•What level of involvement should we have in establishing the actuarial
assumptions?
•Can we rely on plan actuary as a management specialist?
Plan Concerns:
•What level of involvement should the employer have in establishing the
actuarial assumptions?
•Does the auditor of the plan possess the skills, knowledge, and experience
related to the actuarial information in the standard?
•Does the auditor of plan include an actuarial specialist as part of the audit
team?
Auditor Concerns:
•What role should we have in evaluating the actuarial assumptions?
•As auditor of the plan, do I have to engage auditor specialists for actuarial
information?
•As auditor of the employer, did the auditor of the plan engage an auditor
specialist to review actuarial information?
3
Investment Return Rate
7.25%
Wage Inflation Rate
4.0%
Pay increase Assumptions
4.0%
Assumed Retirement
62
Rates of: Mortality, Disability,
Retirement, and Marriage
Actual Experience during 2008-2010
Period
The auditor must obtain an understanding of the actuarial methods and
assumptions and assess their reasonableness and consistency of application.
4

Key census data
◦
◦
◦
◦
◦
◦
◦
◦

The auditor must test the
reliability and completeness of
the census data provided to the
actuary
Date of birth
Gender (male or female)
Date of hire or years of service
Date of termination or retirement
Marital status
Spouse date of birth
Eligible compensation
Employment status
Auditing census data
◦ Active employees
◦ Inactive/retired

Resolving exceptions
5
Definitions
Auditor’s Specialist – Individual or organization possessing
expertise in a field other than accounting or auditing,
whose work in that field is used by the auditor to assist the
auditor in obtaining sufficient appropriate audit evidence.
An auditor’s specialist may be either an auditor’s internal
specialist or an auditor's external specialist
Management’s Specialist – An individual or organization
possessing expertise in a field other than accounting or
auditing, whose work in that field is used by the entity to
assist the entity in preparing the financial statements
6
Management's
specialists
Auditor
internal
specialists
and resources
Specialists
engaged by
auditor
Specialists are a member of the
engagement team
No
Yes
No - however,
auditor directs
their work
Auditor evaluates competence, capabilities
and objectivity of specialists
Yes
Yes
Yes
Description
Specialists may assist auditor in obtaining
an understanding of the entity and its
environment, including its internal control
(AU-C-500.08(a), (AU-C-620.09,
.A38-.A44)
.A15-.A22)
(AU-C-620.09,
.A15-.A22)
No - however,
Yes
they may
(AU-C-620.A5)
provide relevant
information
Yes
(AU-C-620.A5)
7
Description
Specialists may assist auditor in identifying
and assessing risks of material misstatement
Management's
specialists
Auditor
internal
specialists
and resources
No - however,
Yes
they may
(AU-C-620.A5)
provide relevant
information
Specialists may assist auditor in determining
and implementing overall responses to
financial statement level risks
No
Specialists may assist auditor in designing
and performing further audit procedures to
respond to the assessed risks at the
assertion level, comprising test of controls
or substantive procedures
No
Specialists
engaged by
auditor
Yes
(AU-C-620.A5)
Yes
Yes
(AU-C-620.A5)
(AU-C-620.A5)
Yes
Yes
(AU-C-620.07
and .A5)
(AU-C-620.07
and .A5)
8
Description
Auditor obtains an understanding of the
work of specialists
Auditor evaluates the adequacy of the work
of specialists
Specialists may assist auditor in evaluating
the sufficiency and appropriateness of audit
evidence obtained in forming an opinion on
the financial statements
Management's
specialists
Auditor
internal
specialists
and resources
Specialists
engaged by
auditor
Yes
Yes
Yes
(AU-C-500.08(b) (AU-C-620.11
and A.45-.A48) and .A25-A.29)
Yes
Yes
(AU-C-500.08(c) (AU-C-620.12
and .A49)
and .A35-.A42)
No
(AU-C-620.11
and .A25-A.29)
Yes
(AU-C-620.12
and .A35-.A42)
Yes
Yes
(AU-C-620.07
and .A5)
(AU-C-620.07
and .A5)
9
Do you need
skills,
knowledge
and
experience
related to a
particular
area of
accounting
or auditing,
or related
subject
matter?
No
No auditor
specialist needed
Ye
s
Does the
engagement
team possess
the skills,
knowledge
and
experience?
Yes
No auditor
specialist needed
No
Is there a
firm
specialist
and/or firm
resource
that
possesses
the skills,
knowledge
and
experience?
No
The
engagement
team may
need to
engage an
expert.
Yes
The firm specialist
and/or firm resource is
included as a member of
the engagement team.
10






The nature, scope, and objectives of the work of
specialist
Whether specialist is employed by entity or is party
engaged to provide relevant services
Extent to which management exercises control or
influence or work of specialist
Competence and capabilities of specialist
Whether specialist is subject to technical performance
standard or professional or industry requirements
Auditor’s ability to evaluate work and findings of
specialist without assistance of auditor’s specialist
11

Statements on Standards for Accounting and
Review Services (SSARS) have changed
significantly
◦ The ARSC undertook a “clarity-like” revision of the
SSARS, similar to what the ASB did with the SASs
◦ The result is SSARS 21, which effectively amends
and supersedes all previous SSARS sections in the
codification, except for Sec 120, Compilations of
Pro Forma FS, which will be superseded by an
additional clarity SSARS this year
◦ The following slides will take us through the
changes for compilations, reviews, and a new(?)
service labeled “preparation of financial statements”
12

STATEMENTS ON STANDARDS FOR
ACCOUNTING AND REVIEW SERVICES 21
◦
◦
◦
◦
General Principles (Significant changes)
Preparation of financial statements (New)
Compilation engagements (Significant changes)
Reviews (not much change)
Effective date would be for financial statement
periods ending on or after December 15, 2015
(so effective for any 12-31-15 financial statements)
13


Intended to help accountants better
understand their professional responsibilities
Sec 60 must be followed in additional to the
section applicable to the type of work you are
doing
◦ Covers things like ethical requirements,
professional judgment, following the SSARS, quality
control, and acceptance/continuance
◦ Also specifies a requirement that all SSARS
engagements must have a signed engagement
letter (signed by both parties)
14



Provides requirements and guidance when an
accountant is engaged to prepare financial
statements for an entity, BUT has NOT been
engaged to perform a compilation, review or
audit with respect to those financial
statements
DOES NOT apply in situations where the
accountant is not in public practice
This is a non-attest service (no assurance)
15

Why needed?
◦ In the past, compilations were required when an
accountant was engaged to report on compiled
financial statements, or submits” (presenting to
management financial statements that the
accountant has prepared) financial statements to a
client or third parties
◦ Today, with the advent of new technology and other
applications, it is becoming difficult to determine
just “who” prepared the financial statements, and it
was tough to tell when a third party might use them
16


No report is required, even if they are to be
used by or presented to a third party
Since it is non-attest (no assurance)
◦ Now in harmony with Yellow Book treatment of FS
preparation
◦ Also more consistent with practitioners who have
considered FS prep a “management responsibility”
and an essential part of an entity’s system of
internal control
◦ The accountant need no longer be concerned with
who prepared the FS, or who is using the FS, when
issuing a compilation
17

Other issues with preparation
◦ Each page of the FS needs include a statement or legend
stating, at a minimum, that “no assurance is provided”
◦ The accountant’s name need not be included in the
statement or legend
◦ If the accountant is unable to include an appropriate
statement or legend described above, the accountant must
issue a disclaimer report, OR may perform a compilation in
accordance with Sec 80 requirements, OR may resign
◦ Oh, and by the way, these services are excluded from peer
review, if this is the only service that your organization
performs
◦ AICPA Code of Conduct prohibits a CPA from being
associated with FS that are misleading, so be careful
◦ What if I’m just assisting management with the preparation
of FS, and I’m not really preparing ? Am I following this
SSARS? No, you are not
18
Examples
19


A written, and signed, engagement letter or other
suitable form of written agreement is required
A report is now required for all compilation
engagements
◦ — It is no longer necessary to have the non-reporting
exception that was previously afforded for financial
statements that were prepared and presented by an
accountant to management that were not intended for
third party use. Such engagements will be covered by
section 70.
20

Additional paragraphs are required when

— the financial statements are prepared in accordance with a
special purpose framework.

— management elects to omit substantially all disclosures
required by the applicable financial reporting framework.

— when the accountant’s independence is impaired.

— there is a known departure from the applicable financial
reporting framework.

— supplementary information accompanies the financial
statements and the accountant’s compilation report thereon.
21





Compilation report looks significantly different an audit or
review report, i.e., one paragraph, no headings
Accountant no longer concerned with FS being general use
or not
Management use only financial statements (SSARS 8 type
stuff) will be eliminated
When the accountant is not independent, a statement to
that effect is still required in the compilation report
Don’t have to disclose why the accountant isn’t
independent, but if they voluntarily choose to disclose the
why, ALL of the whys must be disclosed (not just part of
them)
22


Primarily a clarity redraft of the pre-clarity
review literature with very few changes
SSARS No. 21 does make clear that section 90
may be applied to historical financial
information other than historical financial
statements, such as specified elements,
accounts, or items of a financial statement;
supplementary information; required
supplementary information; and financial
information included in a tax return
23


The accountant’s review report will look
different as SSARS No. 21 requires the use
of headings in the report. The accountant is
also required to name the city and state of
the issuing office
Requirement will be met if the accountant’s
review report is presented on the
accountant’s letterhead and the letterhead
contains the city and state of the issuing
office
24

Although pre-clarity guidance stated that
emphasis would never be added to a review
report, this has now changed
◦ Emphasis of matter paragraph, or other matters
paragraph will be required in certain situations
 Inclusion of supplemental information and required
supplemental information
 Special reporting framework used
 Several others
25