Practitioners add new services, such as CPA WebTrust, to their roster of services. Clients ask their CPAs to provide assurance on information beyond the traditional financial statements. These increasingly popular engagements fall under the statements on standards for attestation engagements. Realizing that the standards have to keep up with a fast-changing business world, the ASB is considering widespread changes to make them more useful and understandable. As a start, it has exposed proposed amendments to SSAE no. 1, Attestation Standards, SSAE no. 2, Reporting on an Entitys Internal Control over Financial Reporting, and SSAE no. 3, Compliance Attestation .
Basically, the ED says practitioners can directly report on a specific subject mattersuch as an entitys internal control over financial reportingrather than just on a managements assertion, AICPA technical manager Jane Mancino told the Journal . The ED presents an example of each. The long-standing report on managements assertion might say: In our opinion, managements assertion that W Company maintained, in all material respects, effective internal control over financial reporting. Using the new direct method, the practitioners report might say: In our opinion, W company maintained effective internal control over financial reporting. Mancino stressed that this direct form of reporting would be an option: Practitioners still would be able to issue an opinion on managements assertion and still would have to require management to make an assertion.
The ED is available from the AICPA at 888-777-7077. Comments are due by July 31.SSAE no. 8: The Marketing Issues
A public company can choose which firm will perform its annual financial statement audit, but it cant choose to skip an audit altogether. As a result, auditors may have marketed their firms but usually not the service itself because they didnt have to sell the auditthe SEC has required audits of public companies for over half a century. Today, as auditors expand their services into voluntary areas, moving beyond the traditional financial statement audit, they will have to answer this question from their clients: If the SEC doesnt require this, whats in it for us?
The Journal spoke with James S. Gerson, ASB vice-chairman, about some of the marketing problems that may crop up with engagements under the new SSAE no. 8, Managements Discussion and Analysis. In a nutshell, SSAE no. 8 sets ground rules for how auditors might deal with an emerging range of information, he said. But will companies be anxious to spend money to gain such assurance? The Financial Executives Institute, in its comment letter, said it would not object to SSAE no. 8, if the standard made it clear it was a voluntary service. Many public companies already have confidence in their MD&As. They may not see a need to pay for additional assurance.
Nevertheless, Gerson said there were some who might welcome MD&A engagements, such as the underwriting community. Underwriters may be looking for additional assurance in connection with offerings. Demand for the MD&A engagement may originate here.
Even as some companies are reluctant to pay for the service, practitioners may be reluctant to offer it, according to Gerson. There is some risk associated with this engagement. The SEC is not shy about asking a company to modify the MD&A after its been filed. When a company has to make those changes, the auditors may have to address the MD&A all over again. Because of this risk possibility, Gerson said most firms would probably wait to see how the market develops and not aggressively push it just yet.