Plain-paper hearing:

SSARS Hearing Yields No New Answers

There is still widespread disagreement about when financial statements have to be compiled and the so-called plain-paper issue, according to Wanda Lorenz, chairwoman of the American Institute of CPAs accounting and review services committee. ARSC held a two-day hearing on these issues in August. "However, despite the disagreement on how to solve the problem, for the first time I did see a general agreement that even though many may not like the proposed solutions, something needs fixing," she told the Journal . (For background information, see "Public Hearing on SSARS no. 1," JofA, July97.)

Although at Journal press time the committee had not yet met to formally address the results of the hearing, Lorenz discussed some of her impressions. "Even those who do not want to see a plain-paper standard are finding the current standards onerous. There were suggestions that standards should take into account the intent of the CPA and client." She cited "inadvertent compilations," in which a client wants the CPA only to post journal entries, for example. The software program used, however, automatically generates a statement. Although neither the client nor the CPA had intended to issue a formal statement, the CPAs actions call for at least a compilation. Lorenz said there were ways around generally accepted accounting principles, such as a tax basis statement. However, these solutions usually did not save any of the CPAs time and, thus, any of the clients money. Therefore, CPAs had to bill for services the client may not have wanted or needed.

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Another key issue was GAAP departures. Lorenz said that with plain-paper statements, the CPA would not be taking responsibility for noting these departures. "Wed have to train the public to understand what plain-paper statements are and their differences from compilations." However, she said that might be a simpler proposition than the status quo of mandating compilations.

A work in progress

"I fail to see how we are serving the public interest when we force our clients to accept a service they dont want," she said. "Unfortunately, the hearing didnt supply a lot of really snappy ideas." She said that although there has been a lot of debate, no one has approached ARSC with a widely acceptable solution. The ARSC planned to review the meeting transcript and work with legal counsel on these difficult issues.


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