Section 70, Preparation of Financial Statements, of Statement on Standards for Accounting and Review Services No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification, applies when an accountant in public practice is engaged to prepare financial statements.
The following table provides examples of services that the accountant may be engaged to perform and whether Section 70 would apply. The table is not intended to be all-inclusive, and professional judgment should be applied in determining whether the accountant was engaged to prepare financial statements.
|Services to Which Section 70 Applies||Services to Which Section 70 Does Not Apply|
|Preparation of financial statements prior to audit or review by another accountant||Preparation of financial statements when the accountant is engaged to perform an audit, review, or compilation of such financial statements|
|Preparation of financial statements that are not expected to be used by a third party (management-use-only financial statements)|
|Financial statements prepared solely for submission to taxing authorities|
|Personal financial statements that are prepared for inclusion in written personal financial plans prepared by the accountant|
|Financial statements prepared in conjunction with litigation services that involve pending or potential legal or regulatory proceedings|
|Financial statements prepared in conjunction with business valuation services|
|Maintaining depreciation schedules|
|Preparing or proposing certain adjustments, such as those applicable to deferred income taxes, depreciation, or leases|
|Preparation of a single financial statement, such as a balance sheet or financial statements with substantially all disclosures omitted||Drafting financial statement notes|
|Using the information in a general ledger to prepare financial statements outside of an accounting software system||Entering general ledger transactions or processing payments (general bookkeeping) in an accounting software system|
Source: Michael P. Glynn, CPA, CGMA.