'Direct examination' engagement created by SSAE No. 21

By Ken Tysiac

Practitioners will be able to perform a new engagement known as a direct examination for clients under a new standard published Wednesday by the AICPA Auditing Standards Board (ASB).

Statement on Standards for Attestation Engagements (SSAE) No. 21, Direct Examination Engagements, gives a practitioner the ability to measure or evaluate underlying subject matter against criteria and provide an examination opinion that conveys the result of that measurement or evaluation without another party responsible for the underlying subject matter having first measured or evaluated the subject matter.

The service will enable practitioners to report on new and emerging nonfinancial subject matters for entities that may not have the expertise in-house to measure or evaluate a complex, emerging subject matter.

In the new direct examination engagement, the responsible party (usually the client) is not required to:

  • Measure or evaluate the underlying subject matter against the criteria; or
  • Provide a written assertion to the practitioner.

The responsible party will be required to acknowledge responsibility for the underlying subject matter.

“While maintaining the ability to perform traditional ‘assertion-based’ examination engagements, this new engagement allows practitioners to use their highly valued skills and expertise to measure or evaluate different types of nonfinancial subject matters against criteria and report the results of their work directly to users, thereby furthering the public interest,” Tracy Harding, CPA, the ASB’s chair, said in a news release.

Harding said the entity responsible for the underlying subject matter is not required to expend resources to measure or evaluate the subject matter against criteria. Harding expects the new service to be useful because the types and complexities of nonfinancial subject matters are expanding.

SSAE No. 21 adds a new section in AICPA Professional Standards designated as AT-C Section 206, Direct Examination Engagements. The new standard also:

  • Amends AT-C Section 105, Concepts Common to All Attestation Engagements, principally for new terminology.
  • Supersedes AT-C Section 205 to differentiate it from AT-C Section 206, although both types of examination engagements are reasonable assurance engagements. Revised AT-C Section 205 continues to enable practitioners to perform assertion-based examination engagements.

SSAE No. 21 takes effect for practitioners’ reports dated on or after June 15, 2022, and early implementation is permitted.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

Where to find May’s flipbook issue

The Journal of Accountancy is now completely digital. 





Leases standard: Tackling implementation — and beyond

The new accounting standard provides greater transparency but requires wide-ranging data gathering. Learn more by downloading this comprehensive report.