How will SSARS 25 Impact You?

In February 2020, the Accounting and Review Services Committee (ARSC) released a Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions. It impacts AR-C sections 60, 70, 80 and 90. 

What is SSARS 25?

SSARS 25 is effective for engagements performed on financial statements for periods ending on or after December 15, 2021.  Early implementation is permitted.

One of the goals of the new SSARS standard was to converge with the International Standard for Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. This resulted in numerous wording changes, content reorganizations, and minor enhancements. Generally, the majority of the SSARS 25 changes are not expected to significantly alter existing practice. The following are just a few examples:

• Clarification that substantial omission of disclosures in the preparation of financial statements should be disclosed either on the face of the financial statements or in an accompanying disclaimer.
• If a special purpose framework is applied in a compilation, the report should state that, as a result, the financial statements may not be suitable for another purpose.
• A review accountant is explicitly required to plan and perform the engagement with professional skepticism.
• Engagement letters in a review must be obtained prior to performing the engagement.

One SSARS convergence change that will significantly impact current practice is the permissibility of issuing a qualified or adverse review conclusion. Use of modified conclusions were previously not allowed in SSARS review engagements.

Materiality within SSARS 25

Separate from convergence efforts, the concept of materiality was modified to be in alignment with a recent change to generally accepted auditing standards (GAAS). Misstatements or omissions would be considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

The SSARS content contained in this article is for informational purposes only and is not tax advice. You should consult a tax advisor for advice applicable to your situation.

Take the next step with Becker CPE

Learn more about preparing and reviewing financial statements with Becker's CPE courses. With over 1,700 live webcasts and on-demand courses, you can choose the options that will build your skillset while meeting state requirements. To learn more about this topic, check out the following: 

• SSARS 21
• Quality Management Standards 
• Managing Professional Liability Risk in Nonattest Services