Generic SSARS 21 Preparation Engagement Letter

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#1
Wiles  
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We have a few in-house bookkeeping clients. We use QuickBooks for all of these. Occasionally, we get a request for a Balance Sheet or P&L. Unfortunately, being a CPA firm, we can't just hit Print without fear and trepidation that we are violating a professional standard.

Thank goodness SSARS 21 came out providing us with the Preparation level of financial statements. One very important requirement is that we obtain an Engagement Letter from the client. That's no problem, except we need to remember to do it every time the client asks us to hit the Print button.

I have been wondering if we can prepare a generic Preparation engagement letter that does not specify the financial statement that we are engaged to prepare. Can we just refer to "requested financial reports"? This way we can have the client sign it once, and we can fearlessly hit that Print button forever and beyond?
 

#2
Joan TB  
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Read this article from Journal of Accountancy. It explains it well. Since you have not been ENGAGED to prepare financial statements (you do bookkeeping services) you are not doing a compilation stmt under SSARS 21. Hitting the print button doesn't make it so.

http://www.journalofaccountancy.com/issues/2016/jan/bookkeeping-service-or-preparation-service.html
 

#3
Wiles  
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Joan TB. Thank you for sharing that article. It is right on point.

From the article:
If the accountant is aware that the client will provide financial statements to a third party and assert that the accountant prepared (or is otherwise associated with) the financial statements, the accountant may, as part of the process of reaching an understanding with the client as to the services to be provided, make clear that either:
* The accountant is preparing the financial statements, or
* The client should not make any assertions regarding the accountant's association with the financial statements.

So here we have a dilemma. What to do? I cannot control what my client says to the third party. The prudent thing to do would be to get an engagement letter saying we prepared it even though we know we didn't. Do you agree? If so, then that takes us back to my original question?
 

#4
Joan TB  
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I recently read about the accountant presenting a disclaimer letter. Let me see what I can find.
 

#5
Joan TB  
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It might have been in this video presented by the Pennsylvania Institute of CPAs that mentioned the accountant preparing a disclaimer letter to a possible 3rd party recipient.

https://www.youtube.com/watch?v=tD6jyz8tXVE
 

#6
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The disclaimer letter is an option under a SSARS 21 engagement. I suppose you can do whatever you want in a bookkeeping engagement that is not a preparation engagement.

Perhaps a more creative answer is to, with the understanding of the client, turn these bookkeeping engagements into a monthly SSARS 21 preparation engagement. Maybe you just retain the copies of the financial statements until the client requests them if they have no desire to see them. Once the accounting is done and the workpapers are saved, it doesn't take more than 5 minutes and a few kilobytes to turn the reports into a pdf file, does it?
 

#7
Wiles  
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It's hard to anticipate what reports they want. I had one call us this week that needs 3 years P&L, and current year to date P&L for a third party. Several weeks back another client wanted Jan - Dec even though their fiscal year is June. A while back there was another that wanted a P&L out of QB for just a single Class (QB's class tracking).

Each time we send them out a new Preparation engagement letter itemizing these specific requests.

I just want to send them all a letter that refers to "requested financial reports" generically.
 

#8
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Oh, yikes! I see your problem. In that case, I can't answer with enough conviction whether you can have a SSARS 21 compliant engagement letter like you want.

How do your clients usually request these goofball reports? Phone call? E-mail? They stop at your office and bug your receptionist? Where I'm going with this is that if you implemented a change order system for these engagements, the client could (for example) fill in a very simple form and sign it; once you have the form and sign it, you've met your requirement under SSARS 21 to obtain a written understanding of the work to be done.

And depending on the size of your firm, you might wish to have a change order system anyway, even if it's not the right fit for this situation.
 

#9
Wiles  
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Yes. Trying to comply with these professional standards makes me envy non-CPAs.

My peer reviewer may scold me, but I think I will use my God-given free will and proceed with the generic engagement letter. The liability on these kinda reports are so minimal. The report includes a footer that says "The accountant makes no assurances." If somehow, I end up with liability on this, I doubt it was because I used a generic engagement letter vs a specific engagement letter.

I will do the same for our many clients where we go onsite or remote to help with their QB. Often times, they ask us to print a report so that they can give it to whomever.
 

#10
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The problem with an open engagement letter is when does the engagement conclude? Since it is listed for all periods your liability runs until your engagement ends plus a few years as provided by state law. your firm could have recourse on statements you prepared 10 years ago. Since most firms don't want that open engagement letters are frowned upon by our insurers.
 

#11
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Terry Oraha wrote:The problem with an open engagement letter is when does the engagement conclude? Since it is listed for all periods your liability runs until your engagement ends plus a few years as provided by state law. your firm could have recourse on statements you prepared 10 years ago. Since most firms don't want that open engagement letters are frowned upon by our insurers.


I don't think that the engagement is "open" in the way you are describing. I assume that Wiles' engagement letters expire with the completion of the year-end financial statements; he simply wishes that additional reports could be prepared within the context of an existing engagement without requiring additional paperwork.
 

#12
dsocpa  
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The Quick books files I've looked not set-up by an accounting professional have not been suitable for presentation to an outside party. I know I'm a perfectionist, and possibly overly paranoid but I'm unable to issue a report by hitting "print" without doing some sort of due diligence.
 

#13
Wiles  
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Yes, of course. One should actually take a look at what is coming out of the printer. However, a Preparation is not a Compilation. The report formatting provided by QuickBooks is sufficient.
 

#14
dsocpa  
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Thanks Wiles. I meant the actual $$ reported. For example, negative expenses, receiveables, "ask my accountant", etc. Although, I prefer to export and do a bit of reformatting, then change to PDF.
 

#15
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Passing by
Last edited by Keyad22 on 22-Sep-2016 12:26pm, edited 2 times in total.
 

#16
Wiles  
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Keyad22, This discussion is a whole different topic. Can you please delete your post and start a brand new discussion for your question?
 


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