SSARS engagements can sound technical, but the real business question is simple: what kind of financial statement service does your business need, and how much assurance do outside users expect?
If a lender or investor has asked for financial statements, understanding the available SSARS engagement options can help you choose the right level of reporting support without overbuying or underpreparing.
Key Takeaways
- SSARS engagements cover preparation, compilation, and review services for unaudited financial statements of nonpublic entities.
- The level of service affects cost, timing, and credibility with lenders, investors, and other outside users.
- The intended use of the statements should drive the engagement type, not assumptions about what sounds most thorough.
What Are SSARS Engagements?
SSARS, or Statements on Standards for Accounting and Review Services, govern certain unaudited financial statement services that CPAs perform for nonpublic entities. Businesses typically hear the term from a CPA, banker, or advisor when financial statements are needed for outside use.
The Three Main Types of SSARS Engagements
There are three main types of SSARS engagements, and each serves a different purpose:
- Preparation engagements: The CPA prepares financial statements based on information provided by management. No assurance is provided, and independence is not required. This may be appropriate when management needs organized statements for internal planning or ownership discussions.
- Compilation engagements: The CPA presents management’s financial information in financial statement form. No assurance is provided. A compilation may be appropriate when externally formatted statements are needed, but the user does not require assurance.
- Review engagements: The CPA performs inquiry and analytical procedures and provides limited assurance. A review offers more comfort than a compilation, but less than an audit. This may be appropriate when a lender or investor wants additional confidence in the financial statements.
What SSARS Engagements Mean for Your Business
Not every business needs an audit. Sometimes a preparation, compilation, or review is the more appropriate fit. The right service affects cost, timing, and how much confidence outside users can place in your statements.
It is also important to remember that management remains responsible for the underlying records and financial statements. The scope of the work should be clearly defined in the engagement letter.
How to Think About the Right Fit
When evaluating which SSARS engagement makes sense, ask:
- Who will use the statement? Management, a lender, or an investor?
- Is assurance required, or are organized statements enough?
- Would a review provide more comfort than a compilation for the intended user?
The answers usually point clearly to the right level of service. Internal-use statements may call for preparation or compilation, while lenders or investors often expect a review.
How Assurance Dimensions Helps Businesses Choose the Right Engagement
Understanding SSARS engagements helps businesses choose the right level of financial statement service without unnecessary confusion or expense. Compilation and review engagements can be especially important when financial statements will be shared with lenders, investors, ownership groups, or other outside stakeholders.
Assurance Dimensions helps businesses determine the appropriate SSARS engagement based on how the financial statements will be used and what outside stakeholders expect.
If your business needs financial statements for a lender, investor, ownership group, or internal planning, contact Assurance Dimensions to discuss whether preparation, compilation, or review is the right fit.