Sharpe CPA / For CPAs / Preparation, compilation and review
The firm manual I use for SSARS engagements, opened up: pick the service, pick the framework, follow the workprogram, and build the engagement letter, report and representation letter. Current through SSARS 27, for periods beginning on or after December 15, 2025.
Step 1
The engagement's main objective, what the users need, and the firm's independence decide the service. Settle it before accepting and write it into the engagement letter. None of these services ends in an opinion: a compilation gives no assurance, a review gives a limited-assurance conclusion.
1. Is preparing financial statements the engagement's main objective?
2. Does a lender, surety or other user need limited assurance?
3. Does management want an accountant's report on the statements?
4. Is the firm independent of the client?
Step 2
Management chooses the framework; the accountant must judge it acceptable before accepting (AR-C 60). The framework then decides what a complete set of statements is, which disclosures are required, and what the report says.
| US GAAP | Income tax basis | |
|---|---|---|
| Use it when | A lender, surety, investor or regulator requires GAAP, or users are not familiar with another basis | Closely held entities whose users are the owners, or a bank that reads the tax return; common for S corporations, partnerships, smaller fuel jobbers and contractors |
| Statement titles | Balance sheet; statement of income; changes in equity; cash flows | Statement of assets, liabilities, and equity—income tax basis; statement of revenue and expenses—income tax basis |
| Cash flow statement | Required | Not required |
| Notes | Full GAAP disclosures — use the disclosure checklist | Describe the basis, the significant policies and the primary differences from GAAP (no quantifying); GAAP-like disclosures for items like GAAP's — tax basis checklist below |
| Common differences | — | MACRS, bonus and §179 depreciation; direct write-off, no CECL allowance; no deferred taxes; leases as rentals; nondeductible items shown as expenses; completed-contract method for small contractors |
| Going concern | ASC 205-40: management evaluates one year from the date the statements are available to be issued | No evaluation required, but in a review the accountant inquires and considers disclosure when doubt exists |
| New for 2026 years | ASU 2025-05 credit-loss practical expedient and private company collections election; ASU 2023-09 income taxes paid by jurisdiction | Check entity-level California taxes and the PTE elective tax in the notes |
| Report language | Standard compilation or review report | Adds a paragraph that the statements use the tax basis, a basis other than GAAP, referring to the note; in a review it is an emphasis-of-matter paragraph headed “Basis of Accounting” |
Each is a special purpose framework with the same description, title and report requirements as the tax basis, plus what is listed here.
| Framework | When it fits | What to watch |
|---|---|---|
| Cash basis | Very small entities, clubs, trusts; users who only need receipts and disbursements | Titles such as “statement of cash receipts and disbursements”; disclosures for items like GAAP's |
| Modified cash | Cash plus a few accruals with substantial support, such as fixed assets and debt | Modifications must have substantial support and must not turn it into accrual accounting; describe each one |
| Regulatory | Statements filed with a regulator that prescribes the basis | Use usually restricted to the entity and the regulator; a review report adds a restricted-use other-matter paragraph when required |
| Contractual | A loan, buy-sell or acquisition agreement prescribes the basis | The statements must describe significant interpretations of the contract or the report is modified; use restricted to the parties |
| FRF for SMEs | Owner-managed businesses wanting accrual statements without full GAAP | Not GAAP; taxes-payable method allowed, older lease model, no CECL; confirm the lender accepts it |
| IFRS, IFRS for SMEs | Foreign-owned or foreign-reporting clients | General purpose frameworks; AR-C 100 covers frameworks of other countries not set by AICPA-designated bodies |
Step 3
What each service requires, as a checklist. Ticks are kept in this browser only; print the list for the file.
Step 4
Fill in the engagement and the documents write themselves from the requirements of AR-C 70, 80 and 90 and CS 100. Highlighted text still needs your attention. Tailor every document to the engagement; do not carry last year's forward unchanged.
Disclosures
Tax-basis statements need fewer notes than GAAP, but every item that resembles a GAAP item needs a similar disclosure, and the basis itself must be described. For GAAP, use the full disclosure checklist. Cash and modified cash statements use this list, with item 3 describing that basis instead.
Consulting standards
Since SSARS 27, financial statements prepared inside a consulting engagement are outside AR-C 70 when preparing them is not the engagement's main objective. It is effective for periods ending on or after December 15, 2026, and may be applied now.
On top of the general standards in ET 1.300.001 — competence, due care, planning and supervision, sufficient relevant data.
Consultations, advisory, implementation, transaction, staff and support (outsourced controller or CFO), and product services.
Outside CS 100: tax preparation, planning and advice (Statements on Standards for Tax Services), bookkeeping, personal financial planning, and work under the SASs, SSAEs or SSARSs. The AICPA notes that CS 100 work sits outside the firm's accounting and auditing practice for quality management and peer review purposes.
Independence is not required for consulting, but for a client the firm also compiles or reviews, the nonattest services rules in ET 1.295 apply. Never take on management responsibilities.
Sources
The SSARS Codification controls. The AICPA Guide Preparation, Compilation, and Review Engagements is interpretive guidance; practice aids, CPE materials and this page are not authoritative. The templates here are written from the requirements of the standards, not copied from AICPA illustrations. Check the current Codification and Guide before relying on any of it.