A study of the expectations gap for no-assurance services

Abstract

Standards for Accounting and Review Services (SSARS) Number (No.) 1, “Compilations and Review Services” (AICPA, 1979), provides guidance for public accountants associated with unaudited financial statements through compilations and reviews. SSARS No. 8, “Amendment to SSARS No. 1, Compilation and Review of Financial Statements” (2000), extends this guidance to plain paper statements. Unlike traditional compilations, plain paper statements are intended only for the use of informed members of management.

To examine the effects of SSARS No. 8, we surveyed practicing Certified Public Accountants (CPAs) and bank loan officers to measure their perceptions of what constitute “submitted financial statements,” “third parties,” “informed members of management,” and other key terms that aroused concerns described in SSARS No. 8 comment letters. We find that several years after the issuance of SSARS No. 8, CPAs, even those somewhat familiar with SSARS No. 8, and bankers who have experience with plain paper statements do not fully understand the definitions and applications of SSARS No. 8. In addition, several of the concerns cited in the statement's Exposure Draft (ED) comment letters linger. The results suggest the need to either better education plain paper statement users or revise the standards, perhaps prohibiting a CPA's association with plain paper statements. We also identify future research questions.

Citation

Patrick Green, B., Reinstein, A. and Miller, C.L. (2010), "A study of the expectations gap for no-assurance services", Lehman, C.R. (Ed.) Ethics, Equity, and Regulation (Advances in Public Interest Accounting, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 75-109. https://doi.org/10.1108/S1041-7060(2010)0000015007