The role of CPA firms who perform “outsourced accounting services” for their clients has greatly expanded over the years into what many today refer to as “client advisory services and/or client accounting services” (“CAS”). With the evolution of CAS, many CPAs have questioned the appropriateness of applying the “preparation standards” (“AR-C 70”) set forth in the Statements on Standards for Accounting and Review Services (SSARS) for financial statements prepared as part of CAS engagements, when all other client advisory services (including controllership or CFO services) are performed under the consulting standards.
On April 7, 2025, the AICPA’s Accounting and Review Services Committee issued Statement on Standards for Accounting and Review Services No. 27 (“SSARS 27”), Applicability of AR-C Section 70 to Financial Statements Prepared as Part of a Consulting Services Engagement. The new SSARS amends AR-C section 70, Preparation of Financial Statements, explicitly excluding financial statements prepared as part of a consulting services engagement performed in accordance with CS section 100, Consulting Services, (“CS 100”) from engagements in which AR-C 70 must be applied.
The scope paragraphs of AR-C 70 were amended to clarify that accountants are not required to apply AR-C 70, but application is not precluded when accountants are preparing financial statements or prospective financial information as part of a consulting services engagement performed in accordance with CS 100 when the preparation of financial statements is not the primary objective of the engagement.
The SSARS 27 exception to AR-C 70 preparation engagements is effective for the preparation of interim or annual financial statements for periods ending after December 14, 2026. Early implementation is permitted.
For many CPA firms, SSARS 27 is welcome relief, as performing financial statement engagements under the consulting standards may better align with the evolving needs of clients and the CAS being provided. With that said, SSARS 27, does present a changing “risk landscape” and CAMICO cautions firms not to rush into early adoption without first having appropriate risk mitigating tools and solutions in place. Firms should seek to establish clear guidelines and a timeline for implementation and not short-change the efforts needed to educate themselves and their clients about the implications of this change, including the fine distinctions of when financial statements may be deemed a mere by-product of the services the firm is rendering versus the primary objective of the services.
Proactive documentation will be critical in managing the changing risk landscape for those firms who seek to embrace the flexibility afforded by preparing financial statements under the consulting standards. New written understandings with the clients should be executed delineating the revised scope and applicable standards of the services being provided. Firms should also consider the appropriateness of including revised indemnification language in these agreements, especially in situations where they may be perceived as, or in fact performing, management responsibilities as part of the CAS engagement.
In the coming weeks, CAMICO will make available engagement letter templates to assist policyholders who choose to early implement SSARS 27. CAMICO is also developing a risk management FAQ document to highlight common inquiries received from policyholders related to the risk management implications of SSARS 27 to CAS engagements and includes suggested best practices to proactively minimize potential exposures. CAMICO policyholders can access these resources on CAMICO’s Members-Only Site Accounting and Auditing Resource Center.
CAMICO policyholders with questions regarding this article or other risk management topics should contact the Loss Prevention department at lp@camico.com, or call our advice hotline at 800.652.1772 and ask to speak with a Loss Prevention Specialist.
