May 5, Mr. Mike Glynn American Institute of Certified Public Accountants 1211 Avenue of the Americas New York, NY

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1 Deloitte & Touche LLP Ten Westport Road PO Box 820 Wilton, CT Tel: Fax: May 5, 2014 Mr. Mike Glynn American Institute of Certified Public Accountants 1211 Avenue of the Americas New York, NY Re: Proposed Statements on Standards for Accounting and Review Services: Preparation of Financial Statements; Compilation Engagements; and Association with Financial Statements Dear Mr. Glynn: Deloitte & Touche LLP (D&T) is pleased to respond to the request for public comment from the Accounting and Review Services Committee (ARSC) of the American Institute of Certified Public Accountants (AICPA) on its proposed Statements on Standards for Accounting and Review Services (SSARSs): Preparation of Financial Statements; Compilation Engagements; and Association with Financial Statements (the proposed preparation standard, the proposed compilation standard, and the proposed association standard; collectively, the proposed SSARSs ). We have responded to questions posed in the explanatory memorandum, provided an overall comment as well as additional comments on the proposed SSARSs. In our recommendations for specific changes, additions are noted in bold and deletions are noted in strikethrough text. Responses to Questions Posed in the Explanatory Memorandum 1. ARSC asks for specific feedback about whether respondents are supportive of the revised applicability for the compilation engagement so that the standard applies only when the accountant is engaged to perform a compilation engagement. We are supportive of the revised applicability of the proposed compilation standard such that it applies only when the accountant is engaged to perform a compilation engagement. However, we believe there is a contradiction between the requirement stating that compilation services be provided only when the accountant is so engaged and the application guidance in paragraph A16, which states that the accountant may issue a compilation report even if not engaged to do so. In order to issue a compilation report under the proposed compilation standard, the accountant is required to be so engaged. Accordingly, we believe paragraph A16 should be removed from the proposed compilation standard and instead be included in the proposed preparation standard to address the accountant s consideration about the need to issue a compilation report and the accountant s responsibilities under the proposed compilation standard, i.e., to address the situation when the accountant is performing a preparation service and determines it is appropriate to issue a compilation report. Page 1 of 7

2 2. ARSC asks for specific feedback about whether respondents are supportive of the issuance of standards and guidance for an engagement to prepare financial statements. D&T is supportive of the issuance of the proposed standards and guidance for engagements to prepare financial statements. However, because preparation services are deemed nonattest services under Interpretation No , Nonattest Services, under Rule 101, Independence, we recommend that this proposed preparation standard not be issued as a Statement on Standards for Accounting and Review Services, as we believe SSARSs should continue to address only attest engagements. However, if the proposed preparation standard is issued as a SSARS, we believe that the proposed SSARS, Framework for Performing and Reporting on Compilation and Review Engagements, needs to be expanded to address preparation services and in particular, to fully explain the differences in the objectives of, and the accountant s responsibilities in, a preparation service as compared to a compilation service, as well as the rationale for and implications of the inclusion of a standard for a nonattest service within the SSARSs. We also recommend that paragraph A4 of the proposed preparation standard be expanded to provide further application guidance as to when this proposed standard applies, including providing additional examples of the nature and types of preparation services anticipated to be performed by the accountant that would be encompassed by the proposed standard. 3. ARSC asks for specific feedback about whether respondents are supportive of the requirement that the engagement letter or other suitable form of written agreement be signed by (a) the accountant or the accountant s firm and (b) management. Although an engagement letter is ordinarily signed by the accountant or the accountant s firm and management, we do not believe that the SSARSs should be more prescriptive than the auditing and attestation standards issued by the AICPA, which do not include a specific requirement for the engagement letter or other suitable form of written agreement to be signed by the accountant or the accountant s firm, and management. 4. ARSC asks for specific feedback about whether respondents are supportive of the proposed requirement that each page of the financial statements that the accountant has prepared include a statement or legend stating that no CPA provides any assurance on the financial statements or else the accountant would be required to issue a disclaimer. We believe that it is appropriate for each page of the financial statements that the accountant has prepared to include a legend to indicate that the financial statements have not been audited, reviewed, or compiled. However, we recommend that the requirements in paragraphs 8.e and 12, and the related application guidance in paragraphs A13-A14 and A20 be amended to include more specific language, including language pertaining to compilation engagements. Additionally, the second sentence of paragraph A13 indicates that [t]he statement is made at management s discretion. We believe this guidance is contradictory to the requirement in paragraph 12 whereby the accountant is required to include the statement, and as such we believe it should be deleted. We also believe that the third sentence of paragraph A13 is redundant with the first one, and should also be deleted. Page 2 of 7

3 Following are our suggested revisions: 8. e. The understanding that an adequate statement will be included on each page of the financial statements indicating that no CPA audited, reviewed, or compiled provides any assurance on the financial statements (Ref: par. A17-A18) 12. The accountant should include an adequate statement on each page of the financial statements indicating that the financial statements have not been audited, reviewed, or compiled by a no CPAprovides any assurance on the financial statements. If the accountant is unable to include an adequate statement on each page of the financial statements, the accountant should issue a disclaimer on the financial statements (Ref: par. A13-A14) A13. The adequate statement on each page of the financial statements, including related notes, is intended to avoid misunderstanding on the part of users with respect to the accountant s involvement with the financial statements. The statement is made at management s discretion, and the accountant or the accountant s firm name is not required to be included in the statement. The accountant is concerned that the indication is not misleading. Examples of an adequate statement on each page of the financial statements include the following: No CPA has audited, reviewed, or compiledprovides any assurance on these financial statements. These financial statements have not been audited, or reviewed, or compiled by a CPA, and no CPA expresses an opinion or a conclusion, nor provides any assurance on them. A14. An example of a disclaimer that the accountant may issue is as follows: The accompanying financial statements of XYZ Company as of and for the year ended December 31, 20XX, were not reviewed or audited, reviewed, or compiled by me (us) and, accordingly, I (we) do not express an opinion, a conclusion, nor provide any assurance on them. A20. [Exhibit A Illustrative Engagement Letter] Your Responsibilities You agree that the financial statements will clearly indicate that no CPA audited, reviewed, or compiled provides any assurance on them. 5. ARSC asks for specific feedback about whether respondents are supportive of the proposed compilation reporting requirements. We believe that requiring a report in all instances when the accountant is engaged to perform a compilation service is helpful and will provide the intended user with the clarity needed to understand the service being performed. Further, although we are supportive of the elements required to be included in the written compilation report, D&T believes the basic elements of the report should also include a title and addressee, which are required in paragraph.17 of extant AR section 80, Compilation of Financial Statements. Accordingly, we recommend including the title Page 3 of 7

4 and addressee as required elements of the report and amending the examples in Exhibit B accordingly. 6. ARSC asks for specific feedback about whether respondents are supportive of the proposed standard that would provide requirements and guidance when an accountant permits the use of the accountant s name in a report, document, or written communication containing financial statements on which the accountant did not issue a compilation, review, or audit report. We agree with the rationale for moving AU Section 504, Association with Financial Statements (AICPA, Professional Standards), to the SSARS literature. However, we believe similar conforming amendments need to be made to paragraphs 9, A3, and A4 of the proposed association standard regarding the incorporation of the compilation services in the legend on the financial statements, as discussed in the response to Question 4 above. 7. ARSC asks for specific feedback about whether respondents are supportive of the proposed effective dates, specifically the permitting of early implementation. D&T is supportive of the proposed effective dates, and believes that permitting early implementation of the proposed SSARSs is appropriate. Overall Comment D&T noted that there is additional interpretive guidance in the interpretations to extant AR section 80. To the extent it has not already done so, we recommend that these interpretations be reviewed by the ARSC and where appropriate, incorporated into the application guidance of the proposed SSARSs. Additional Comments Following are additional comments for your consideration. Proposed Statements on Standards for Accounting and Review Services: Preparation of Financial Statements and Compilation Engagements Paragraph 7 (proposed preparation standard) and paragraph 5 (proposed compilation standard): We note that the AICPA s Financial Reporting Framework for Small-and Medium-Sized Entities issued in June 2013 is described as a special purpose framework. We believe it would therefore be appropriate to clarify that such framework is an example of item e in the definition of special purpose framework. We understand the need to keep the definition of special purpose framework consistent with the definition in the auditing and attestation standards, so such clarification could be made in the proposed standards through the inclusion of appropriate application material. Paragraph 8.c (proposed preparation standard) and paragraph 6.c (proposed compilation standard): These paragraphs require the accountant to include in the engagement letter or other suitable form of written agreement the responsibilities of the accountant, including the requirement to perform the engagement in accordance with SSARSs and comply with relevant ethical requirements. We noted the Page 4 of 7

5 phrase and comply with relevant ethical requirements is not included in extant AR section 80 or in the auditing and attestation standards (including proposed revisions to the attestation standards). We believe this phrase is unnecessary because compliance with relevant ethical requirements is implicit in the accountant s responsibilities when performing engagements in accordance with the SSARSs. Inclusion of the phrase in the proposed preparation and compilation standards would also result in an unnecessary and potentially confusing difference between the SSARSs and the attestation standards. Proposed Statement on Standards for Accounting and Review Services, Preparation of Financial Statements Paragraph 16: We recommend that paragraph 16 include the following revision to incorporate the concept from paragraph 15 as to the accountant s request for additional information from management: 16. The accountant should withdraw from the engagement and inform management of the reasons for withdrawing if the accountant is unable to complete the engagement because management has failed to provide the additional or corrected records, documents, explanations, or other information, including significant judgments, as requested. (Ref: par. A17-A18) Paragraphs 2 and A3: Paragraph 2 indicates that the proposed standard does not apply to financial statements prepared in conjunction with litigation services that involve pending or potential legal or regulatory proceedings and paragraph A3 provides some further guidance as to what these types of proceedings would encompass. Paragraphs.19 and.20 of extant AR section 9080 however address situations in which the SSARSs would apply to litigation service engagements. As noted in our Overall Comment above about the interpretations to extant AR 80, we recommend this interpretive guidance be updated as necessary to reflect the new requirements of the proposed compilation and preparation standards and incorporated into the appropriate proposed SSARSs. Paragraph A17: Paragraph A17 indicates that informing management and those charged with governance of the accountant s reasons for withdrawing from a preparation engagement may provide an opportunity for the accountant to explain the accountant s ethical obligations to management or those charged with governance. We believe that explanations about the accountant s ethical obligations would generally take place in connection with agreeing to the terms of the engagement with management and when discussing the accountant s ethical requirements. Accordingly, we recommend the following revision: A17. In circumstances addressed by the requirements of this proposed SSARS in which withdrawal from the engagement is necessary, the responsibility to inform management and those charged with governance of the reasons for withdrawing provides an opportunity for the accountant to remind management and those charged with governance of and further to explain the accountant s ethical obligations. Page 5 of 7

6 Paragraph A20. Exhibit A Illustrative Engagement Letter We noted that the section on management s responsibilities in the illustrative engagement letter does not include all the required items listed in paragraph 8.d(iv). Accordingly, we recommend that the following paragraph be revised as follows (note that we have also included proposed changes to reflect our comments in response to Question 4): Your Responsibilities The engagement to be performed is conducted on the basis that you acknowledge and understand that our role is the preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America. You have the following overall responsibilities that are fundamental to our undertaking, in accordance with SSARSs, the engagement to prepare your financial statements: a. The prevention and detection of fraud b. To ensure that the entity complies with the laws and regulations applicable to its activities c. To make all financial records and related information available to us c d. The accuracy and completeness of the records, documents, explanations, and other information, including significant judgments, you provide to us for the engagement to prepare financial statements d. To provide us with: (1) c. To make all financial records, documentation, and other related matters that are relevant to the preparation and presentation of the financial statements related information available to us (2) additional information that may be requested for the purpose of the preparation of the financial statements (3) unrestricted access to persons within ABC Company whom we determine necessary to make inquiries of. You agree that the financial statements will clearly indicate that no CPA has audited, reviewed, or compiled provides any assurance on them. Proposed Statement on Standards for Accounting and Review Services, Compilation Engagements Paragraph 8: We noted that paragraphs of extant AR section 80, are not included in the proposed compilation standard. We believe that obtaining knowledge about the client and the accounting principles and practices used by the client is important when performing a compilation engagement as such knowledge will assist Page 6 of 7

7 the accountant in fulfilling the requirements under the proposed compilation standard. Accordingly, we believe requirements similar to those in the extant standard should be included in the proposed compilation standard. Paragraph A34: The second example in paragraph A34 addresses a situation in which the accountant has performed a compilation engagement on the financial statements, but has not performed an audit, review, or compilation on the information presented for supplementary analysis. However, the illustrated wording for the paragraph to be included in the accountant s report does not refer to the compilation service. Accordingly, we recommend revising paragraph A34 and the example report paragraph as follows: The following is an example of how an accountant may word a separate paragraph in the accountant s compilation report addressing information presented for supplementary analysis when the accountant has performed a compilation engagement on the financial statements but has not performed an compilation audit, review, or audit compilation on the information presented for supplementary analysis purposes: Other Matter The [identify the information presented for supplementary analysis purposes] is presented for purposes of additional analysis and is not a required part of the basic financial statements. The information is the representation of management. I (We) have not audited, or reviewed, or compiled the information and, accordingly, I (we) do not express an opinion, a conclusion, nor provide any assurance on it. * * * D&T appreciates the opportunity to provide our perspective on the important matter of the proposed SSARSs. If you would like to discuss further, please contact Susan Menelaides at (602) Very truly yours, Page 7 of 7