The AICPA on April 7, 2025, published Statement on Standards for Accounting and Review Services (SSARS) No. 27, Applicability of AR-C Section 70 to Financial Statements Prepared as Part of a Consulting Services Engagement, to clarify that a practitioner does not have to apply AR-C Section 70 when financial statements are prepared as a by-product of client advisory services (CAS).
SSARS No. 27 is effective for the preparation of financial statements for periods ending on or after December 15, 2026. But practitioners can start applying now.
The publication follows a late March decision by the association’s Accounting and Review Services Committee (ASRC) to exclude financial statements prepared as part of a consulting services engagement performed under CS Section 100, Consulting Services: Definitions and Standards, from those engagements in which AR-C section 70 is required to be applied.
Thus, this is for when the primary objective of an engagement is not the preparation of financial statements.
The move comes as there has been a significant growth in outsourced accounting services in the past several years, and the ARSC is addressing a misunderstanding about the required application of AR-C Section 70. The committee first issued an exposure draft in September, and almost every single comment letter supported the clarification.
The AICPA states that while the CPA is not required to apply AR-C Section 70, application is not precluded in whole or in part when the CPA prepares financial statements or prospective financial information as part of a consulting services engagement performed in accordance with CS Section 100 in which the preparation of financial statements is not the primary objective of the engagement.
Practical Implications
Unlike AR-C Section 700 engagements, CS Section 100 engagements are not required to comply with quality management standards because such consulting work is outside the firms’ accounting and auditing practice.
Moreover, they also do not need to enroll in a peer review program.
“ARSC considered these implications and concluded that CS section 100 provides the appropriate safeguards regarding the CAS practitioner’s association with financial statements that the CAS practitioner prepared as part of a consulting services engagement as well as the CAS practitioner’s responsibility to prepare such financial statements with professional competence and due professional care,” the AICPA said.
The CAS Advisory Council applauded the ARSC’s clarification because it will better enable firms to further the shift into higher value advisory services.
“This change represents a new era for CAS practices,” Becky Munson, partner at Eisner Advisory Group LLC and member of the CAS Advisory Council, said in a statement. “The standards now align more closely with the evolving needs of businesses and the services provided by CAS teams. This will now allow them to truly serve clients while continuing to fulfill their professional obligations. It’s a win for everyone, and we can’t thank the committee enough for their diligence in making these changes.”
According to a 2024 benchmark survey by CPA.com, CAS practices reported a median growth rate of 17%, continuing the double-digit CAS growth seen in previous surveys.
Almost one-third of firms reported growth of their CAS revenues from business insights or bundles. And all respondents expected a decrease over the next three years in services that do not qualify as CAS, such as single-service financial statement preparation.
CPA.com believes that this move is fueled by client demand for deeper insights.
The benchmark report notes that 206 respondents participated in the survey last year.
“The modernization of standards reflects the reality of what is already happening within CAS practices today,” said Bill Reeb, chief executive officer of Succession Institute and past chair of the AICPA’s Consulting Services Executive Committee.
CPA.com in the coming weeks will issue additional resources to help firms apply the clarifications, including frequently asked questions, video discussions, and engagement letter templates.
This article originally appeared in the April 8, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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