Question

North Co., a privately held entity, asked its tax accountant, King, a CPA in public practice, to review and generate North's interim financial statements on King's microcomputer when King prepared North's quarterly tax return. King should not submit these financial statements to North unless, as a minimum, King complies with the provisions of:

a. Generally Accepted Accounting Principles (GAAP)
b. Statements on Auditing Standards (SAS)
c. Statements on Standards for Accounting and Review Services (SSARS)
d. International Financial Reporting Standards (IFRS)

Answer 1

A CPA preparing and reviewing North Co.'s interim financial statements would need to comply with the Statements on Standards for Accounting and Review Services (SSARS), which are the relevant standards for private companies' financial statement preparation and review services. Option c

Step-by-step explanation:

When CPA King is preparing interim financial statements for North Co., he must adhere to professional standards that apply to such engagements. In this context, since the services involve the preparation and review of financial statements, the minimum standards to be complied with are the Statements on Standards for Accounting and Review Services (SSARS).

These standards are set by the American Institute of Certified Public Accountants (AICPA) and are designed for the accounting and review services that CPAs provide to private companies.

They are different from the Generally Accepted Accounting Principles (GAAP), which are the standard framework of guidelines for financial accounting, including the standards and procedures accountants must follow when preparing financial statements.

On the other hand, Statements on Auditing Standards (SAS) are relevant when a full audit is being conducted. International Financial Reporting Standards (IFRS) would not be applicable unless the entity is specifically reporting under those standards, which is often the case for multinational or publicly traded companies operating in IFRS jurisdictions. Option c