AICPA’s New Direct Examination Engagements Standard Uses a Practitioner’s Expertise when Evaluating Nonfinancial Information

The American Institute of CPAs’ (AICPA) Auditing Standards Board (ASB) has issued Statement on Standards for Attestation Engagements (SSAE) No. 21, which adds a new section in AICPA Professional Standards designated as AT-C section 206, Direct Examination Engagements.

“While maintaining the ability to perform traditional ’assertion-based’ examination engagements, this new engagement allows practitioners to use their highly valued skills and expertise to measure or evaluate different types of nonfinancial subject matters against criteria and report the results of their work directly to users, thereby furthering the public interest,” said Tracy Harding, CPA, AICPA Auditing Standards Board Chair. “The entity responsible for the underlying subject matter is not required to expend resources in measuring or evaluating the subject matter against criteria. The new service is expected to be useful given the ever-expanding types and complexities of nonfinancial subject matters.”

SSAE No. 21 enables the practitioner to provide an opinion, without another party responsible for the underlying subject matter having first measured or evaluated the subject matter. The service will be helpful with new and emerging nonfinancial subject matters, since many entities may not have the expertise in-house to measure or evaluate a complex, emerging subject matter.

In this new direct examination engagement, the responsible party (usually the client):

• is not required to measure or evaluate the underlying subject matter against criteria and;
• is not required to provide a written assertion to the practitioner;
• however, the responsible party continues to be required to acknowledge responsibility for the underlying subject matter.

The new SSAE amends AT-C section 105, Concepts Common to All Attestation Engagements, principally for new terminology, and supersedes and renames AT-C section 205 to Assertion-Based Examination Engagements. SSAE No. 21 supersedes AT-C section 205 to differentiate it from AT-C section 206, although both types of examination engagements are reasonable assurance engagements. Revised AT-C section 205 continues to enable practitioners to perform traditional assertion-based examination engagements.

SSAE No. 21 becomes effective for practitioner’s reports dated on or after June 15, 2022. Early implementation is permitted.