What in the world are presumptively mandatory and unconditional requirements? And why does SSARS 19 talk about ‘should’ and ‘must’?

(duplicate of post from Attestation Update  blog)

What in the world are unconditional requirements and presumptively mandatory requirements?

If you provide audits to your clients, you know those terms.  If you don’t deal with audits in your firm, these are two very weird terms in the SSARSs world, newly introduced by SSARS 19. These phrases have been around since SSARS 16, which was effective December 2007.  The impact hadn’t been that large because there was only SSARS 17 and 18.  These two phrases are lots more important since they show up in SSARS 19 quite frequently.In very casual terms, if you see a comment that says the accountant “must” do such and such, then you have to do it.  If you see that the accountant “should” do something, then you have to do that thing if the comment applies to the situation unless you have a really, really good reason not to do it and you document why you didn’t. 

The “must” comment is an unconditional requirement.  You have to do that thing, whatever it is.  An example is the comment than an “accountant must perform a compilation or review of a nonissuer in accordance with SSARS…”. 

The “should” comment is a presumptively mandatory requirement.  An example is the comment on engagement letters, which says the accountant “should establish an understanding with management regarding the services to be performed for compilation engagements and should document the understanding through a written communication with management.”  If you don’t have a written engagement letter, you had better have an incredibly wonderful reason for skipping it and that reason had better be documented in the workpapers.

The other new comment is “should consider”.  Very casually, this means you have to think about doing the specified thing.  Don’t have to actually do it, but you do have to think about it.

The SSARS documents now are written so that when you see “must”, “should”, or “should consider” it has those specific meanings.  In the past, the certainty of a requirement was a little fuzzy.  No more.

Updated 1-31-11 – Oops. Removed comments indicated in strikeout.  New comments in italic.

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