In what scenario does SSARS not apply regarding the preparation of financial statements?

The situation where SSARS (Statements on Standards for Accounting and Review Services) does not apply is when financial statements are prepared solely for submission to taxing authorities. This is because SSARS governs the preparation of financial statements intended for external use, particularly in situations where the financial statements will be disseminated or relied upon by third parties.

When the primary purpose of the financial statements is to meet tax reporting requirements, they are typically not subject to the same review or compilation standards set forth in SSARS. This obviates the need for adherence to those standards since the statements are not meant for general distribution or reliance by stakeholders outside of tax authorities.

In contrast, scenarios such as preparation for internal management use or for an audited engagement generally require adherence to SSARS because they involve the need for some level of external validation or compliance with professional standards. Moreover, preparation in accordance with GAAP also necessitates the application of SSARS when the financial statements are prepared for external reporting purposes, as GAAP encompasses comprehensive accounting principles that guide such reporting. Thus, the context of their use is critical in determining the applicability of SSARS.