When an accountant prepares financial statements solely for submission to taxing authorities, which standard applies?

When an accountant prepares financial statements exclusively for submission to taxing authorities, the appropriate standard that applies is that SSARS does not apply. SSARS, which stands for Statements on Standards for Accounting and Review Services, is primarily designed for the preparation and review of financial statements intended for general distribution outside the entity. However, when financial statements are prepared solely for tax reporting purposes, they are often tailored to the specific requirements of tax authorities and may not adhere to general accounting principles or standards like GAAP or SSARS.

In such cases, the financial statements may be based solely on the tax code and other relevant tax regulations rather than the more comprehensive framework of GAAP. This implies a significant difference in objective because the financial information in question is not meant to represent the financial position and performance of a business to external stakeholders but rather to meet specific tax compliance needs. Thus, the accountant’s reporting obligations and ethical considerations when creating these statements differ from those that would apply when preparing financial statements for stakeholders or public distribution.