IFAC Helps SMPs Implement Auditing Standards
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Presentation by Inge Saeys, Member, IFAC SMP Committee, at IFAC SMP Forum, March 2012
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IFAC Helps SMPs Implement Auditing Standards
- 1. IFAC FORUM SINGAPORE 4-A HELPING SMPS Promote and implement IAASB standards Inge Saeys, Committee Member Page 1 | Confidential and Proprietary Information
- 2. IFAC SMP COMMITTEE One of the four strategic pillars of the SMP Committee Development of Resources and Tools for SMPS Practical assistance with a focus on implementation of standards, practice management and business advisory (25 %) Page 2 | Confidential and Proprietary Information
- 3. SMPS SMPS : limited in-house resources versus challenges in efficiently and cost effectively implementing international standards SMPS HAVE TO • Perform high quality work • Deliver high quality services • Develop their OWN quality control system Page 3 | Confidential and Proprietary Information
- 4. EXISTING SMPC PRODUCTS • Guides (and supporting materials) • “E” news • Articles Page 4 | Confidential and Proprietary Information
- 5. Guides - Overview Existing SMPC Products GUIDES High quality and free to download – Guide to Using ISAs in the Audits of SMEs (ISA Guide) – Guide to Quality Control for SMPs (QC Guide) – Guide to Practice Management for SMPs (PM Guide) Page 5 | Confidential and Proprietary Information
- 6. Guide to Using ISAs in the Audits of SMEs Existing SMPC Products Guide To Using ISAs in the audits of SMEs • Purpose : To help apply ISAs cost effectively • 1st edition Dec 2007; 2nd edition Oct. 2010 ;3rd edition Nov. 2011 • Two volumes – Volume 1 – approach to risk-based ISAs - core concept – Volume 2 – practical guidance for SME audits • Two case studies (inc. micro-entity audit) • Illustrations, consider boxes, color design Page 6 | Confidential and Proprietary Information
- 7. How to Use the Guide Existing SMPC Products The guide can be used to : • Develop a deeper understanding of an audit conducted in compliance with the ISAs; • Develop a staff manual (supplemented as necessary for local requirements and a firm‟s procedure) to be used for day-to-day reference, and as a basis for training sessions and individual study and discussion; and • Help ensure that staff adopt a consistent approach to planning and performing an audit Page 7 | Confidential and Proprietary Information
- 8. Guide to quality control for SMPs Existing SMPC Products Guide To Quality Control For SMPs • Purpose : To help SMPs apply ISQC 1 cost effectively • 1st edition March 2009; 2nd edition July 27 2010; 3rd edition August 2011 • Case study, forms & sample QC manuals • Color design Page 8 | Confidential and Proprietary Information
- 9. How to Use the Guide Existing SMPC Products The guide can be used to : • Assist a firm in developing a system for quality control; • Promote consistent application of the quality control requirements within audit, review, and other assurance and related services engagements; and • Provide a reference document for training within the firm Page 9 | Confidential and Proprietary Information
- 10. Downloads Existing SMPC Products • Successful ? Of course ! • Free download (…but contact IFAC for permissions) Number of downloaded publications 2008 2009 2010 2011 2012 (to Mar 2) ISA Guide 13.453 6.679 22.679 25.742 1.549 QC Guide NA 10.483 12.356 7.726 602 Page 10 | Confidential and Proprietary Information
- 11. Translations Existing SMPC Products Publication Number of languages of translation (completed or in progress) ISA Guide 19 QC Guide 18 Page 11 | Confidential and Proprietary Information
- 12. GUIDES - FUTURE DEVELOPMENTS • Annual updates – continuous improvement • User guide • Materials to support use in training (for ISA and QC Guides) • Anything else? Page 12 | Confidential and Proprietary Information
- 13. E News Existing SMPC Products • Each quarter SMP “E” news is issued to inform Member Bodies, subscribers, boards and committees on SMP Committee activities, relevant events, net values and projects by MB and others. • Subscriber base : 11,580 • Latest “e” news : February 2012 Page 13 | Confidential and Proprietary Information
- 14. E News Existing SMPC Products Included In This Issue • Standards and Guidance - Member Bodies Support Implementation of Clarified ISAs - IAASB Approves Auditor Reporting Project - Updates on IESBA and on IFRS for SMEs • SMP Quick Poll Reveals Regulatory Burdens, Economic Uncertainty as Top Challenges Page 14 | Confidential and Proprietary Information
- 15. E News Existing SMPC Products • Meetings and Events Annual SMP Forum SMP Committee Members Speak at International Events • Articles for Member Bodies Tips for Cost Effective ISQC 1 Application Tips for Cost Effective ISA Application (both available at https://www.ifac.org/publications- resources) Page 15 | Confidential and Proprietary Information
- 16. Helping SMPs Promote/Implement IAASB Standards IFAC Small and Medium Practices Forum March 19, 2012 Presented by N. Dawn McGeachy, BAccS, FCUIC, ACUIC, FCGA, LPA Director, Public Practice, CGA-Canada Page 16 | Confidential and Proprietary Information
- 17. IFAC Small and Medium Practices Forum Helping SMPs Promote/Implement IAASB Standards Two recent IAASB projects, including: • ISRS 4410, Engagements to Compile Financial Statements (recently approved) • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements Page 17 | Confidential and Proprietary Information
- 18. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Assurance • Reasonable • Limited • None provided •“Fairly present” • “Plausible”, worthy • Do not express any • High level of of belief form of opinion or confidence • Nothing has come negative assurance • Must be satisfied (not absolute) to the accountant's that the attention that the that the financial financial statements do not statements are not statements fairly present in all misleading are free of material respects material misstatement Page 18 | Confidential and Proprietary Information
- 19. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Independence Required Required Not required Understanding of the Extensive Enhanced Limited client Understanding of the Required Sufficient to Sufficient to compile entity’s environment, identify where the information including internal misstatements are control likely and to be able to design procedures to address these Page 19 | Confidential and Proprietary Information
- 20. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Consider fraud; Required Required Not required but documentation of practitioner must be fraud risk alert to cases where information is materially misleading Materiality calculated Yes; at the financial Yes; at the statements as a whole financial Not required; but level, classes of statements as a professional judgment transactions, account whole level used to determine that balances and the statements are not disclosures and misleading performance materiality Page 20 | Confidential and Proprietary Information
- 21. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Acceptance/ Required Required Required; accountant must Reacceptance be satisfied that the client is considered aware of the limited use of the statements Procedures • Test of • Enquiry •Not required to make controls • Analytical enquiries or perform other • Substantive procedures procedures to verify, procedures • Discussion corroborate or review • Analytical information supplied unless • Added the information is procedures procedures if obviously incorrect, plausibility in incomplete or materially doubt misleading Page 21 | Confidential and Proprietary Information
- 22. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Enquiry and • Required; Required Not required analytical procedures plus • Other procedures including inspection, observation, confirmation, recalculation and re- performance Unadjusted Yes Yes Not required misstatements/ differences Page 22 | Confidential and Proprietary Information
- 23. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Communication Unqualified Unqualified States that no assurance in report positive negative is provided assurance assurance Readers are cautioned Reservation Reservation that the information has (qualified, (qualified, not been verified for adverse or adverse or accuracy or disclaimer) disclaimer) completeness Page 23 | Confidential and Proprietary Information
- 24. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Engagement Required for Not required Not required unless Quality Control listed entities; unless determined by firm Review (EQCR) not required for determined by policy (good other audits firm policy (good practice) unless practice) determined by firm policy (good practice) Page 24 | Confidential and Proprietary Information
- 25. Helping SMPs Promote/Implement IAASB Standards Why consider an audit alternative? Less rigor in the engagement means staff may be less experienced and will still be proficient to complete the work Less risk in the engagement Cost/benefit to the client – in the instance of a compilation (particularly when preparation is required on the cash basis, for tax purposes, discounted value basis, liquidation etc) Page 25 | Confidential and Proprietary Information
- 26. Helping SMPs Promote/Implement IAASB Standards Why consider an audit alternative? Cost benefit to the client – in the instance of a review (sufficient assurance is provided when the user has access to other information such as venture capitalists or bankers) or where the investment or credit extended is relatively insignificant to the user Opportunities to achieve a higher recovery rate for your time Page 26 | Confidential and Proprietary Information
- 27. Helping SMPs Promote/Implement IAASB Standards Why consider an audit alternative? Opportunity to offer alternative services to the client, particularly in the instance of a compilation (such as business consulting, tax services, controllerships, estate and financial planning) Page 27 | Confidential and Proprietary Information
- 28. Helping SMPs Promote/Implement IAASB Standards Page 28 | Confidential and Proprietary Information
- 29. Helping SMPs Promote/Implement IAASB Standards Page 29 | Confidential and Proprietary Information
- 30. Helping SMPs Promote/Implement IAASB Standards Page 30 | Confidential and Proprietary Information
- 31. Helping SMPs Promote/Implement IAASB Standards Page 31 | Confidential and Proprietary Information
- 32. Helping SMPs Promote/Implement IAASB Standards Page 32 | Confidential and Proprietary Information
- 33. Helping SMPs Promote/Implement IAASB Standards • The SMP Committee is currently discussing these new standards and looking at ideas and suggestions for how they might support the international SMP community • No decisions have yet been taken; today represents an opportunity to provide your own feedback to the SMP Committee Page 33 | Confidential and Proprietary Information
- 34. QUESTIONS Page 34 | Confidential and Proprietary Information
- 35. Question – Proportionality of ISAs • What are the challenges in applying the ISAs proportionately to a „typical‟ audit of an SME? • Do you believe the ISAs themselves are fully scalable to SME audits? If not, why? Page 35 | Confidential and Proprietary Information
- 36. Question – Implementation support for IAASB standards • How important is it for the SMP Committee to develop implementation guidance for member bodies in order to support adoption of IAASB standards by SMPs? • What particular guidance materials or tools should the SMP Committee develop to best assist member bodies and their SMPs with IAASB standards? • Consider in particular ISQC 1, ISAs, ISRE 2400 and ISRS 4410 Page 36 | Confidential and Proprietary Information
- 37. Possible implementation support tools? • Guide to Reviews and Compilations • Sample audit file • Example work papers and/or checklists • Illustrative decision trees • Articles for member bodies • Videos • Slide decks • ….others? What means of support works best for SMPs in your jurisdiction? Page 37 | Confidential and Proprietary Information
- 38. www.ifac.org
Editor's Notes
- As you are all aware, the IAASB has been very busy over the course of the last couple of years working on two specific projects. These include ISRS 4410, Engagements to Compile Financial Statements (recently approved) and ISRE 2400 (Revised), Engagements to Review Historical Financial Statements.In Canada, both of these types of engagements form an large component of a SMP’s service offerings, together with the audit engagement.It would be useful to first have a better understanding of these types of engagements and to compare/contrast their characteristics.
- There are a number of products that CGA-Canada has which support our own SMPs with the implementation and adoption of new standards.Some of these include:CGA-Canada public practice manual – a publication which is updated at least twice per year that provides checklists, forms and precedents on compilation, review and audit engagements in addition to a number of other service offerings (such as taxation, FOFI, and money laundering engagements)The screen shot here provides a sampling of the types of planning documents that are provided for a review engagement
- And this is a screen shot of the review engagement at the finalization stage.
- Yet another method which we use to inform our membership is the ‘Orientation to Public Practice Series.’ This product is developed for all those practitioners initially entering public practice, but is also used as a professional development refresher, particularly when new standards are introduced. One of the seven-part series includes the ‘Compilation and Review Engagement module.’ Designed as either a one or two-day in-person seminar it walks participants through these two service offerings, highlighting file engagement standards.The national Association provides this product, updated annually, for delivery in each of our provincial and territorial regions.
- The product consists of a presenter’s guide which facilitates delivery for the region by providing both a guide and a Powerpoint presentation that can be used to deliver the content, together with a participant’s manual which can be taken away by attendees as a reminder of the content covered during the in-person session.
- Other services that we provide to our members include practitioner advice publications.We have three main categories or types of publications, including practice alerts, tax/valuation newsletters and guidance bulletins. Those that relate to standards updates for our membership fall under the Practice Alert category.