presentation subject header overview of the ed - isrs 4410 presenter: ashif kassam group chief...

Presentation Subject Header

OVERVIEW OF THE ED - ISRS 4410

Presenter:Ashif Kassam

Group Chief Executive, RSM Ashvir

ISRS 4410

IAASB Projects for Assurance and Related Services on Financial Information Other Than Audits:

Development of use of “hybrid” engagements (e.g. review + selected procedures).

IAASB Agenda

Compilation Engagements

ISRS 4410

Review Engagements

ISRE 2400

Engagements to Perform Agreed-Upon Procedures

ISRS 4410

Commenced in March 2009 - IAASB project approval. ED for proposed International Standard on Related Services

4410 (Revised) issued in October 2010 - comments received. ED for proposed International Standard on Review

Engagement 2400 (Revised) issued in January 2011 - comments requested by 20 May.

Anticipated in 2011: ISRS 4410: Full review of comments in September 2011;

First read in December 2011. ISRE 2400: Full review of comments in December 2011.

Project Summary

ISRS 4410

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Demand for range of services to meet the unique needs of SMEs and users of their financial information.

High priority on development of appropriate responses to provide options for other type of services (including assurance) for audit-exempt entities.

Vision: Responding to Diverse Needs

ISRS 4410

Clarity ISAs able to be applied proportionately for SME financial statement audits. IFAC’s policy position that “an audit is an audit” is well-

understood. IAASB Staff Publication on how ISAs can be proportionally

applied in SME audits. Implementation support is important, e.g. IFAC SMP

Committee Implementation Guides.

Use of ISAs for SME audits

ISRS 4410

Practitioner’s responsibility when engaged to compile and report on historical financial information.Excludes engagements where the practitioner is not

required to report. Practitioner applies accounting and financial reporting

expertise to assist the management of an entity in preparing and presenting financial information in accordance with an applicable financial reporting framework.

Focus on historical financial information, but concept can be applied, and adapted as necessary, to other types of financial information e.g. prospective financial information, statistical returns and greenhouse gas statements.

Scope

ISRS 4410

Premised on basis that firm is subject to ISQC 1:The firm and its personnel comply with professional

standards and applicable legal and regulatory requirements.

Report issued is appropriate in the circumstances. Key to an SMP - Acceptance and continuation, engagement

performance and monitoring.

ISQC 1

ISRS 4410

General principles of integrity; objectivity; professional competence and due care; confidentiality; and professional behavior apply.

IESBA Code does not require independence in compilation engagements.

Ethical Requirements

ISRS 4410

To apply accounting and financial reporting expertise to assist management in preparing and presenting financial information in accordance with an applicable financial reporting framework based on information provided by management; and

To report in accordance with the requirements of this ISRS.

Compliance with the ISRS requires compliance with all the requirements of the ISRS relevant to the compilation engagement.

Objective

ISRS 4410

Application of professional judgement in planning and performing a complication engagement including:Acceptability of the financial reporting framework in view of

the intended purpose and the intended users of the financial information.

Selection of appropriate accounting policies.Development of accounting estimates.

Facts and circumstances that are known to the practitioner up to the date of the practitioner’s report.

Requirements - Professional Judgment

ISRS 4410

Responsibility of the engagement partner including:Compliance with professional standards and ethical

requirements.Compliance with the firm’s QC policy.Client acceptance and continuation procedures.Competence of the engagement team.Directing, supervising and performance of the

engagement.Maintaining appropriate engagement documentation. Issuing the report.

Requirements - Engagement Level Quality Control

ISRS 4410

Pre-acceptance - Integrity of key owners, key management and those charged with governance.

IESBA Code - Not to be associated with financial information that is materially false or misleading (including omission of relevant information or material facts).

If risk cannot be mitigated through appropriate safeguards - decline the engagement.

Requirements - Acceptance and Continuation

ISRS 4410

Pre-conditions of acceptance:Rational purpose for the engagement.Financial reporting framework acceptable in the context of

the intended use.Management acknowledgement that it understands that:

• Practitioner compiles financial information on behalf of management; and

• Management assumed overall responsibility for the compiled financial information.


ISRS 4410

Management’s responsibilities include:Adoption of a framework that is acceptable in view of its

intended use.Fair presentation of the financial information, selection of

appropriate accounting policies and management judgements.

Providing practitioner with all information relevant to the compilation, and any additional information requested by the practitioner.

Accuracy and completeness of information.Acknowledgement of the financial information prepared by

the practitioner.


ISRS 4410

Agreeing the terms in writing prior to performance. To include:Objective and scope of the engagement.Not an assurance engagement.Respective responsibilities of the practitioner and the

management.Applicable financial reporting framework. Intended use and distribution.Expected form and contents of the practitioners’ report.

Recurring engagements - new letter where there is change or a need to remind management of the existing terms.

Requirements - Terms of Engagement

ISRS 4410

Knowledge and Understanding Knowledge and understanding of the entity’s business and

operations. Accounting systems and accounting records. Financial reporting framework including its application in the

industry. Knowledge to be sufficient to enable the practitioner to

compile the financial information.

Requirements - Performing the Engagement

ISRS 4410

Using the records, documents, explanations and other information provided by management.Schedule showing reconciliation of the general ledger to

compiled financial information including adjusting entries. Discuss with management significant adjustments, basis for

significant accounting estimates and use of the going concern assumption.

Bring to attention of management and request additional information where it is incomplete, inaccurate or otherwise unsatisfactory.However, practitioner not required to perform procedures

designed to assess or evaluate the accuracy or completeness of the information.

Requirements - Compiling

ISRS 4410

Prior to completion, read the financial information with the knowledge and understanding of the entity’s business.Stand-back - not to be associated with information that is

misleading.Consideration whether information gives a true and fair view

in a fair presentation framework. In case of material misstatements or where the financial

information does not adequately refer to, or describe the applicable framework, the practitioner shall propose to the management to make appropriate adjustments. If the proposal is to change the reporting framework -

alternative framework to be acceptable in the circumstances.


ISRS 4410

If management declines to the proposed amendments, the practitioner shall:Communicate with the management on the implications.Withdraw from the engagement, unless prohibited by law. If withdrawal not permitted, determine the professional and

legal responsibilities applicable in the circumstances. Practitioner’s report is not a vehicle to express an opinion on

the compiled financial information, or whether the practitioner is aware the compiled financial information is misstated or misleading.


ISRS 4410

On a timely basis during the course of the engagement.

Communicate all significant matters concerning the compilation engagement.

Requirements - Communication with Management / Governance

ISRS 4410

Description of significant matters discussed with management and requiring their agreement.

Sources from which the financial information was compiled. Reconciliation to underlying records including:

Trial balance and summary of significant accounting records.Proposed and final adjustments.

Consultations and notes of discussions with management. Explanations and other information provided by the

management. Copy of the compiled financial information and the report

thereon.

Requirements - Documentation

ISRS 4410

Neither an audit or a review - practitioner does not express an audit or review opinion.

Special purpose financial statements - alert to the users that the financial statements may not be suitable for other purposes / supplemented by restriction on distribution.

Reporting

ISRS 4410

47 responses received. Variety of issues raised, including:

Need for balance: to distinguish compilations from assurance engagements; but also to create a “stand-alone” engagement standard.

Level of specificity in the revised ISRS: requirements vs. principles-based standards.

Expectations surrounding the work effort for a compilation.

Practitioner’s report on the engagement - purpose of the report and practitioner’s association with the information.

Feedback on Exposure

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ISRS 4410

CAVEATThis presentation has been prepared for general guidance only. It does not relieve one from reading the entire text of the standard nor does it constitute professional advice. The views expressed herein are of the presenter, and not of RSM Ashvir or of any body that the presenter or RSM Ashvir is affiliated to. Accordingly, to the extent permitted by law, the presenter, RSM Ashvir or any of the affiliations (including their employees and agents) accept no liability, and disclaim all responsibility, for the consequences of anyone acting, or refraining from acting, in reliance on the information contained in these slides or for any decision based on it, or for any consequential, special or similar damages even if advised of the possibility of such damages.

presentation subject header overview of the ed - isrs 4410 presenter: ashif kassam group chief...

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