release notes ifrs for smes and probe november 2016
TRANSCRIPT
Release NotesIFRS for SMEs and Probe
November 2016
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IFRS for SMEs 2016.01.01 6
Section A: Executive summary 7
1. Revised assurance reports 7
2. Technical enhancements 8
Section B: Revised assurance reports - detail 11
3. Split of reports 11
4. Revised Independent Auditor’s Report 13
5. Signature area of reports 19
IFRS for SMEs 2015.01.01 20
Executive summary 21
1. Disclosure enhancements 21
2. Technical enhancements 23
Probe 2016.20.01 24
Section A: Executive summary – Probe MMX 25
Technical enhancements 25
Compliance Changes (major changes) 25
2.1 New and Revised Auditor Reporting Standards 25
Revised Auditor’s Report 26
Going Concern 26
Key Audit Matters 26
Content (Click to navigate)
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Content (Click to navigate)
Revised Audit Engagement Letter 27
Auditor’s Responsibility relating to Other Information 27
2.2 Addressing Disclosures in the Audit of Financial Statements 28
2.3 Audit Procedures relating to International Financial Reporting Standards: Probe MMX Recog &
Measurement (IFRS) only 30
Content enhancement – making compliance easier 30
Section B: Detailed Probe MMX
compliance changes (major changes) 32
Planning 32
10.20 Engagement Evaluation (major change - compliance) 32
10.21 Engagement letter (major change - compliance) 33
10.30 Discussions with those Charged with Governance (major change - compliance) 33
10.50 Gathering Information (major change - compliance) 34
10.60 Overall materiality assessment (major change - compliance) 36
11.20 Inherent risk assessment (major change - compliance) 36
11.40 Fraud risk assessment (major change - compliance) 37
11.50 Control activities design and implementation (major change - compliance) 38
11.60 Risk assessment at assertion level (Major change – compliance) 39
12.30 Planning Memorandum (Major change – compliance) 39
Execution 41
Work Programs (Major change - compliance) 41
80.10 Financial Statement Preparation (Major change – compliance) 41
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Finalisation 42
02.00 Partner Sign-off (major change - compliance) 42
02.55 Key Audit Matter (NEW) (Major change – compliance) 42
02.20 Going Concern Conclusion (Major change – compliance) 43
02.40 Evaluation of misstatements (Major change – compliance) 43
02.80 EQCR Checklist (Major change – compliance) 44
02.90 Report to Management and Those Charged with Governance (Major change – compliance) 44
Probe MMX Premium 45
02.50 Consideration of Audit Report (major change - compliance) 45
02.70 Manager’s final checklist (major change - compliance) 45
Probe MMX Recog & Measure (IFRS) 46
24.10 Group Companies (major change - compliance) 46
20.10 Property, plant and equipment (major change - compliance) 46
23.10 Intangible Assets (major change - compliance) 46
60.10 Revenue (major change – compliance). The following procedures were added: 46
Probe MMX Recog & Measure (IFRS for SME) 47
60.10 Revenue (major change – compliance). The following procedures were added: 47
Other Changes to Probe MMX, Probe MMX Premium, Probe MMX Recog & Measurement (IFRS and IFRS for
SME) (minor changes) 47
Content (Click to navigate)
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Content (Click to navigate)
Probe Compilations 48
06.10 Letter of representation 48
06.20 Compilation engagement evaluation 48
Summary of documents being updated 49
Probe MMX Audit: Key Audit Matters 51
Contact CQS 52
IFRS for SMEs 2016.01.01
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Section A: Executive summary
The focus of this template release is the incorporation of changes to assurance reports as well as introducing some exciting new technology enhancements. These are summarised below.
1. Revised assurance reports
Split of reports
y The Independent Auditor’s, Independent Reviewer’s, Practitioner’s Compilation and Accounting Officer Reports have been split to allow the user to present more than one report in the financial statements.
y The following areas of the financial statements were impacted: � Information store � Independent Auditor’s, Independent Reviewer’s, Practitioner’s Compilation, Accounting Officer’s and
Accounting officer’s and Compilation Reports.
[Read more]
Revised Independent Auditor’s Report
The Independent Auditor’s Report was revised to meet the requirements of the new and revised Audit Reporting Standards effective for audits of financial statements for periods ending on or after 15 December 2016.
Key enhancements to the Independent Auditor’s Report
Mandatory for audits of financial statements of listed entities, voluntary application for entities other than listed entities: y A new section in the Independent Auditor’s Report to communicate key audit matters (KAM) (new ISA 701)
� KAM are those matters that, in the auditor’s judgement, were of most significance in the audit of the current-period financial statements.
� The description of KAM is always required to include: ○ Why the matter was considered to be one of most significance in the audit and therefore determined to
be a KAM; ○ How the matter was addressed in the audit; and ○ Reference to the related disclosure(s).
In South Africa, it is also mandatory for audits of Collective Investment Schemes and Medical Schemes.
For all audits: y The Opinion section is required to be presented first, followed by the Basis for Opinion section, unless law or
regulation prescribed otherwise (revised ISA 700). y Enhanced audit reporting on going concern (GC), including
� Description of the respective responsibilities of management and the auditor for GC; and � A separate section when a material uncertainty exists, and is adequately disclosed in the financial statements,
under the heading ‘Material Uncertainty Related to Going Concern’’ (ISA 570). y Affirmative statement about the auditor’s independence and fulfillment of relevant ethical responsibilities, with
disclosure for the jurisdiction of origin of those requirements of reference to the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (revised ISA 700).
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y Other Information or other appropriate heading to provide transparency on the auditor’s work relating to other information (revised ISA 720).
[Read more]
Other changes to reports
Signature areas in Reports: y Provide for the option to sign as engagement partner or as firm. y Provide for the option to show date and place of signature either below or next to the signature. y Provide for option to record business address and place of signature.
[Read more]
2. Technical enhancements
New Content and Version Management document simplifies update process
We’ve changed the way of updating files by giving you more control over financial statement content changes and updates. An update notification still launches when opening a file after installing the latest template. This update, however, only applies the latest technology enhancements. To ensure that users enjoy the latest technological enhancements to the software, running the technology update is compulsory. Thereafter, users are in control of content updates, using the Content and Version Management document.
The new Content and Version Management document empowers users to select which areas of the financial statements to update through the use of filtered views and content status tags.
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Content status type DescriptionOn Content in use in the financial statements; most-likely to show in a printed set.Outdated Existing content is outdated; new content available by updating to the latest template. Required Sections to be updated consisting of compliance content or having a dependency on
other parts of the financial statements.Restricted Existing sections in the financial statements where users have selected to “restrict
content updates”.User-created Sections created by the user i.e. customised (new) note or accounting policy.Alternate Alternate content layout available in the template, i.e. Property, plant and equipment
and Related Parties notes.Updated Following an update, indicates the specific sections updated, allowing users to review
the changes made to the content.
By default, the “On and outdated content” filter is selected. This is the minimal recommended list of content to update to ensure that the file is updated with the latest available compliance features in the file. However, if extensive changes had been made to specific sections these can be deselected from the update. Users are however encouraged not to deselect these options.
Click on this link for a video guiding you through the new update process.
Balance check enhanced for unmapped accounts
A new line item, “Unmapped accounts”, has been added to the balance check. After running an update, it is possible that certain accounts have been unmapped. In the event that there are unmapped accounts, the following information is provided: y A bubble appears on the balance check icon, informing users that there are accounts which are unmapped. y The “Unmapped accounts” line item has been added to the Balance Check in the CaseView toolbar as well as on
the control page and only populates if there are unmapped accounts, and those accounts have balances.
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Getting Started
The option is now available to turn off the Getting Started for a specific user. y Although this toolbar can be turned off per client file, we recognise that as users become more advanced there
is a need to turn it off permanently. y This is possible by selecting the “Don’t show on startup” option at the bottom of the Getting Started. y The Getting Started is still available in the CaseWare template toolbar.
New expand and collapse buttons
The user interface has been updated with a modernised expand and collapse button. Functioning in the same manner as the old plus/minus button ( / ), clicking on expand button ( ) unveils hidden content within that section. Similarly, clicking on the collapse button ( ) will hide the content. The right click on/off function is still available and performs the same function.
Keep together feature to avoid blank spaces
A keep together function has been added to the notes section of the financial statements, as part of the right click menu. This function allows users to control the way content prints when flowing over more than one page and will resolve many of the support queries related to ‘blank spaces’ in the financial statements.
Click on this link for a video guiding you through the use of the keep together feature.
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Financial statement headers and footers renamed for easy referencing
The headers and footers in their respective libraries have been renamed from their previous generic descriptions (Header 1, 2, etc.) to be more specific; referencing the pages and/or sections to which they relate. This enables users to identify headers and footers at a glance and allows for easy referencing.
Section B: Revised assurance reports - detail
3. Split of reports
3.1 Selection of report(s) in 01.20 Information store
What’s new? Why?Provision is made under “Engagement variables” for the selection of more than one report to be presented in the financial statements.
Users wanted the ability to insert more than one report in the financial statements, for example an “Independent Reviewer’s Report” and a “Practitioner’s Compilation Report” when the financial statements are prepared by one person and the independent review is performed by another.
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What’s new? Why?Based on the selection of the report, the type of engagement with the highest level of assurance is populated. For example, if both Independent Auditor’s and Practitioner’s Compilation Reports are selected, audit will be populated as the Type of engagement.
The Type of engagement will determine information populated in other areas of the financial statements, for example the “Control page”, “Index Page”, the “Director’s Responsibilities and Approval” and “Director’s Report”.
3.2 Warning messages for selection of reports in 01.20 Information store
What’s new? Why?Warning messages have been built in depending on the selection of the reports, indicated by the icon which highlights when a report is selected that appears to be an illogical selection based on the Public Interest Score, entity type and/or combination of reports.
To assist the user in selecting the correct report(s) to present in the financial statements.
For example: If the Public Interest Score (01.30) indicates that an audit must be performed, a warning message will appear when an Independent Reviewer’s Report is selected (see below).
For example, if the entity type is a company and the “Accounting officer’s and Compilation Report” is selected, a warning message will appear as the accounting officer is an appointment per the Close Corporation Act and is not expected in the instance of a company.
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4. Revised Independent Auditor’s Report
The new and revised Audit Reporting Standards and related confirming amendments respond to the call by stakeholders that the auditor’s report should provide more relevant information to users based on the audit that was performed. The IAASB has indicated that they believe that the changes to audit reporting will have the benefit of: y Enhanced communication between the auditor and investors as well as between auditors and those charged
with governance; y Increased attention by management and those charged with governance (e.g. the audit committee) to the
disclosure in the financial statements to which reference is made in the Independent Auditor’s Report; and y Renewed focus of the auditor on matters to be reported, that could indirectly result in an increase in
professional skepticism.”
4.1 Provide for two versions of the Independent Auditor’s Report
What’s new? Why?Use the “Version of Report” button to select the applicable version of the report, namely Independent Auditor’s Report for periods ending y Between 15 December 2009 and 15 December 2016 y On or after 15 December 2016 (hereafter referred to as
“Revised Independent Auditor’s Report”)
To provide the user with the required format and content of the Independent Auditor’s Report based on the year end of the auditee or the decision to early adopt.
4.2 Opinion section
What’s new? Why?The Opinion section is presented first, followed by the Basis for Opinion section.
Compliance with the revised ISA 700.
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4.3 Basis for opinion section
What’s new? Why?An affirmative statement about the auditor’s independence and fulfillment of relevant ethical responsibilities is included in the “Basis for opinion” section.
Compliance with the revised ISA 700.
What’s new? Why?The jurisdiction or origin of the independence and ethical requirements will update based on the selection of country in the “Information Store”.
The user has the ability to edit the information in the relevant fields.
To enable compliance with the revised ISA 700.
For example, if South Africa is selected as depicted in the image above, reference will be made to the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable in South Africa. If Kenya is selected for example, reference will be made to the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (IESBA Code) and other independence requirements applicable in Kenya (refer below):
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4.4 Going Concern section
What’s new? Why?Included a separate section ‘Material Uncertainty Related to Going Concern’’ to be used when a material uncertainty exists, and adequate disclosure about the material uncertainty was made in the financial statements. (The Emphasis of Matter paragraph was used to date.)
Compliance with the revised ISA 700.
What’s new? Why?
A warning message shows next to the heading, when the note relating to “Going Concern” was switched on in the financial statements, but the “Material uncertainty related to going concern” section in the Independent Auditor’s Report is not switched on.
A warning message shows next to the heading and the note relating to “Going Concern” when the “Material uncertainty related to going concern” section in the Auditor’s Report is switched on, but the note in the financial statement is not switched on.
To assist the user with compliance.
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4.5 Other Information section
What’s new? Why?The Other Information section was updated to include: y A statement that management is responsible for other information. y Identification of the other information. y A statement that the auditor’s opinion does not cover the other information
and, accordingly that the auditor does not express and audit opinion or any form of assurance conclusion thereon.
y A description of the auditor’s responsibilities relating to reading, considering and reporting on other information.
y Either a statement that: � The auditor has nothing to report; or � Describes the uncorrected material misstatement of the other information.
Compliance with revised ISA 720.
4.6 Key audit matter section
What’s new? Why?Included a section in the Independent Auditor’s Report to communicate key audit matters (KAM).
Guidance is provided to inform the user in which instances reporting of KAM is mandatory.
Provision is made for the instance where KAM should be presented, for example listed entities, but the auditor did not identify any KAM to report.
KAM should be presented for all audits of complete sets of general purpose financial statements of listed entities and when the auditor is required by law or regulation to communicate these matters.
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What’s new? Why?When the Type of company in the Information Store is selected as a Listed Company, the KAM section will appear in blue with the guidance text to prompt the user to switch on the KAM paragraph.
KAM should be presented for all audits of complete sets of general purpose financial statements of listed entities.
What’s new? Why?Provision is made for 3 different ways to present KAM: y 2 Column table y 3 Column table y Text format
The user can edit the description of the heading.
We reviewed the public available examples of Independent Auditor’s Reports with KAM sections included. We noted that different formats were used to present KAM. We wanted to give our users options to present KAM.
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What’s new? Why?Provision is made for 3 KAM. The user can add additional KAM by following the steps below.
Enable the user to add more KAM.
Step 1: Use the Insert function
Step 2: Select Table rows and select to add the Heading Row above or below
Step 3: Select Table rows and select to add an Input row above or below
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5. Signature area of reports
What’s new? Why?Provide for the following options: y Sign as engagement partner or as firm. y Show or hide line above signature. y Provide line to record date of report or date pulls through
from Information Store. y Present place of signature or business address as recorded in
the Information Store.
Feature requested by clients.
Option added to attach electronic headers and footers or use pre-printed letterheads
What’s new? Why? y The header/footers tab in the Settings and Format has been
updated with the following, for all reports: y Option to use electronic header/footer, and the ability to add
separate headers and footer logos/images y Option to use a pre-printed letterheads
Feature requested by users.
IFRS for SMEs 2015.01.01
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Executive summary
This summary details the changes encapsulated in the 2015.01.01 version of the template, released in November 2015. If you are on version 2014.01.03 or earlier, all the changes listed in the release notes to version 2016.01.01 as well as those listed below would be applicable. Click on this link to be directed to the web for the complete release notes that accompanied this release.
1. Disclosure enhancements
IFRS for SMEs multi-country template
The multi-country template supports localised content for all South African, Nigerian and Kenyan countries. Other countries are supported with generic IFRS content as legislated internationally.The following localised content is in the information store and throughout the financial statements: y Country-specific disclosure y Applicable legislation y Currency, includes an editable currency symbol field to allow for user customisation of the currency symbol
across the financial statements y Tax information y Relevant designations
Read more
Independent Auditor's Report
y Outdated report options which were no longer ISA 700 compliant were omitted y Included additional narration as commonly practiced in East Africa y Added automation based on country selected in the information store y Designation options expanded in signature areas
Read more
Leasehold Property (For countries in Africa other than South Africa)
Entering into 99-year lease agreements in Africa is common practice, so in order to cater for this disclosure, the following changes to the template were made: y Balance sheet
� Mapping numbers added to cater for leasehold property � Line items for “Leasehold Property” added for classification as either current or non-current
y Statement of Cash Flows � “Acquisition of Leasehold Property” line item added under the Cash flows from investing activities section
○ Notes to the financial statements � Balance sheet notes
○ Leasehold property note now available and referenced to the Balance Sheet ○ Categories of financial instruments note updated with a line items for Leasehold property.
� Income statement notes ○ Operating profit (loss) note - New line item for Leasehold property under the heading Operating lease
charges
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○ Depreciation, amortisation and impairments - New line item added for leasehold property under Amortisation
� Statement of cash flows notes ○ Cash generated from operations - A new line item added for Movements in Leasehold property
� Value added statement ○ In various countries in Africa the compilation of a Value Added Statement is compulsory. This statement
was extended to the SME template and thus available to all financial statement compilers in Africa. The value added statement shows how much value (wealth) has been created by an entity through
utilisation of its capacity, capital, manpower, and other resources, and how it is allocated among different stakeholders (employees, lenders, shareholders, government, etc.) in an accounting period.
� Five-year financial summary ○ This statement was extended to the SME template and thus made available to all financial statement
compilers in Africa. This summary document provides more accurate information about the entity’s financial health. The trend
and type of information presented points to symptoms that might be contributing to financial distress or problems that can be treated to achieve financial health. The information presented in the five-year financial summary has several advantages: ○ Improving the quality of information for making policy and budgetary decisions ○ Identifying emerging trends in order to take corrective or proactive action ○ Utilising the trends of specific financial indicators to guide budget decisions and priorities
Read more
Known issues
The following known issues were applicable in this release:
Issue SolutionAfter turning Group Figures on, the values in the Value Added Statement disappear.
Go to Options | Column Settings. Change the Group entity from PTY to Group ID, and save the changes. The issue will not come up going forward.
Undefined differences may appear in the Value added statement and the five-year trend analysis due to rounding. y Value added statement y Five-year trend analysis
The Retained income cell is an input cell. Add the rounding difference to this cell. The Current assets and Current liabilities cells are input cells. Add the rounding differences to these cells.
The Other income figure in the Value added statement does not tie up to the Income statement. This is because profit/ loss items have been excluded, and shown under Investment activity.
Refer to the Other income lead sheet for balance confirmation.
On certain computers running Windows 7, when installing a Service Pack, a message appears indicating that the program might not have installed correctly.
Select the option This program installed correctly.
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2. Technical enhancements
2.1 Rounding
The rounding calculation has been updated, thus resolving the rounding issues identified between statements, notes and reconciliation table values.
2.2 Signature areas enhanced
The signature areas have been enhanced to work independently of each other such that the number and selection of directors can be different in the different areas. Signature areas in the following reports have been affected: y Directors’ Responsibility and Approval. y Directors’ Report. y Index.
2.3 Page column headings now editable
A new category “Column headings” has been added to the Information store. Compilers of financial statements can now change the column headings for all periods presented to either “Unaudited”, “Restated” or “Other”. y When “Restated” is selected, an asterisk appears next to the column heading and as a footnote in the page
footer with reference to either the “Change in accounting policy” or “Prior period error” note. y The new column headings can also be applied to the notes of the financial statements.
Along with this, the dates category was improved such that if “is or is not” 12 months is selected, the associated column heading options will appear in the new Column headings section in the information store.
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Probe 2016.20.01
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Section A: Executive summary – Probe MMX
Technical enhancements The Probe MMX 2016 template provides enhanced update functionality that will enable the firm and/or user in the future to update their firm template or engagement file with only the relevant changes to work programs, whereas up until now work programs were replaced.
For this release we distinguish between major and minor changes. y Major changes are compliance changes and improvements to make compliance easier that will automatically
be updated. The revised or new procedures or documents will be added to the firm template and/or existing engagement file.
y Minor changes are optional changes which include improvements in documents or correction of bugs. The firm and/or user will have an option to insert the document. In this instance client data and customization in the document will be lost.
Refer to Annexure A for a summary of documents that are being updated.
Compliance Changes (major changes) The template release contains various compliance changes brought about by:
y The new and revised auditor reporting ISAs and related conforming amendments (insert link to 2.1), y The clarification of the auditor’s work in relation to disclosures (insert link to 2.2), y Revised International Financial Reporting Standards (insert link to 2.3), and y Content enhancement – making compliance easier (insert link to 2.4).
A summary of the resultant impact on the template has been provided below.
2.1 New and Revised Auditor Reporting Standards
The template release contains various compliance changes brought about by the new and revised auditor reporting ISAs (ISA 700, ISA 701, ISA 705, ISA 706, ISA 570, ISA 260) as well as the conforming amendments to other ISAs as a result of the new and revised auditor reporting ISAs (ISA 210, 220, 230, 510, 540, 580, 600, 710, 720). The new and revised Auditor Reporting standards are effective for audits of financial statements for periods ending on or after 15 December 2016.
General y The relevant documents will be updated (refer Annexure A) to incorporate procedures relating to the new and
revised auditor reporting standards based on: � The year-end of the auditee
Year-end before 15 December 2016 Existing proceduresYear-end on or after 15 December 2016 New and revised procedures
� A decision to early adopt the revised standards (including the revised Auditor's Report). y The following area of Probe MMX was impacted:
� 10.20 Engagement Evaluation Read more
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Revised Auditor’s Report
y Summary of key changes to the Auditor’s Report mandatory for all audits y The Opinion section required to be presented first, followed by the Basis for Opinion section, unless law or
regulation prescribes otherwise (ISA 700). � Enhanced auditor reporting on going concern (GC), including
○ Description of the respective responsibilities of management and the auditor for GC; ○ A separate section when a material uncertainty exists, and is adequately disclosed in the financial
statements, under the heading 'Material Uncertainty Related to Going Concern' (ISA 570). � Affirmative statement about the auditor’s independence and fulfilment of relevant ethical responsibilities,
with disclosure for the jurisdiction of the origin of those requirements of reference to the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (ISA 700).
� Enhanced description of the responsibilities of the auditor and key features of an audit (ISA 700). � Other Information or other appropriate heading to provide transparency on the auditor’s work relating to
other information (revised ISA 720).
y Key change to the Auditor’s Report mandatory for listed entities (and the audits of Collective Investment Schemes and Medical Schemes in South Africa) � A new section in the auditor’s report to communicate key audit matters (KAM) (ISA 701). The description of
KAM is always required to include: ○ Why the matter was considered to be one of most significance in the audit and therefore determined to
be a KAM; ○ How the matter was addressed in the audit; and ○ Reference to the related disclosure(s).
y The following areas of Probe Premium was impacted: � 02.50 Consideration of Audit Report Read more
Going Concern
y Enhanced auditor reporting on going concern (GC), including: � A separate section when a material uncertainty exists, and is adequately disclosed, under the heading
‘Material Uncertainty Related to Going Concern’’; and � Requirement to challenge adequacy of disclosure for ‘close calls’ in view of the applicable financial reporting
framework when events or conditions are identified that may cast significant doubt of an entity’s ability to continue as a GC.
y The following area of Probe MMX was impacted: � 02.20 Going Concern Conclusion Read more
y The following area of Probe Premium was impacted: � 02.50 Consideration of Audit Report Read more
Key Audit Matters
y KAM are those matters that, in the auditor’s judgement, were of most significance in the audit of the current-period financial statements. Mandatory for audits of financial statements of listed entities, voluntary application
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for entities other than listed entities. In South Africa, it is also mandatory for audits of Collective Investment Schemes and Medical Schemes.
y The auditor’s responsibility to communicate key audit matters in the auditor’s report in accordance with ISA 701 was included in the Engagement letter (ISA 210).
y The conclusions reached by the engagement team in formulating the auditor’s report to include: � The key audit matters to be included in the auditor’s report; � The key audit matters that will not be communicated in the auditor’s report; and � If applicable, depending on the facts and circumstances of the entity and the audit, that there are no key
audit matters to communicate in the auditor’s report. y The following areas of Probe MMX were impacted (refer to the flow diagram in Annexure XX):
� 10.20 Engagement Evaluation Read more � 10.21 Engagement letter Read more � 10.50 Gathering information Read more � All work programs – conclusion paragraph Read more � 02.00 Partner sign-off Read more � 02.55 Key Audit Matters (New) Read more � 02.80 EQCR Read more � 02.90 Report to Management and Those Charged with Governance Read more
y The following areas of Probe Premium were impacted: � 02.50 Consideration of Audit Report Read more � 02.70 Manager’s final checklist Read more
Revised Audit Engagement Letter
y The example of an Audit Engagement Letter in ISA 210 has been revised. y The following areas of Probe MMX were impacted:
� 10.21 Engagement letter Read more
Auditor’s Responsibility relating to Other Information
y The scope of Other Information was broadened and clarified by relating it to the concept of an ‘annual report’. y The auditor’s work effort was enhanced and explained, inter alia to include:
� Obtain in a timely manner the final version of the other information. � Read the other information and consider whether a material inconsistency exists between the other
information and ○ The financial statements, and ○ The auditor’s knowledge obtained in the audit. ○ The auditor is required to compare selected amounts or other items in the other information with such
amounts or other items in the financial statements. � Remain alert for indications that the other information appears to be materially misstated in comparison to
the financial statements and the auditor’s knowledge. � Introducing documentation requirements in terms of which the auditor includes in the audit documentation:
○ The procedures performed regarding the “Other Information”, ○ The final version of the other information on which the auditor has performed the work.
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y The following areas of Probe MMX were impacted: � 80.10 Financial statement preparation work program Read more
y The following areas of Probe Premium were impacted: � 02.50 Consideration of Audit Report Read more
2.2 Addressing Disclosures in the Audit of Financial Statements
The template has been updated in response to the revised ISAs and application material to the ISAs (ISA 200, ISA 210, ISA 260 (Revised), ISA 300, ISA 315 (Revised), ISA 320, ISA 330, ISA 450, ISA 00 (Revised)), published by the IAASB in July 2015 “Addressing Disclosures in the Audit of the Financial Statements”.
The aforementioned revised standards are effective for audits of financial statements for periods ending on or after 15 December 2016. The template will be updated with the revised procedures, irrespective of year end of the auditee, as the majority of the amendments to the standards relates to clarifying the auditor’s work in relation to disclosures,
The additional guidance in the application material to the above mentioned ISA, clarify and/or emphasize the work the auditor is required to perform in relation to disclosures, inter alia: a. Encourage management to provide information for disclosures earlier in the audit process. b. Consider whether there is intentional misstatement of disclosures that may constitute fraud. c. Communicate with those charged with governance regarding financial statements and disclosures earlier in the
audit process.d. Consider disclosures earlier in the audit process.e. Consider the information in disclosures obtained from outside of the general and subsidiary ledgers in the
planning process.f. Consider qualitative disclosures when materiality is determined.g. Reconcile the information in the financial statements to audit evidence.h. Consider the adequacy of the presentation and disclosure in the financial statements.i. Accumulate and evaluate the misstatements in disclosures.j. Evaluate the financial statements.
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y The following areas of Probe MMX were impacted:
Document reference
Document description
Auditor’s responsibility clarified and/or emphasized
10.21 Engagement letter Encourage management to provide information for disclosures earlier in the audit process.
10.30 Discussions with those charged with governance
Communicate with those charged with governance regarding financial statements and disclosures earlier in the audit process.
Consider disclosures earlier in the audit process.10.60 Overall materiality assessment Consider qualitative disclosures when materiality is
determined.11.20 Inherent risk assessment Consider disclosures earlier in the audit process.11.40 Fraud risk assessment Consider whether there is intentional misstatement of
disclosures that may constitute fraud. 11.50 Control activities design and
implementationConsider disclosures earlier in the audit process.
Consider the information in disclosures obtained from outside of the general and subsidiary ledgers in the planning process.
12.30 Planning Memorandum/ Audit Strategy Consider disclosures earlier in the audit process.12.30 Planning Memorandum/ Planning
meeting notesConsider whether there is intentional misstatement of disclosures that may constitute fraud.
80.10 Financial statement Preparation Reconcile the information in the financial statements to audit evidence.
Evaluate the financial statements.02.40 Evaluation of misstatement Accumulate and evaluate the misstatements in
disclosures.
The description of the assertions were revised to integrate audit procedures for disclosures with account balances and transactions.
Combined assertion:
Classes of Transactions and related disclosures
Account Balances and related disclosures
Description
Completeness C Completeness Completeness Everything that should have been recorded have been recorded, and all the related disclosures that should have been included in the financial statements have been included.
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Existence and Occurrence
EO Occurrence Existence Everything that is recorded or disclosed in the financial statements exist or has occurred and pertains to the entity.
Rights and Obligations
RO N/A Rights and obligations
All liabilities, assets and rights to assets (in the form of a hold or control) are the property or obligation of the entity.
Accuracy, valuation and allocation
VA Accuracy Cut-off Classification Presentation
Accuracy, valuation and allocation Classification Presentation
Amounts, assets, liabilities and equity interests have been recorded at appropriate amounts and any resulting valuation or allocation adjustments have been appropriately recorded, and related disclosures have been appropriately measured and described (are relevant and understandable). Furthermore everything has been allocated to the proper accounts and appropriately aggregated or disaggregated and recorded in the correct accounting period
2.3 Audit Procedures relating to International Financial Reporting Standards: Probe MMX Recog & Measurement (IFRS) only
y 24.10 Group Companies. The procedure relating to accounting for investments in subsidiaries, associates and joint ventures has been updated to include the equity method as an appropriate method of accounting for such investments in the separate financial statements (Equity Method in Separate Financial Statements (Amendments to IAS 27)).
Content enhancement – making compliance easier
The following areas of Probe MMX were impacted:
y 10.20 Engagement evaluation. Added a question to determine whether the entity is a Public Interest Entity (PIE). To inter alia determine whether audit tenure should be disclosed in the Auditor’s Report.
y Management Override of Controls
� 11.40 Fraud risk assessment. The fraud risk relating to management override of controls was amended to include consideration of the three circumstances when ISA 240.32 requires the auditor to design and perform audit procedures, namely
○ Testing the appropriateness of journal entries. ○ Review accounting estimates for biases. ○ Review the business rationale of significant transactions that are outside the normal course of business.
� 10.50 Gathering of information. A procedure was added to prompt the auditor to consider whether there is a significant transaction outside the normal course of business (other than with related parties). Guidance
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was added to remind the auditor that when such a transaction is identified, the auditor should evaluate the business rationale of the transaction as required by ISA 240.32.
� 11.20 Inherent risk assessment. Guidance text was added to remind the auditor to review the accounting estimates for biases and evaluate whether the circumstances producing the bias represent a risk of material misstatement due to fraud. When such an instance is identified, a significant risk should be recorded.
� 11.60 Risk assessment at assertion level/Other/Accounting records. Per ISA 240.31 the override of controls, which include journal entries, is a risk of material misstatement due to fraud and therefore is a significant risk. The aforementioned risk is now prepopulated in the template.
� 73.10 Accounting records/Journal entries and year-end adjustments. The required procedure was amended to include the testing of a sample of other non-material yearend journals.
y 60.10 Revenue. The completeness procedure was amended to clarify that the auditor is required to follow the selection of transactions through to the debtor’s account in the debtor ledger and ensure that it was allocated to the correct debtor.
y 65.10 Payroll. A procedure was added and another edited to check submission of statutory returns and calculation of statutory deductions respectively.
y 02.80 EQCR Checklist. A procedure was amended to prompt the EQCR that the review must be completed prior to the issue of the audit report and to document it as such.
y 20.10 Property, plant and equipment. The procedure to test completeness of Property, plant and equipment, i.e. the physical assets test, was included under required procedures.
The following areas of Probe MMX Recognition and Measurement (IFRS) were impacted: y 20.10 Property, plant and equipment. The procedure relating to impairment was amended to indicate the
timing of the assessment by management in accordance with IAS 36. y 23.10 Intangible Assets. Procedures relating to amortisation and impairment were amended to indicate the
timing of the assessment by management in accordance with IAS 38 and IAS 36 respectively. y 60.10 Revenue. Additional procedures relating to initial recognition of revenue and revenue received as an
agent on behalf of others were added.
The following areas of Probe MMX Recognition and Measurement (IFRS for SME) were impacted: y 60.10 Revenue. Additional procedures relating to initial recognition of revenue and revenue received as an
agent on behalf of others were added.
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Section B: Detailed Probe MMX compliance changes (major changes)
Planning
10.20 Engagement Evaluation (major change - compliance)
Included a procedure to elect early adoption of the new and revised auditor reporting standards as well as the conforming amendments to other ISAs.
Extract relevant to Large and Small Profile
When the new and revised Auditor Reporting standards is relevant based on the year-end of the auditee or when early adoption has been elected (in 10.20), the auditor will be required to answer a question whether Key Audit Matters will be presented in the auditor’s report. Guidance has been provided to indicate in which instances the KAM is mandatory.
When the entity type is selected as “listed”, the answer to the question will be populated.
Added a question to determine whether the entity is a Public Interest Entity (PIE). The procedure is only applicable when the country of incorporation is selected as South Africa.
Extract relevant to Large and Small Profile
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10.21 Engagement letter (major change - compliance)
The content of the engagement letter was aligned with the Example of an Audit Engagement Letter included as per Appendix 1 in the revised ISA 210, agreeing the Terms of Audit Engagements.
Inserted a paragraph with regards to the requirement for the auditor to communicate key audit matters in the auditor’s report in accordance with ISA 701. The paragraph will by default be switched on, even in the circumstance when the auditor is not required to communicate key audit mattersISA 210 states that it may be helpful for the auditor to make reference in the terms of the audit engagement to the possibility of communicating key audit matters in the auditor’s report. The user is able to hide the paragraph.
Extract relevant to Large and Small Profile
Content in the “Responsibilities of management” paragraph was edited to request management to provide information relevant to the preparation of the financial statements, including information relating to disclosure.
10.30 Discussions with those Charged with Governance (major change - compliance)
The questions to those charged with governance and/or management relating to obtaining an understanding of the accounting policies, estimates and significant, unusual and complex transactions, were edited and added to emphasize that the understanding should address disclosures as well as changes in the accounting framework, policies and disclosures.
Extract relevant to Small Profile (content of Large Profile is similar)
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Procedures were edited to determine the assessment by those charged with governance of the risk that the financial statements, including the disclosure, may be materially misstated due to fraud.
Extract relevant to Small Profile Extract relevant to Large Profile
10.50 Gathering Information (major change - compliance)
In the instance where KAM will be presented in the Auditor’s report (as indicated on 10.20), a procedure is inserted to consider whether any KAM’s were identified in the prior period. A definition of KAM is provided as well as guidance on what should be considered as a KAM.
Extract relevant to Large and Small Profile
The Record Risk Button has been updated to include the functionality to record a KAM throughout the file.
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The information recorded will be summarised in a new work program 02.55 “Key Audit Matters.
A procedure was added to consider whether there was instances in the prior year where audit procedures were difficult to perform, including procedure relating to disclosure.
A procedure was added to consider whether there was significant transactions (other than with related parties) that are outside the normal course of business.
Extract relevant to Large and Small Profile
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10.60 Overall materiality assessment (major change - compliance)
Added guidance with regards to what information is considered to be qualitatively material.
Extract relevant to Large and Small Profile
11.20 Inherent risk assessment (major change - compliance)
Procedures relating to obtaining an understanding of the nature of the entity, including accounting policies, were edited to emphasize that the understanding should address also disclosure.
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Examples of disclosures that will have qualitative aspects and that may be relevant when assessing the risks of material misstatements are included in the Large Profile:
Extract relevant to Large Profile
11.40 Fraud risk assessment (major change - compliance)
Inserted an additional consideration under “opportunity” to determine whether there is an opportunity for intentional misstatement of disclosures that may constitute fraud.
Extract relevant to Large Profile Extract relevant to Small Profile
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The prepopulated risk, "Management override of controls", were amended to include the three circumstances when ISA 240.32 requires the auditor to design and perform audit procedures. Proposed audit procedures for the three instances were included as guidance. The auditor needs to consider the relevance and completeness of these procedures .
11.50 Control activities design and implementation (major change - compliance)
New prompts were added to “Other/Financial Statement Preparation” to emphasize that the understanding obtained should include the process management used to identify and prepare the disclosure in the financial statements.
Extract relevant to Large and Small Profile
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Examples of information obtained from outside of the general and subsidiary ledgers is provided.
Extract relevant to Large and Small Profile
11.60 Risk assessment at assertion level (Major change – compliance)
The risk of material misstatement of financial statements due to fraud with journals is prepopulated in the template.
12.30 Planning Memorandum (Major change – compliance)
The paragraph relating to “Communication to {those charged with governance}” about the planned scope and timing of the audit was updated to include the communication of significant risks identified during the planning process. ISA 260 par 15 requires that the auditor communicate to those charged with governance the planned scope and timing of the audit, which include communication of the significant risks identified by the auditor.
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Extract relevant to Large and Small Profile
The section relating to “Audit Strategy / Characteristics and scope of the engagement / Financial reporting framework” was edited to include consideration of disclosures
Extract relevant to Large Profile
Combine the sentences. to read: "The section relating to “Discussions amongst engagement team members / Development and changes since the last audit” and “Discussions amongst engagement team members / Susceptibility of the financial statements to material misstatement” was edited to include consideration of disclosures."
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Extract relevant to Large and Small Profile
Execution
Work Programs (Major change - compliance)
The conclusion paragraph was updated to consider whether a KAM that was identified in the relevant section may require communication to those charged with governance and presentation in the audit report. The aforementioned paragraph will appear in the instances where it was identified that Key Audit Matters will be presented in the audit report in 10.20 “Engagement Evaluation”.If Key Audit Matters were identified and the question was answered as yes, a pop-up message will appear to prompt the user to record the Key Audit Matter using the Record Risk button.
Extract relevant to Large and Small Profile
80.10 Financial Statement Preparation (Major change – compliance)
Inserted new procedures and amended existing procedures in the paragraph “Supplementary unaudited information and other information in documents containing audited financial statements” relating to the auditor’s
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responsibility to review said information and respond to inconsistencies between the unaudited information and other information included in documents in the audited financial statements.
Extract relevant to Large and Small Profile
Added an instruction to provide examples of disclosure that will have qualitative aspects (included for Large Profile).
Finalisation
02.00 Partner Sign-off (major change - compliance)
A new procedure with regards to the identification, communication and presentation of KAMs was inserted.
Extract relevant to Large and Small Profile
02.55 Key Audit Matter (NEW) (Major change – compliance)
A new work program was added that summarises Key Audit Matters recorded during the planning or execution phase using the “Risk Record” button. The detail of the Key Audit Matters will pull through to 02.90. The work program requires the auditor to indicate which of the potential KAM’s will be presented in the Auditor’s Report and which will not be presented supported by a reason for not presenting it.
Extract relevant to Large and Small Profile
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02.20 Going Concern Conclusion (Major change – compliance)
In the instance where the auditor concluded that ‘Material uncertainty relating to going concern exists but adequate disclosure is made in the financial statements”, the proposed Audit Opinion was changed
from “We should issue an unqualified opinion with respect to the applicability of the going concern basis of accounting, with an emphasis of matter paragraph.”
to “We should issue an unqualified opinion with respect to the applicability of the going concern basis of accounting, with a separate section in the audit report under the heading ‘Material Uncertainty Related to Going Concern.”
Extract relevant to Large and Small Profile
02.40 Evaluation of misstatements (Major change – compliance)
Added a new tab to enable the user to record and evaluate disclosure and presentation misstatements.
Extract relevant to Large and Small Profile
Procedures in the conclusion section was edited to include consideration for the omission of disclosure.
Extract relevant to Large and Small Profile
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02.80 EQCR Checklist (Major change – compliance)
A new procedure with regards to the identification, communication and presentation of KAMs was inserted. The EQCR procedure, including the additional procedure, only applies to the Large Profile.
The aforementioned paragraph will appear in the instances where it was identified that KAM’s will be presented in the audit report in 10.20 “Engagement Evaluation”.
Extract relevant to Large and Small Profile
02.90 Report to Management and Those Charged with Governance (Major change – compliance)
y The following prompts were inserted: y Explain the circumstances that affect the form and content of the auditor’s report, for example modification to
the audit report. y Explain the emphasis of matter or other matter paragraph that is expected to be included in the audit report.
A paragraph relating to KAM’s has been inserted. The detail of KAM recorded in 02.55, Key Audit Matters.
Extract relevant to Large and Small Profile
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Probe MMX Premium
02.50 Consideration of Audit Report (major change - compliance)
The content of the work program was changed significantly to enable the auditor to determine whether the audit report meets the format and requirements of the revised Auditor’s Report effective for financial periods on or after 15 December 2016. Inter alia it includes procedures relating to: y Key Audit Matters, y Going Concern - Material Uncertainty Related to Going Concern, and y Other information.
The results recorded in 02.20 “Going Concern” pull through to 02.50 “Consideration of audit report”. For example, conclusion was such that uncertainty relating to going concern exists but adequate disclosure is made in the financial statements (refer 02.20 below):
The relevant procedures relating to “Material Uncertainty Related to Going Concern” will be populated in 02.50 “Consideration of audit report”.
02.70 Manager’s final checklist (major change - compliance)
Added two new procedures to check whether: y KAM have been determined and communicated in the auditor’s report in instances where it is relevant.
y Material inconsistencies exist between other information and the financial statements or our knowledge of the client.
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Probe MMX Recog & Measure (IFRS)
24.10 Group Companies (major change - compliance)
Included the option of using the equity method when considering whether the interests in jointly controlled operations, subsidiaries, associates and joint ventures are correctly accounted for in the separate financial statements of the entity.
The aforementioned equity method option will be included in the work program based on the year end of the auditee, i.e. if the year-end is on or after 31 December 2016, the procedure will appear. For earlier year ends, the equity method option will not be included.
20.10 Property, plant and equipment (major change - compliance)
y Amended the following procedure (indicated in italics) under Impairment � Ensure that management assessed at the end of each reporting period whether or not there is any indication
that an asset or group of assets may be impaired (IAS36.9&12). (8)
23.10 Intangible Assets (major change - compliance)
y Amended the following procedures (indicated in italics) testing material amortisation � The useful life of any intangible assets that arises from contractual or other legal rights does not exceed the
period of the contractual or other legal rights or the renewable period, but may be shorter depending on the period over which the entity expects to use the asset. (IAS38.94)
� The amortisation method reflects the pattern in which the asset’s future economic benefits are expected to be consumed and that changes in use are reflected in changes in the amortisation method. If pattern cannot be determined reliably the straight line method shall be used.
� The entity reviewed the amortisation period and method for infinite life intangible assets at least annually. y Amended the following procedure (indicated in italics) under material acquisitions
� Ensure that intangible assets arising from development, or from the development phase of a project has only been recognised if management can demonstrate technical feasibility, intention to complete, ability to use and how economic benefits will be generated, the availability of adequate technical financial and other resources to complete the development and its ability to measure reliably the expenditure attributable to the intangible asset during its development. (IAS38.57).
y Amended the following procedure (indicated in italics) under Impairment � Ensure that management assessed at the end of each reporting period whether or not there is any indication
that an asset or group of assets may be impaired (IAS36.9&12).
60.10 Revenue (major change – compliance). The following procedures were added:
y Ensure that revenue is measured as the gross inflows received or receivable, net of any trade discounts, settlement discounts and volume rebates.
y Ensure that revenue received as an agent on behalf of others only includes the commission received. The
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procedure is activated by ticking “Revenue received on behalf of others (i.e. as an agent) “ in 10.51 Types and Volume of Transactions.
y Ensure that any other amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not recorded as revenue.
Probe MMX Recog & Measure (IFRS for SME)
60.10 Revenue (major change – compliance). The following procedures were added:
y Ensure that revenue is measured as the gross inflows received or receivable, net of any trade discounts, settlement discounts and volume rebates.
y Ensure that revenue received as an agent on behalf of others only includes the commission received. The procedure is activated by ticking “Revenue received on behalf of others (i.e. as an agent)" in 10.51 Types and Volume of Transactions.
y Ensure that any other amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not recorded as revenue.
Other Changes to Probe MMX, Probe MMX Premium, Probe MMX Recog & Measurement (IFRS and IFRS for SME) (minor changes)
y To improve the user experience, all the work programs have been updated. Inter alia, the following was improved: � Removed duplicated procedures. � Added procedures to make compliance easier. � C hanged the placement of procedure to create a more logical flow and to enhance consistency between
various work programs. � Resolved bugs.
The firm and/or user will have an option to insert the documents that only contains minor changes. In this instance client data and customization in the work program will be lost.The CaseView document version number will not change when the relevant document only contains minor changes. The CaseView document version number will only be updated to the 2016 version number when the relevant document contains major changes.
To insert work programs with minor changes, follow the steps below:
1. Locate the position of the current document in the Document Manager:
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2. Click on Document in the Ribbon, and select From Library. Select the library applicable to your engagement:
3. Locate the document you wish to insert, and click on Add:
4. The updated document will now be available below the original document:
5. Delete original document and renumber the updated document.
Probe Compilations
06.10 Letter of representation
A management representation letter for a compilation engagement was added.
06.20 Compilation engagement evaluation
The option “SA GAAP” has been removed from the financial reporting framework dropdown box.
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ANNEXURE ASummary of documents being updated
The following existing documents will automatically be replaced. It includes major changes that are either compliance changes or improvements to make compliance easier. New version numbers will be assigned to these documents.
Planning documents10.21 Engagement letter
Work Programs20.10 Property, plant and equipment work program23.10 Intangible assets work program24.10 Group companies work program60.10 Revenue work program65.10 Employee costs work program73.10 Accounting records work program80.10 Financial statement preparation work program
Finalisation document02.00 Partner sign-off02.20 Going concern conclusion02.40 Evaluation of misstatements02.50 Consideration of audit report (premium only)02.55 Key audit matters02.70 Manager’s final checklist (premium only)02.80 EQCR checklist02.90 Report to management and those charged with governance
Compilation documents06.10 Compilation letter of representation
The following existing documents will automatically be replaced due to compliance change. New version numbers will be assigned to these documents. The client data captured in these documents will not be lost in the engagement files as it is written to a database.
02.10 Subsequent events work program10.20 Engagement evaluation10.30 Discussions with those charged with governance10.50 Gathering information10.60 Overall materiality assessment10.70 Areas that are likely to be misstated11.10 Risk analysis summary11.20 Inherent risk assessment
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11.30 Control risk assessment11.40 Fraud risk assessment11.50 Control activities design and implementation11.60 Risk assessment at assertion level11.61 Controls over significant risk12.20 Audit plan and strategy12.21 Using internal audit12.30 Planning memorandum90.10 Blank audit program90.20 Substantive testing worksheet90.30 Controls testing worksheet90.40 Focused enquiries
The KAM procedure in the conclusion paragraph will be inserted in the following documents, but the document will not be replaced. Therefore the document version will NOT change, unless the user want to update the document to the latest version.
21.10 Investment property work program22.10 Agriculture work program25.10 Other financial assets work program27.10 Other assets work program30.10 Inventories work program31.10 Trade and other receivables work program32.10 Cash and cash equivalents work program40.10 Capital and statutory work program41.10 Other financial liabilities work program43.10 Other liabilities work program50.10 Taxes and levies work program51.10 Trade and other payables work program52.10 Provisions work program61.10 Investment and finance income work program62.10 Cost of sales work program64.10 Other income work program66.10 Other expenses work program67.10 Finance costs work program68.10 Disposal groups and discontinued operations work program71.10 Related parties work program72.10 Commitments and contingencies work program74.10 Opening balances and comparatives work program
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ANNEXURE BProbe MMX Audit: Key Audit Matters
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