Overview of the ED - ISRS 4410

OVERVIEW OF THE ED - ISRS 4410 Presenter: Ashif Kassam Group Chief Executive, RSM Ashvir

IAASB Agenda Review Engagements ISRE 2400 Compilation Engagements ISRS 4410 Engagements to Perform Agreed-Upon Procedures IAASB Projects for Assurance and Related Services on Financial Information Other Than Audits: Development of use of “hybrid” engagements (e.g. review + selected procedures).

Project Summary • 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.

Vision: Responding to Diverse Needs 4 • 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.

Use of ISAs for SME audits • 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.

Scope • 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.

ISQC 1 • 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.

Ethical Requirements • General principles of integrity; objectivity; professional competence and due care; confidentiality; and professional behavior apply. • IESBA Code does not require independence in compilation engagements.

Objective • 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.

Requirements - Professional Judgment • 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 - Engagement Level Quality Control • 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 - Acceptance and Continuation • 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 • 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.

Requirements - Acceptance and Continuation • 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.

Requirements - Terms of Engagement • 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 - Performing the Engagement 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 - Compiling • 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 - Performing the Engagement • 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.

Requirements - Performing the Engagement • 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.

Requirements - Communication with Management / Governance • On a timely basis during the course of the engagement. • Communicate all significant matters concerning the compilation engagement.

Requirements - Documentation • 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.

Reporting • 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.

Feedback on Exposure • 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. 24

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.

Overview of the ED - ISRS 4410