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International Federation of Accountants ADDRESSING THE NEEDS OF SMP IN THE DEVELOPMENT OF IAASB PRONOUNCEMENTS Jan Tyl, IAASB Technical Manager IFAC SMP/SME and Developing Nations Consultative Conference Prague, March 10-11, 2005 Defining the Context Int’l. Fed. of Accountants

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International Federation of Accountants

ADDRESSING THE NEEDS OF SMP IN THE DEVELOPMENT OF IAASB PRONOUNCEMENTS

Jan Tyl, IAASB Technical Manager

IFAC SMP/SME and Developing Nations Consultative Conference

Prague, March 10-11, 2005


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Defining the Context

Int’l. Fed. of Accountants

  • Small and medium-sized practice (SMP) definition - IFAC

  • Small and medium-sized entity (SME) definitions

    • the European Union

    • IFC

    • Czech Republic

    • USA

    • IAASB


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SMP Permanent Task Force (SMP PTF)

Int’l. Fed. of Accountants

  • SMP/SME in IFAC Strategic Plan

  • SMP Permanent Task Force

    • To directly work with standard-setters

    • To monitor IFAC committees work

    • To facilitate communication


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SMP Permanent Task Force (SMP PTF)

Int’l. Fed. of Accountants

  • IAASB liaison with SMP PTF

  • Composed of 15 members

  • Rapid Response Teams (up to 4 members)

  • Comments on standards and guidance – 10 since January 2004


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SMP Permanent Task Force (SMP PTF)

Int’l. Fed. of Accountants

  • Comments on proposed revised ISA 260 result in changes to the exposure draft

  • Proposed revised ISA 701 includes situations relevant for SMEs

  • Practice aids development


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Applicability of ISAs to SMEs and SMPs

Int’l. Fed. of Accountants

  • The Wong Report

    • Length and complexity of ISAs

    • Cost of compliance

    • Inconsistent application of standards

    • Lack of SMP/SME involvement in standard-setting

    • Focus on large entities


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Developing Standards Applicable to Audits of All Entities

Int’l. Fed. of Accountants

  • Clarity project

    • Requirements and presumptive requirements (shall and should)

    • Bold type lettering and present tense

  • Comments currently considered


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Developing Standards Applicable to Audits of All Entities

Int’l. Fed. of Accountants

  • International Auditing Practice Statement 1005 (IAPS)

    • Introduced in 1999, revised in 2003

    • Not designed to substitute ISAs

    • ISA 240 and IAPS 1005

    • Commentaries and considerations of SMP/SME issues


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Int’l. Fed. of Accountants

Developing Standards Applicable to Audits of All Entities

  • Is IAASB meeting its objective of one set of standards applicable to all entities?

    • Difficult to reconcile circumstances of large and small entities

    • Significance of the public interest


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Int’l. Fed. of Accountants

Developing Standards Applicable to Audits of All Entities

  • “An audit is an audit”

  • “Think-small-first” standard-setting

  • Consultative Advisory Group

  • SMP/SME participation on IAASB Task Forces

    • 2 IAASB members from SMPs

    • SMP participation impediments


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    Int’l. Fed. of Accountants

    Is Audit the Only Alternative for SMP/SMEs?

    • Do SME owners and SME accounts users need an audit?

      • Is audit a “stamp purchase?”


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    Int’l. Fed. of Accountants

    Is Audit the Only Alternative for SMP/SMEs?

    • What could replace audit?

      • Two levels of assurance

      • Canadian experience

      • British experience

      • IAASB study

      • Moderate assurance – ISRE 2400


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    Questions to Participants

    Int’l. Fed. of Accountants

    • What other steps should IAASB take to address the issues raised in the Wong Report?

    • Would a different level of assurance serve the public interest?

    • Are there other relevant questions?



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