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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

defining the context
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
smp permanent task force smp ptf
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
smp permanent task force smp ptf4
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
smp permanent task force smp ptf5
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
applicability of isas to smes and smps
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
developing standards applicable to audits of all entities
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
developing standards applicable to audits of all entities8
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
developing standards applicable to audits of all entities9

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
developing standards applicable to audits of all entities10

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
is audit the only alternative for smp smes

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?”
is audit the only alternative for smp smes12

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
questions to participants
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?