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Inge Saeys - Helping SMPs Promote and Implement IAASB Standards


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Presentation by Inge Saeys, Member, IFAC SMP Committee, at IFAC SMP Forum, March 2012

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Inge Saeys - Helping SMPs Promote and Implement IAASB Standards

  1. 1. IFAC FORUM SINGAPORE4-A HELPING SMPSPromote and implementIAASB standardsInge Saeys, Committee Member Page 1 | Confidential and Proprietary Information
  2. 2. IFAC SMP COMMITTEE One of the four strategic pillars of the SMP Committee Development of Resources and Tools for SMPS Practical assistance with a focus on implementation of standards, practice management and business advisory (25 %) Page 2 | Confidential and Proprietary Information
  3. 3. SMPS SMPS : limited in-house resources versus challenges in efficiently and cost effectively implementing international standardsSMPS HAVE TO• Perform high quality work• Deliver high quality services• Develop their OWN quality control system Page 3 | Confidential and Proprietary Information
  4. 4. EXISTING SMPC PRODUCTS• Guides (and supporting materials)• “E” news• Articles Page 4 | Confidential and Proprietary Information
  5. 5. Guides - OverviewExisting SMPC Products GUIDES High quality and free to download – Guide to Using ISAs in the Audits of SMEs (ISA Guide) – Guide to Quality Control for SMPs (QC Guide) – Guide to Practice Management for SMPs (PM Guide) Page 5 | Confidential and Proprietary Information
  6. 6. Guide to Using ISAs in the Auditsof SMEsExisting SMPC Products Guide To Using ISAs in the audits of SMEs • Purpose : To help apply ISAs cost effectively • 1st edition Dec 2007; 2nd edition Oct. 2010 ;3rd edition Nov. 2011 • Two volumes – Volume 1 – approach to risk-based ISAs - core concept – Volume 2 – practical guidance for SME audits • Two case studies (inc. micro-entity audit) • Illustrations, consider boxes, color design Page 6 | Confidential and Proprietary Information
  7. 7. How to Use the GuideExisting SMPC Products The guide can be used to : • Develop a deeper understanding of an audit conducted in compliance with the ISAs; • Develop a staff manual (supplemented as necessary for local requirements and a firm‟s procedure) to be used for day-to-day reference, and as a basis for training sessions and individual study and discussion; and • Help ensure that staff adopt a consistent approach to planning and performing an audit Page 7 | Confidential and Proprietary Information
  8. 8. Guide to quality control for SMPsExisting SMPC Products Guide To Quality Control For SMPs • Purpose : To help SMPs apply ISQC 1 cost effectively • 1st edition March 2009; 2nd edition July 27 2010; 3rd edition August 2011 • Case study, forms & sample QC manuals • Color design Page 8 | Confidential and Proprietary Information
  9. 9. How to Use the GuideExisting SMPC Products The guide can be used to : • Assist a firm in developing a system for quality control; • Promote consistent application of the quality control requirements within audit, review, and other assurance and related services engagements; and • Provide a reference document for training within the firm Page 9 | Confidential and Proprietary Information
  10. 10. DownloadsExisting SMPC Products• Successful ? Of course !• Free download (…but contact IFAC for permissions) Number of downloaded publications 2008 2009 2010 2011 2012 (to Mar 2) ISA Guide 13.453 6.679 22.679 25.742 1.549 QC Guide NA 10.483 12.356 7.726 602 Page 10 | Confidential and Proprietary Information
  11. 11. TranslationsExisting SMPC Products Publication Number of languages of translation (completed or in progress) ISA Guide 19 QC Guide 18 Page 11 | Confidential and Proprietary Information
  12. 12. GUIDES - FUTURE DEVELOPMENTS• Annual updates – continuous improvement• User guide• Materials to support use in training (for ISA and QC Guides)• Anything else? Page 12 | Confidential and Proprietary Information
  13. 13. E NewsExisting SMPC Products• Each quarter SMP “E” news is issued to inform Member Bodies, subscribers, boards and committees on SMP Committee activities, relevant events, net values and projects by MB and others.• Subscriber base : 11,580• Latest “e” news : February 2012 Page 13 | Confidential and Proprietary Information
  14. 14. E NewsExisting SMPC ProductsIncluded In This Issue• Standards and Guidance - Member Bodies Support Implementation of Clarified ISAs - IAASB Approves Auditor Reporting Project - Updates on IESBA and on IFRS for SMEs• SMP Quick Poll Reveals Regulatory Burdens, Economic Uncertainty as Top Challenges Page 14 | Confidential and Proprietary Information
  15. 15. E NewsExisting SMPC Products• Meetings and EventsAnnual SMP ForumSMP Committee Members Speak at International Events• Articles for Member BodiesTips for Cost Effective ISQC 1 ApplicationTips for Cost Effective ISA Application(both available at resources) Page 15 | Confidential and Proprietary Information
  16. 16. Helping SMPs Promote/Implement IAASB StandardsIFAC Small and Medium Practices ForumMarch 19, 2012Presented by N. Dawn McGeachy, BAccS, FCUIC, ACUIC, FCGA, LPADirector, Public Practice, CGA-Canada Page 16 | Confidential and Proprietary Information
  17. 17. IFAC Small and MediumPractices ForumHelping SMPs Promote/Implement IAASB Standards Two recent IAASB projects, including: • ISRS 4410, Engagements to Compile Financial Statements (recently approved) • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements Page 17 | Confidential and Proprietary Information
  18. 18. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationAssurance • Reasonable • Limited • Noneprovided •“Fairly present” • “Plausible”, worthy • Do not express any • High level of of belief form of opinion or confidence • Nothing has come negative assurance • Must be satisfied (not absolute) to the accountants that the attention that the that the financial financial statements do not statements are not statements fairly present in all misleading are free of material respects material misstatement Page 18 | Confidential and Proprietary Information
  19. 19. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review Compilation Independence Required Required Not required Understanding of the Extensive Enhanced Limited client Understanding of the Required Sufficient to Sufficient to compile entity’s environment, identify where the information including internal misstatements are control likely and to be able to design procedures to address these Page 19 | Confidential and Proprietary Information
  20. 20. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationConsider fraud; Required Required Not required butdocumentation of practitioner must befraud risk alert to cases where information is materially misleadingMateriality calculated Yes; at the financial Yes; at the statements as a whole financial Not required; but level, classes of statements as a professional judgment transactions, account whole level used to determine that balances and the statements are not disclosures and misleading performance materiality Page 20 | Confidential and Proprietary Information
  21. 21. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationAcceptance/ Required Required Required; accountant mustReacceptance be satisfied that the client isconsidered aware of the limited use of the statementsProcedures • Test of • Enquiry •Not required to make controls • Analytical enquiries or perform other • Substantive procedures procedures to verify, procedures • Discussion corroborate or review • Analytical information supplied unless • Added the information is procedures procedures if obviously incorrect, plausibility in incomplete or materially doubt misleading Page 21 | Confidential and Proprietary Information
  22. 22. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationEnquiry and • Required; Required Not requiredanalytical procedures plus • Other procedures including inspection, observation, confirmation, recalculation and re- performanceUnadjusted Yes Yes Not requiredmisstatements/differences Page 22 | Confidential and Proprietary Information
  23. 23. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationCommunication Unqualified Unqualified States that no assurancein report positive negative is provided assurance assurance Readers are cautioned Reservation Reservation that the information has (qualified, (qualified, not been verified for adverse or adverse or accuracy or disclaimer) disclaimer) completeness Page 23 | Confidential and Proprietary Information
  24. 24. Helping SMPs Promote/Implement IAASB Standards Standard Audit Review CompilationEngagement Required for Not required Not required unlessQuality Control listed entities; unless determined by firmReview (EQCR) not required for determined by policy (good other audits firm policy (good practice) unless practice) determined by firm policy (good practice) Page 24 | Confidential and Proprietary Information
  25. 25. Helping SMPs Promote/Implement IAASB Standards Why consider an audit alternative?  Less rigor in the engagement means staff may be less experienced and will still be proficient to complete the work  Less risk in the engagement  Cost/benefit to the client – in the instance of a compilation (particularly when preparation is required on the cash basis, for tax purposes, discounted value basis, liquidation etc) Page 25 | Confidential and Proprietary Information
  26. 26. Helping SMPs Promote/Implement IAASB StandardsWhy consider an audit alternative? Cost benefit to the client – in the instance of a review (sufficient assurance is provided when the user has access to other information such as venture capitalists or bankers) or where the investment or credit extended is relatively insignificant to the user Opportunities to achieve a higher recovery rate for your time Page 26 | Confidential and Proprietary Information
  27. 27. Helping SMPs Promote/Implement IAASB StandardsWhy consider an audit alternative? Opportunity to offer alternative services to the client, particularly in the instance of a compilation (such as business consulting, tax services, controllerships, estate and financial planning) Page 27 | Confidential and Proprietary Information
  28. 28. Helping SMPs Promote/Implement IAASB Standards Page 28 | Confidential and Proprietary Information
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  30. 30. Helping SMPs Promote/Implement IAASB Standards Page 30 | Confidential and Proprietary Information
  31. 31. Helping SMPs Promote/Implement IAASBStandards Page 31 | Confidential and Proprietary Information
  32. 32. Helping SMPs Promote/Implement IAASB Standards Page 32 | Confidential and Proprietary Information
  33. 33. Helping SMPs Promote/Implement IAASB Standards• The SMP Committee is currently discussing these new standards and looking at ideas and suggestions for how they might support the international SMP community• No decisions have yet been taken; today represents an opportunity to provide your own feedback to the SMP Committee Page 33 | Confidential and Proprietary Information
  34. 34. QUESTIONS Page 34 | Confidential and Proprietary Information
  35. 35. Question – Proportionality of ISAs• What are the challenges in applying the ISAs proportionately to a „typical‟ audit of an SME?• Do you believe the ISAs themselves are fully scalable to SME audits? If not, why? Page 35 | Confidential and Proprietary Information
  36. 36. Question – Implementation support for IAASBstandards• How important is it for the SMP Committee to develop implementation guidance for member bodies in order to support adoption of IAASB standards by SMPs?• What particular guidance materials or tools should the SMP Committee develop to best assist member bodies and their SMPs with IAASB standards?• Consider in particular ISQC 1, ISAs, ISRE 2400 and ISRS 4410 Page 36 | Confidential and Proprietary Information
  37. 37. Possible implementation support tools?• Guide to Reviews and Compilations• Sample audit file• Example work papers and/or checklists• Illustrative decision trees• Articles for member bodies• Videos• Slide decks• ….others?What means of support works best for SMPs in yourjurisdiction? Page 37 | Confidential and Proprietary Information
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