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Page 1 | Proprietary and Copyrighted Information
IFAC Guide to Compilation
Engagements
IFAC SMP Committee
September 2015
Page 2 | Proprietary and Copyrighted Information
• To represent interests of small- and medium-sized
practices (SMPs)
• Co...
Page 3 | Proprietary and Copyrighted Information
• International Standard on
Related Services (ISRS)
4410 (Revised)
• Guid...
Page 4 | Proprietary and Copyrighted Information
Uses of Compilation Engagements
Uses Commentary
Expertise of a
Profession...
Page 5 | Proprietary and Copyrighted Information
Benefits of Compilation Engagements
SME Benefits Commentary
Alternative
S...
Page 6 | Proprietary and Copyrighted Information
Benefits of Compilation Engagements
SMP Benefits Commentary
Customized
Ad...
Page 7 | Proprietary and Copyrighted Information
Benefits of the Guide to Compilation Engagements
Guide Benefits Commentar...
Page 8 | Proprietary and Copyrighted Information
Accepting
Planning
Performing
Reporting
Enforcement
The Four Elements
Page 9 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Acce...
Page 10 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Pla...
Page 11 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Pla...
Page 12 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Pla...
Page 13 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Per...
Page 14 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Per...
Page 15 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Per...
Page 16 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – Rep...
Page 17 | Proprietary and Copyrighted Information
Some Highlights in the Guide from the
Practitioner’s Point of View – App...
Page 18 | Proprietary and Copyrighted Information
IFAC Resources – Compilation Engagements
• IFAC SMP Committee: www.ifac....
Page 19 | Proprietary and Copyrighted Information
Thank You
www.ifac.org/smp
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IFAC Guide to Compilation Engagements

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An introduction to the IFAC SMP Committee’s Guide to Compilation Engagements

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IFAC Guide to Compilation Engagements

  1. 1. Page 1 | Proprietary and Copyrighted Information IFAC Guide to Compilation Engagements IFAC SMP Committee September 2015
  2. 2. Page 2 | Proprietary and Copyrighted Information • To represent interests of small- and medium-sized practices (SMPs) • Comprised of 18 members from 18 countries • Regular input to policy, regulation and international standards – IAASB on key projects • Develops tools and guidance – Guide to Compilation Engagements, Guide to Review Engagements, Guide to ISA Engagements…… and more – IFAC Global Knowledge Gateway • Promotes the visibility and recognition of SMPs IFAC SMP Committee – Overview
  3. 3. Page 3 | Proprietary and Copyrighted Information • International Standard on Related Services (ISRS) 4410 (Revised) • Guide to Compilation Engagements at www.ifac.org/SMP Guide to Compilation Engagements
  4. 4. Page 4 | Proprietary and Copyrighted Information Uses of Compilation Engagements Uses Commentary Expertise of a Professional is Required Expertise of the practitioner is required by the client to compile the financial statements but no assurance is required. Within Other Engagements Compiled financial statements may be a useful, and ancillary addition to, other engagements, such as income and cash flow projections, financial or tax planning services, or taxation reporting engagements. They may also be supplemental in nature (i.e. for interim purposes to supplement an annual review or audit report). Transaction Purposes Any number of transaction related purposes may be supported by a compilation report. For example, a change to the entity’s ownership or restructured financing (i.e. merger to acquisition).
  5. 5. Page 5 | Proprietary and Copyrighted Information Benefits of Compilation Engagements SME Benefits Commentary Alternative Service Trend towards higher audit exemptions. May be less time consuming for client. Cost Effective A compilation engagement is normally a lower cost for an entity than an audit or a review engagement. Reported Involvement From a Professional Accompanying report states expertise in accounting and financial reporting applied to assist in the preparation and presentation as well as adherence to relevant ethical requirements.
  6. 6. Page 6 | Proprietary and Copyrighted Information Benefits of Compilation Engagements SMP Benefits Commentary Customized Advice Add value to the client and provide a basis for customized advice. Financial reporting requires judgment, therefore management may benefit from the assistance of the practitioner, particularly when making significant judgments. Opportunities – Additional Service Ensure the client is aware of how and when a compilation engagement can be used (i.e. not appropriate when assurance is required). Opportunities for cross-selling (i.e. the IESBA ethical requirements of Section 290 and 291, Independence, do not apply to compilation services). Flexibility Consists of use of records, documents, explanation and other information provided by management allowing practitioners to tailor procedures, if any, based on professional judgment and experience.
  7. 7. Page 7 | Proprietary and Copyrighted Information Benefits of the Guide to Compilation Engagements Guide Benefits Commentary Extracts from the Standard Direct extracts from ISRS 4410 (Revised) Tailored Examples Illustrated examples and Consider Points, including efficiency suggestions Appendices Checklists, correspondence samples and reports for adaption Staff Training Day-to-day reference tool for staff – can be used for training Ensure SMP staff develop a consistent approach
  8. 8. Page 8 | Proprietary and Copyrighted Information Accepting Planning Performing Reporting Enforcement The Four Elements
  9. 9. Page 9 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Accepting Accepting • Is the Firm ready? • Engagement acceptance or continuance • Terms of engagement
  10. 10. Page 10 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Planning Planning • Communications • Consideration of materiality using the tenet of ‘misleading’ as a benchmark • Understanding of the entity • Procedures
  11. 11. Page 11 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Planning
  12. 12. Page 12 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Planning
  13. 13. Page 13 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Performing Emphasis on Professional Judgment Minimal Checklists Required Flexibility of the Engagement
  14. 14. Page 14 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Performing Example(s) of Procedures (if determined appropriate) Improper Accounts Payable Cutoff Cause for Consideration Potential Amendments Required A retail toy store has a December 31st year-end. It is reasonable to expect that the operation would take receipt of a large quantity of merchandise during the busiest time of year that would not require immediate payment. The accounts payable listing does not appear to include balances due within 30-60 days to suppliers of Christmas holiday related toys. Examples of Procedures Discuss accounts payable and accruals with client Scan transactions List accounts payable and accruals Reconcile accounts payable to list If incomplete, inaccurate or otherwise unsatisfactory propose amendments as necessary
  15. 15. Page 15 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Performing Example(s) of Documentation Information Prepared by the Practitioner Preparation Signed engagement letter. Understanding the entity The AFRF that will be used. Planning Matters of continuing relevance to future compilation engagements. Listings of planned inquiries. Work performed Results obtained from any procedures elected to be performed. Listing of amendments to the financial statements, including any adjusting entries or other amendments to the financial statements that the practitioner has agreed with management during the course of the engagement. Recording of how the compiled information reconciled with the underlying records, documents, explanations and other information provided by management (for example, a schedule showing how the trial balance links to the compiled financial statements) Reporting A copy of the practitioner’s report. Approval from management, if applicable.
  16. 16. Page 16 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Reporting Reporting • Forming the report • Wording of the report
  17. 17. Page 17 | Proprietary and Copyrighted Information Some Highlights in the Guide from the Practitioner’s Point of View – Appendices Tools that are included as appendices: • Client acceptance/continuance checklist • Sample engagement letter • Sample file completion checklist • Alternate compilation report
  18. 18. Page 18 | Proprietary and Copyrighted Information IFAC Resources – Compilation Engagements • IFAC SMP Committee: www.ifac.org/SMP – Article - The Standard for Today’s Compilation Engagements – Follow us on Twitter: IFAC_SMP – Join us on LinkedIn: IFAC SMP Community • IAASB: www.iaasb.org – ISRS 4410 (Revised) International Standard on Related Services • The Global Knowledge Gateway: www.ifac.org/gateway
  19. 19. Page 19 | Proprietary and Copyrighted Information Thank You www.ifac.org/smp

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