In this Update: Standards Updates; PEG Updates; Firm Risk Management; Pricing Client Engagements
The end of August is upon us and it has been a busy month. Summer is winding down (even though I don’t want to admit it) and minds are turning to fall and the planning that it brings. This month’s topics include matters that will help you get ready as you continue to think about upcoming standards changes, new PEG forms, quality management and discussing fees with your clients. Read on…
No significant news to report but wanted to provide an update so you stay informed; changes are coming, that is a known! Exposure drafts being deliberated as response deadlines have passed. The key topics that will impact your practice include Quality Management (CSQM1 and CSQM 2), Identifying and Assessing Risks of Material Misstatements (CAS 315 Revised) and Compilation Engagements (CSRS 4200). A summary of the status of these is:
Other assurance exposure drafts still being deliberated include Key Audit Matters, for public companies, along with Public Sector Auditing Standards and Reporting Controls at a Service Organization. Responses to the Discussion Paper of Less Complex Entities were due this month and are now being deliberated. Finally, accounting exposure drafts on Agriculture and Revenue are still out there.
This month the 2019 Edition of the Professional Engagement Guide (PEG) was released. I have spent time understanding the changes and would be happy to discuss them further with you to determine what is most efficient and effective to implement in your practice. Key changes include:
Ten Steps to Successful Firm Risk Management
Since quality management is top of mind with the CSQM1 and CSQM 2 Exposure Drafts, I thought you may be interested in an article to help you address quality matters in your firm. This is the second article of a risk management series and covers 10 steps for successful risk management. The first article is 8 steps to Establishing a Firm Risk Management program (link within). These articles are a result of discussions at recent IFAC SMP Committee meetings, the committee that is focused on practice management for small- and medium-size practices (SMPs).
How to Price Client Engagements and Increase Firm Profits
With all the changes coming, another topic that is top of mind is how to price engagements and discussing fee increases with your clients. The attached link is the second of a three-part series addressing this critical area; it covers approaches to fee increases and value pricing. The first in the series, the Importance of client Selection and Relationship Management (link within), features client classification and the importance of engagement letters and the third instalment will highlight credit control, collection techniques and dealing with conflict.
Lots to think about in the upcoming months but I am here to assist as needed to save you time and provide peace of mind. But first, enjoy the long weekend. Work will always be there, it is more important to spend time with your family and friends. I know I will this weekend.
Kirsten S. Albo, FCPA, FCA
In this Update: Less Complex Entities; Firm Risk Management; Understanding Financial Statements.
We are in the middle of summer and many of you are taking the opportunity to take some well-deserved time off. With that in mind, this month’s update is “summer-lite”. Only a few topics to reflect upon during this slower time of the year. Read on…
Less Complex Entities Discussion Paper
As mentioned in a previous update, the IAASB issued a discussion paper “Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs”. The discussion paper focuses on challenges that have been identified relating to applying the ISAs in the audits of less complex entities and possible actions that could be undertaken to address the identified challenges. Options include scalability of the current standards or even a new set of auditing standards. Because the AASB has committed to adopting the ISAs as CASs, Canadian standard setters are actively involved in this matter.
This is an important topic which may have a significant impact on the audits of small clients. Over the past few months I have participated in webinars, round table discussions and conference calls to provide input. I am preparing a formal response which will incorporate thoughts I have heard from many of you. Auditing small clients efficiently can be a challenge and there are many CASs that just do not make sense.
The IAASB is gathering as much input as they can and has issued a brief survey to obtain information directly from those practitioners who audit less complex entities. The survey has only 6 primary questions and 3 demographic questions so takes less than 5 minutes to complete. You don’t even have to read the discussion paper before taking the survey but I have included the link just in case you want to.
READ IAASB DISCUSSION PAPER HERE
Eight Steps to Establish a Firm Risk Management Program
Summer is a good time to think about monitoring, file inspections and updating your quality assurance manual. However risk management is more than just these things; it is important to establish a risk management “culture” in the firm. This becomes even more critical with the recently issued exposure draft Canadian Standards on Quality Management (see June update). IFAC published a thought-provoking article on this topic highlighting steps to establishing a risk management program along with the benefits it provides.
Understanding Reports on Financial Statements
As a practitioner you understand the differences between an audit, a review and a compilation. However there are many of your clients who may not clearly understand those differences, especially not-for-profit clients with volunteer Board members. CPA Canada issued a good publication to help clients learn about financial statements and the different levels of engagements you can provide. The publication succinctly outlines the concept of applicable financial reporting frameworks, explains the terms assurance and materiality and highlights differences between audits, reviews and compilations. This would be a good tool to provide to new Board members and other clients. One caution, the exposure draft on Compilation Engagements (see June update) most likely will change the Compilation Report in the near future.
In the above topics, I alluded to two important exposure drafts – Canadian Standard on Quality Management and Compilation Engagements. When issued these will have a big impact on your practice however for now, there are no updates but rest assured I will provide information as it is available. For now, enjoy the rest of summer and take advantage of the opportunity to catch up on matters. Whether it is monitoring, file efficiency reviews, file inspection or general consultation, I am here to assist as needed.
Kirsten S. Albo, FCPA, FCA
In this Update: Summary of Upcoming Changes; Support for SMP; Common Technology Mistakes
For many, the focus for the month of June has been completing year end engagements and getting tax returns out the door. Now time to take a breathe and think forward to the next few months; as there are many upcoming changes that will have an impact on your practice, this month’s update focuses on a summary of those changes and resources to support you getting ready for them. Read on…
Summary of upcoming changes
Below are some of the current projects the standard setters are addressing. This is not a comprehensive list but rather the key ones that I think are important to small and mid-sized firms. Within each section I have provided the link to the Financial Reporting and Assurance Standards Canada (FRAS) site which includes further details and a listing of all active and completed projects.
|Standard||Status and Impact|
|CAS 315: Identifying and Assessing Risks of Material Misstatements||Exposure draft issued September 2018 and feedback being considered. Impact: Significant changes to audit approach and documentation.|
|CAS 540: Auditing Accounting Estimates||Final Handbook material issued and standards in effect for periods on or after December 15, 2019. Impact: Minimal impact unless complicated estimates in your clients financial statements.|
|CAS 700 et al: Auditor Reporting||Final Handbook material issued and standards in effect for periods on or after December 15, 2018. Impact: Now issue new auditor’s report.|
|Audits of Less Complex Entities||Discussion paper issued June 2019; response deadline August 14, 2019. Impact: Not sure on this but goal is scalability for small audits so that not as onerous as is today.|
|Quality Management||Exposure draft issued April 2019 and feedback being considered. Impact: New QAM required to address changes and compilations could now be covered by these standards.|
|CSRS 4200: Compilation Engagements||Exposure draft issued September 2018 and feedback being considered. Impact: Significant changes including documentation, accounting framework and report.|
|Public Sector Auditing Standards||Exposure draft for guidance on performance audits currently being developed. Impact: Significant changes but only if you do compliance reporting.|
|CSAE 3000/3001 et al: Assurance on Compliance with Agreements, Statutes and Regulations||Final Handbook material issued and standards in effect for periods on or after April 1, 2019. Impact: New auditor’s reports for special engagements such as compliance, public sector compensation and other government required reporting.|
|Agriculture||Exposure draft issued July 2018 and feedback being considered. Impact: Significant changes for farming clients.|
|Contributions – Revenue Recognition and Related Matters||Public outreach since January 2016 and is continuing. Impact: Not sure since a long way away from being finalized.|
I am happy to discuss any of the changes above further with you if you have additional questions.
Resource Roundup: Implementation Support for Small- and Mid-Sized Practices
Keeping up to date with standards poses unique challenges for small- to mid-sized practices (SMPs), especially as the changes are coming fast and furious (see topic above). Canadian Standards are basically now driven by what is happening with International Standards. I am here to help keep up to date on standards and will provide you updates as the changes are announced. The International Federation of Accountants (IFAC) is another great sources of information and tools. To support SMPs, IFAC has developed extensive implementation support for international standards and offers an extensive suite of material. The link below is to a nice summary of available information.
12 Common Technology Mistakes You Should Avoid
Not only can it be difficult keeping up with standards, keeping up with technology creates its own challenges. A recent article in the Journal of Accountancy addressed several questions such as could your company survive a data breach or could your company withstand a server crash? The author identified 12 common technology mistakes and offers recommendations for avoiding them. I found the article very interesting and more importantly, very practical.
I hope you had a nice long weekend and were able to take advantage of the beautiful weather we had. While the summer months typically slow down, it is also a good time to ensure you are prepared for the next few months. This is a good time to undertake such activities such as planning, completing file reviews and monitoring. I have recently joined the CPA Canada PEG Task Force Committee. Over the past few years I have had conversations with many of you about the PEG and now have the opportunity to bring those views forward. Stay tuned in for future updates. I am here to support you as needed, feel free to contact me at any time.
Kirsten S. Albo, FCPA, FCA
In this Update: Ethics; Rising Revenues for SMP; Succession Planning; Compliance Reporting
It is ironic the standard setters are so busy yet there is nothing new to report. Over the past few months, I provided you details about exposure drafts for auditing standards (CAS 315), compilation engagements (CSRS 4200) and quality management (CSQM 1 and CSQM 2) among other technical topics. But the standard setters are still deliberating on comments received so there is no new news on any of these fronts. I will continue to track status and let you know as soon as there are developments. So, in the meantime, I have highlighted other random topics of interest I have come across. Read on…
With the new professional development requirement to have at least four hours of verifiable PD specifically related to ethics, this subject matter is a hot topic these days. In fact I am developing an Ethics Workshop to be delivered to firms to help meet this requirement in an interesting and unique way. Feel free to contact me about delivering “Putting Ethics into Practice” to the members of your firm. While preparing this workshop I came across an article that I think may be of interest to you. “Paying Professional Ethics More than Lip Service” provides guidance on building trust in business and how to be anchored by fundamental ethical principles.
Rising Revenues for Sole Practitioners and Small Firms
As a sole practitioner or a partner of a small to mid-sized firm, it can be challenging to gather competitive information on how you are doing compared to your peers. “Rising Revenues for Sole Practitioners and Small Firms” summarizes the results of the 2019 Accounting and Bookkeeping Operations and Technology. According to the survey, 36.2% of respondents earned more than $150,000 in revenue for 2018 compared to only 31.8% in 2017. How do you compare?
This past month I led a practitioner forum on the topic of human resources. It was a very interesting session with a variety of topics discussed including recruiting, retaining, compensating and motivating staff. One topic we did not cover in detail but is very important is building your team is succession planning. To secure the future succession, and success, of your firm, it is important to start with what kind of team you must create. An article from Accounting Today provides an interesting perspective on building teams and how planning for such breaks down to two categories: composition and development.
I have included Compliance Reporting as a topic in previous months but as I have received numerous questions on this topic over the past month I thought it worthwhile raising again. Often government (such as Manitoba Housing), and other oversight, agencies will include the type of report they want issued in the agreement. However these agencies are not the standard setters and do not understand our requirements as practitioners. It is important to educate these agencies on the types of reports that can be issued. The new standards 3530 Attestation Engagement to Report on Compliance or CSAE 3531 Direct Engagement to Report on Compliance are the reports to be issued related to compliance with lease, funding or other debt agreements. These standards are effective for compliance reports dated on or after April 1, 2019. If you want a pair of fresh eyes to read your report before you release it, just reach out.
As mentioned in the introduction, I will keep you updated on technical developments as they happen. In the meantime, if you have any questions on any topic or would like further information on the Ethics Workshop, please feel free to contact me. We are headed into the time where practice inspections are taking place and it is a good time to ensure you have the right processes in place to address quality and other matters. I am here to help as needed. Have a great weekend.
Kirsten S. Albo, FCPA, FCA
Please join me at the CPA Manitoba Practitioner Forum on May 15. This event will be held at the CPA Manitoba office from 5:00 – 7:00 pm. Appetizers will be provided. The topic this time is on the unique human resources (HR) issues that small to mid-sizes firms face.
I am facilitating this month’s forum and presenting on such topics as the reviewing results of the most recent salary survey, discussing current trends in the market related to salaries and highlighting challenges and ideas with respect to recruiting, retaining, motivating and engaging staff. The presentation will be followed by a facilitated round table discussion so practitioners can share their experiences and learn from others.
Further details and registration can be found at the following link: https://cpamb.ca/news-events/events or on the CPA Manitoba website. I hope to see you there.
Kirsten S. Albo, FCPA, FCA
In this Update: Exposure Drafts (Quality Management & Others); Other Information (CAS 720); auditing Less Complex Entities
April 30. Another tax season is officially passed. Knowing how busy this month can be, I wanted to keep this update light. There has been a lot recent activity by the standard setters therefore this month’s updates includes topics I will cover in more detail in the coming months as matters become more relevant but they are important enough to bring to your attention today. Read on…
Exposure Drafts on Quality Management
An exposure draft Canadian Standards for Quality Management (CSQM 1) was issued April 5, 2019. CSQM 1, along with the new Engagement Quality Reviews (CSQM 2), will replace the existing CSQC 1. Why do you care? While there are many changes in the exposure draft which I will provide details on in the next update, the biggest change is CSQM 1 will apply to all assurance and related services including compilation engagements and agreed-upon procedures engagements. CSQC 1 never applied to these types of engagements as CSQM 1 will now. CPA Canada issued an Audit and Assurance Alert further detailing these exposure drafts and the reasons for the changes.
Other Exposure Drafts
The Audit and Assurance Board is still deliberating feedback on comments received on the Exposure Drafts for Compilation Engagements (CSRS 4200), Reporting on Controls at a Service Organization (CSAE 3416) and Identifying and Assessing the Risks of Material Misstatement (CAS 315). Exposure Drafts for Group Audits and Agreed-Upon Procedures Engagements are being drafted. Why do you care? It is important to keep up-to-date on standards. I will provide updates and the impact as these Exposure Drafts are released, re-exposed or become effective the Handbook.
Other Information (CAS 720)
As you turn your attention back to your audit engagements, it is a good time to remind yourself of the new reporting requirements related to Other Information (CAS 720). This topic is getting a lot of attention as it is not always clear what constitutes “other information”. CPA Canada issued further guidance on other information considerations as it is not always just a formal, glossy annual report put out by the organization. Why do you care? It is a subjective area which requires discussions with management and Those Charged with Governance.
Audits of Less Complex Entities (LCE)
The audit of Less Complex Entities has been a topic for discussion for both the IAASB and Canada’s AASB over the past several years; we are finally seeing results from those discussions. This past November, I participated in an outreach session hosted by the AASB to discuss the barriers to effective and efficient audits of less complex entities. I have heard many comments of the challenges faced by small to mid-sized practitioners and was able to pass these on to the AASB directly. The results of this session will be released in a Discussion Paper shortly.
In the meantime, the IAASB has released their Discussion Paper exploring how the IAASB and others could further support auditors working in increasingly evolving environments. The IAASB is asking for feedback on their paper and I plan to respond by the deadline of September 12, 2019. Why do you care? This is an important topic for practitioners who audit smaller (or less complex) clients and more efficient and effective engagements may be the final result of these discussions. It will be interesting to see what comes next.
Lots to think about in the coming months but for now, take a breathe. Rest assured there is time to deal with all of these matters in the coming months and I am here to assist you as needed. In the meantime, enjoy the upcoming weekend.
Kirsten S. Albo, FCPA, FCA