October 2021 Update
Greetings,
Happy fall. I love this time of year, the air is fresh and the trees are beautiful. I know there is a lot going on and many changes coming quickly. However, this is a good month to take a breathe and remind myself of what is coming and what I need to do to prepare. There is still lots of time to plan for the upcoming year. I don’t like leaving things to the last minute as I find the better prepared I am, the easier it is to get things done. With that in mind to help you be prepared, this month’s update includes key reminders on a variety of topics. Read on…
Revised CAS 540 – Auditing accounting estimates
Are you meeting the requirements?
Over the past few months I have completed a number of cyclical reviews. One consistent finding I already notice is the implementation of revised CAS 540. This standard was in effect for December 31, 2020 year ends however I am finding that either no changes in engagement files for estimates took place or if they did, the requirements were not met. I wanted to bring this to your attention as you start to plan 2021 engagements. Make sure the requirements of the revised standard are understood and implemented. Specific actions to take are:
- Include a discussion of revised CAS 540 in your team planning meetings.
- Review your file to ensure the appropriate checklists are in your file.
- Consider all estimates in your clients at the planning stage of the engagement.
- Invest in training if necessary.
To further help you meet the requirements of the standard, you will want to refer to the standard itself as well as these two very good CPA Canada guidance tools.
PEG Update
Each fall Professional Engagement Guide (PEG) updates are released. This year (at least so far), the updates were not significant. The big changes will be when the forms for Revised CAS 315 are released. Revised CAS 315 is effective for periods beginning on or after December 31, 2021 (basically December 2022 year ends). Timing is unknown but of course, I will keep you posted.
A summary of the August 2021 changes are as follows:
- Amendments to Volumes 1 and 2: Full integration of respective chapters of the Canadian Standard on Compilation Engagements (CSRS 4200). Along with the updates to the volumes, the practice aids for CSRS 4200 are also fully integrated into the publication. These forms have been available for some time therefore no changes to the forms themselves.
- Amendments to Audit Forms: There were audit programs added related to 3041 Agricultural Inventories (F.100 Agricultural Inventories and G. 100 Biological Assets). A reminder that 3041 is effective for periods beginning on or after January 1, 2022. Minor other revisions to three other forms.
To see full details of the changes log onto Knotia to access PEG and check out the What’s New section.
Redeemable or Mandatorily Retractable Preferred Shares
What is the impact for your client?
As we near the end of the year, it is a good time to have discussions with your clients on upcoming accounting standard changes. Many of the changes may not have a significant impact but one could. Section 3856 Financial instruments requirements related to ROMRS shares is effective for periods beginning on or after January 1, 2021. This year!!!
It will be important to consider the impact of the change on the tax planning shares as in many cases the shares that were classified as equity may have to be classified as a liability. This change in classification may impact your client’s banking covenants. Wouldn’t they want to know that now instead of later? No one likes surprises.
To help you in the analysis you should read the standard and understand the three requirements tax planning shares must meet in order to be classified as equity. These apply to all tax planning shares, no matter when they were issued. To further assist you understanding the requirements, you can refer to the CPA Canada ASPE Briefing Tool. An excellent guide that provides further guidance.
What Having a “Growth Mindset” Actually Means
In our profession, we want our staff to have a growth mindset to help themselves, and the firm, develop and grow. A growth mindset has become a bit of a buzzword these days however often the understanding of the idea is limited. There are many misconceptions what it actually means.
In an HBR article, Carol Dweck investigates the misconceptions of a growth mindset. She sums up the findings as follows: “Individuals who believe their talents can be developed (through hard work, good strategies, and input from others) have a growth mindset. They tend to achieve more than those with a more fixed mindset (those who believe their talents are innate gifts). This is because they worry less about looking smart and they put more energy into learning. When entire companies embrace a growth mindset, their employees report feeling far more empowered and committed; they also receive far greater organizational support for collaboration and innovation.”
Why it is Essential to Keep Data Back Ups in Multiple Locations
Can you imagine losing your files? All that work… gone? It is so critical to back up data on a regular basis and not only that, to store it in multiple locations.
In today’s world, our digital data is extremely valuable. This means you need to be very careful when it comes to keeping your information safe. Experts recommend keeping backup copies of important data in at least three locations. Systex, a local IT support company specifically focused on supporting accountants, outlines why it is important and how you can effectively back up your most crucial pieces of data. Data is too critical to our every day work to be unprepared.
ASK KSA Professional Development
Get Ready!!
To help you prepare for the upcoming year, there are a number of ASK KSA PD courses available online that will provide information on upcoming standards changes, areas of focus in audits and reviews. These courses will help you perform effective (doing the right work) and efficient (the right amount of work) as they provide practical guidance, real life examples and tips on application.
Check them out…
WHAT’S NEW? 2021 ASSURANCE AND ACCOUNTING UPDATE
In the last few updates, I have provided guidance on implementing CSRS 4200. I have not included any details this month but I would be remiss if I don’t provide a gentle reminder to get your template files set up so you are ready to hit the ground running in the new year. One tip. Consider what you have documented in your files already about Knowledge of the Business. You can use the PEG forms however if you already have something in your files from previous year’s it may be more efficient to use that. You can compare what you have against the requirements in the standard (para 4200.27 and .A24 to .A26. As I said in my intro, the more prepared you are, the easier things will go.
Reach out at anytime with questions. I am always here to help you save time and achieve peace of mind.
Best regards,
Kirsten S. Albo, FCPA, FCA
President
1.204.228.2529