August 2019 Update

August 31, 2019 / Monthly Newsletter

In this Update:  Standards Updates; PEG Updates; Firm Risk Management; Pricing Client Engagements

Greetings,

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…

Standards Updates

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:

  • CSQM1/2 – The AASB agreed to perform further consultations with stakeholders on the proposed scope of Canadian Standard on Quality Management (CSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, in the fall of 2019. Standards expected in 2020.  READ QM UPDATE HERE
  • CAS 315 (Revised) – The AASB provided input to the IAASB on issues that are relevant to Canada. The Board will continue to discuss this project at future meetings. There is no proposed timeline on when the final pronouncement is expected but anecdotal evidence suggests early 2020.  READ CAS 315 UPDATE HERE
  • CSRS 4200 – The AASB is deliberating feedback received on the Exposure Draft. The new standard is being developed and is expected to be approved by the end of 2019 and effective for years ending on or after December 15, 2020.  READ CSRS 4200 UPDATE HERE

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. 

PEG Updates

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:

  • A new chapter on data analytics in Volume 1. New chapters in both Volumes 1 and 2 have been added to provide guidance on assurance engagements to comply with specific requirements. These engagement are effective for reports dated on or April 1, 2019. This guidance covers either attestation or direct compliance engagements where either reasonable or limited assurance is being provided in a written report.
  • Sample assurance reports (finally!).
  • Some minor and a few major changes to the PEG audit forms, customized review forms for NPOs and new forms related to compliance reporting. 
  • In addition, an alternative set of review engagement forms has been developed. The idea is to use either all of the new forms, or all of the existing forms. It is not appropriate to mix and match sets. 

ACCESS PEG ON KNOTIA HERE (WILL HAVE TO LOG IN)

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).

READ ARTICLE HERE

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.

READ ARTICLE HERE


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. 

Best Regards,
Kirsten S. Albo, FCPA, FCA
President


July 2019 Update

July 31, 2019 / Monthly Newsletter

In this Update:  Less Complex Entities; Firm Risk Management; Understanding Financial Statements.

Greetings,

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  

TAKE SURVEY 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.

READ ARTICLE HERE

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.

ACCESS REPORT HERE


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.

Best Regards,
Kirsten S. Albo, FCPA, FCA
President