In this Update: Less Complex Entities; Technology; Dealing with Clients; COVID-19 Challenges
Slowly businesses are ramping up operations, but it seems that practitioners have been busy all along. Despite the extended deadlines, many challenges have been faced, and solved, over the past few months. Standard setters also continue to be busy with interesting discussions including the potential for a new standard for the audits of less complex entities. This month’s thought leadership covers important topics as we continue all to move forward. Read on…
AASB Decision Summary – New Standard for Audits of LCEs?
Exciting news. At their June meeting, the Audit and Assurance Standards Board (AASB) provided input on the IAASB Audits of Less Complex Entities (LCE) Working Group’s proposal to start developing a separate standard on this topic. Matter discussed included the overarching principles to be used when developing a separate set of standards. The IAASB is clearly headed in the direction of setting a separate standard for the audits of LCEs which will have a significant impact on the profession.
I previously communicated that I am a member of the AASB Working Group on the Audit of Less Complex Entities providing insights and recommending solutions to the challenges faced by SMPs in auditing these types of entities. There is a long way to go but I feel we are headed in the right direction. Do you agree with me? Feel free to reach out with your views directly so I can provide further input to the Working Group and the direction we should head.
The other topic of interest at the AASB meeting included discussions on Quality Management. The IAASB project to revise standard for quality management at the firm and engagement level continue. The IAASB expects to approve the final ISQM 1, ISQM 2 and ISA 220 at its September 2020 meeting. In turn, the AASB expects to approve the Canadian equivalent at its January 2021 meeting. However there are several Canadian issues yet to resolve, the main one being if the new standards apply to compilation engagements or not. Stay tuned.
Innovation in Audit: It is not Just About Technology
Auditors love JELLY. Just Exactly Like Last Year. And to hang out with SALY. Same As Last Year. However these can limit our ability to innovate in an audit. Innovation in an audit is more than just changing technology. It is about thinking differently about challenges faced, and thinking about them before you jump into a solution. While it is important to conduct high quality audits, conducting engagements efficiently is just as important. This article from Accounting Today was a thought-provoking read for ideas in how to innovate the audit. File efficiency reviews are another great way to make changes to your engagement process. I would be happy to assist you in performing such a file review to help you avoid JELLY and SALY.
Small and Mid-sized Enterprises (SMEs) Need Small- to Mid-Sized Practitioners (SMPs)
Businesses are ramping up operations however they continue to make hard decisions about their employees and payroll along with other operating decisions. They need the support of accountants whom they know and trust. With candid and empathetic discussions and a flexible approach, SMPs can enable SMEs with the right tools to bridge the gap between crises mode and action mode. An article in Accounting Today focuses on three guiding principles as practitioners help clients navigate disruption.
Reporting and Fraud Risk Arising from Covid-19 Pose Significant Challenges
In response to the current crisis, many organization have had to quickly change working practices and protocols to enable remote working, which present an increased risk of fraud of internal controls can by bypassed as a result. These changes can create challenges for practitioners in conducting engagements. An article published by IFAC highlights the need for auditors to have increased awareness and the importance of exercising professional skepticism. This is an excellent article and well worth the read.
Tomorrow is July 1 and no fireworks this year but I am okay with that. I would rather move forward at a steady pace then take two steps forward and one step back. So, move forward we do. Please feel free to reach out at anytime with any questions you may have to help you save time and achieve peace of mind. In the meantime, enjoy the upcoming month, it is summer you know.
Kirsten S. Albo, FCPA, FCA
In this Update: ASPE Standards, CSRS 4200; SME Accounting; Auditor Considerations
This month flew by for me and I am not quite sure why. Maybe it is because the new routines have become familiar, maybe it is because I am busy with a few special projects or maybe it is just because it has been nice out and I have taken time to enjoy the backyard and my flowers. In the end it doesn’t matter, all I know is I have started focussing on the future once again instead of trying to get by day by day. This month’s updates are also mainly about the future. Read on…
Deferral of Effective Dates for ASPE Standards
At its meeting on April 15, 2020, the Accounting Standards Board (AcSB) made the decision to defer the effective dates of the following amendments effective for years beginning on or after January 1, 2020 by one year to January 1, 2021:
The biggest takeaway from list above is the postponement of the effective date for financial instruments related to the amendments on Redeemable Preferred Shares Issued in a Tax Planning Arrangement. Due to the amendments, it was expected many preferred shares may now have to be classified as liability versus equity. The postponement allows practitioners more time to perform the analysis of classification and clients more time to discuss the impact on covenants with their lenders. Good news all around.
The AcSB is also deferring the effects dates of the new Section 3041, Agriculture and amendments to Section 3400, Revenue, effective for year beginning on or after January 1, 2021 by one year to January 1, 2022. Early adoption of each of the amendments and the new Section continues to be permitted.
CSRS 4200 Guidance
Unlike the accounting standards, there has been no discussion on deferring the effective date for this standard. CPA Canada is hosting a special Practitioner’s Pulse on the new compilation standard. The webinar, to be held in July, will help you learn about the new compilation standard, CSRS 4200 and cover implementation guidance available. Listen to practitioners share practical tips and answer questions on how to implement the new standard. I already have been working with a number of practitioners on implementation as there are many activities you can undertake well in advance of the effective date (periods ending on or after December 14, 2021).
Small Businesses Need Small Accounting Firms
In times like these small businesses turn to their advisors for assistance. It is important to be there for your clients as that is what keeps your firm growing. Business owners are making hard decision about their employees, struggling to maintain ongoing expenses despite losses in revenue and deciphering confusing information about which government programs might be able to help them. With candid and empathetic discussion and a flexible approach, practitioners can enable their clients with the right tools to bridge the gap between crisis mode and action mode. In this article from Accounting Today there are three guiding principles to focus on as you help clients navigate disruption.
Okay, one topic that is back to the current environment but included as it helpful as you complete current engagements. It is hard to keep track of all the guidance, articles and resources to help auditors address the risks in performing their engagements in relation to the impact of COVID-19 operations, financial results, operations and cash flows of organizations. However, CPA Canada’s latest resource does a good job in bringing it all together. This publication covers most of the topics auditors should be thinking about and links to other resources available. Almost a one-stop shop, almost.
This was also a big month in that Revised CAS 315 (Identifying and Assessing the Risk of Material Misstatement) was formally released in the Handbook. The Revised CAS 315 is effective for audits of financial statements for periods beginning on or after December 31, 2021. I will provide you more guidance on this CAS in the coming months but I wanted to bring this to your attention as it is indicative that standards are still changing and it is important to keep up and not fall behind so you do not have to scramble at the last minute to keep up. As they say, slow and steady wins the race. Feel free to reach out any time. I am here to help save you time and provide peace of mind. In the meantime, have a great weekend.
Kirsten S. Albo, FCPA, FCA