In this Update: AASB Summary; Technology; (SMEs) Need (SMPs); 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: 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: Auditor Reporting Guide; Enhancing Documentation; New Review Engagement Standards; Technology
February is a month where work ramps up as we get busier and busier with clients. At times, it may seem easier to let things slide in order to just get things done and out the door but that approach has its cost in the end. This month topics will help you to ensure that you are meeting standards in an efficient and effective way. The links below provide you a number of resources to help you along the way, including how you may want to consider using technology in your practice. Read on…
Auditor Reporting Guide: Reporting Implications of Canadian Auditing Standards
Have you issued your first auditor’s report under the new standards yet? From a few I have talked to, it is not quite as straightforward as before and takes some time to get it right. CPA Canada has issued the 3rd edition of the Auditor Reporting Guide. This is a very good tool which provides guidance with respect to commonly occurring reporting circumstances. There are many illustrative reports for such things as going concern, qualifications to the opinion, emphasis and other matter paragraphs. I would be happy to consult with you if needed to ensure you get it right.
Documentation is critical in all assurance engagements. The mantra “if not documented, not done” comes up over and over again. There are simple things to keep in mind as you work through your assurance engagements files over the next few months. This short two-minute video from the Global Head of Audit Quality at Grant Thornton provides recommendations on strengthening audit quality. You may want to share this video with you staff.
Observations Regarding the New Review Engagement Standard
CSRE 2400 has been in place for a year and practitioners are now entering their second season performing engagements in accordance with the standard. CPA Canada worked with a task force of practitioners to build resources to support the effective application of the standard. In addition, they gathered observations from practice inspectors from across the country and provide reminders for practitioners in applying the standard.
Technically, Your Practice Could be Better
These days it seems that technology is top of mind whether in your personal life or in business. As practitioners it is important to keep up as the world changes. Knowing which technologies are best for your practice can be complicated, but ignoring the value technology can add to your practice carriers a heavy price in lost efficiency and opportunity. An article from AICPA addresses these issues from a financial planning practice but many of the fundamental ideas apply to practitioners.
Before sending out this monthly update, I did a quick check on the status of a number of exposure drafts including the Compilation Standard (CSRS 4200) and Assessing Risk (CAS 315). Right now the Standards Boards are deliberating feedback received so no updates as of yet. I will continue to keep you abreast of changes as they become known. In the meantime, if you have any questions on existing standards or need support, please feel free to give me a call at anytime. I am here to provide you peace of mind and save you time.
Kirsten S. Albo, FCPA, FCA