1. It needs to be mentioned that AASB uses certain processes in bringing changes in the accounting standards that is the issue of new standard of CSRS 4200. AASB follows eight steps in this process. The first step includes the identification of the technical issues in the current standard (aasb.gov.au, 2019). The second step involves in researching these issues for further consideration. In the third step, AASB involves in the identification of issues consultation documents such as DP, ITC, ED and others. The fourth step involves in considering submissions and complete RIS. In the fifth step, AASB issues the final standard or other procurements (aasb.gov.au, 2019). In the sixth step, AASB is responsible for spreading awareness and education related to the correct use of the proposed accounting standard. The last step in the whole process includes the post-implementation review of the proposed standard. It needs to be mentioned that every step needs to be followed and completed before going to the next step as the steps are interconnected (aasb.gov.au, 2019).
2. AASB has proposed for issuing a new Canadian standard on Related Services (CSRS) 4200, Compilation Engagement which would replace Section 9200, Compilation Engagements and AuG-5, Compilation Engagements – Financial Statement Disclosure. It needs to be mentioned that there are three areas in the existing standard that may change due to the introduction of the new standard; these areas are Public interest issues, the Clarity format and Quality control (frascanada.ca, 2019). There are certain specific parts that may be changed under the proposed standard. The areas of changes are paragraph 3-4 that sets out the exclusion from the scope of the standard; paragraph 12 leaves the conditions to accept the audit engagement; paragraph 5 of Section 9200 that describes the work effort as only the information arrangement into financial statement form to check the arithmetic correctness of information (frascanada.ca, 2019); Section 9200 does not consider to disclose the accounting basis; Section 9200 needs the attachment of a communication to the compiled financial statements; paragraph 25 of Section 9200 needs the labelling of each page of the compiled financial statements; and Section 9200 has no requirement for the inclusion of the address of the documents. It needs to be mentioned that these are areas that may change due to the introduction of the new accounting standard by AASB (frascanada.ca, 2019).
3. The first introduction of Section 9200 could be seen in the year 1987 and since then, it has not been any significant revision of this standard. At the commencement of 2011, AASB undertook wide consultation with the provisional accounting body representatives, practitioners and lenders for gaining better understanding on how compilation engagements are performed and identification of the issues of the stakeholders (iasplus.com, 2019). There are certain key public interest issues identified by the consultation and they are mentioned below:
In the presence of all of the above-mentioned reasons, the AASB was interested in making the changes in the existing standard.
4. It can be seen from the Exposure Draft that AASB has proposed the changes in three areas; they are public interest issues, clarity format and quality control. In case of the quality issues, AASB has proposed for a scope that fits the present environment while addressing the issues related to public interest (iaasb.org, 2019). After that, changes are proposed in engagement acceptance and continuous requirements establishing boundaries as to when it is suitable for accepting a compiled financial statements engagements. It has also proposed for the requirements that lead to the establishment of minimum documentation and work effort (iaasb.org, 2019).
In case of the clarity format, AASB has proposed the new CSRS 4200 with the use of a drafting convection that is called the clarity format. The proposed changes will include five parts; they are introduction, objective, definition, requirements and application and other explanatory materials (accaglobal.com, 2019). These aspects explain the standard’s purpose and scope, defines specific meaning of the standard’s terms, includes specific requirements of the standard, defines the need for complying with the standard and cross-references the requirements. At the same time, AASB is considering the matter whether the standards of CSRS 4200 should be subject to the requirements of quality control at the firm level along with the engagement level. These are the areas with major proposed changes (accaglobal.com, 2019).
5. According to the Exposure Draft of AASB, on the basis of the inputs that AASB receive from the major stakeholders, AASB has the proposition that the standards of CSRS 4200 will be effective for the compiled financial information for the period ending at least 12 months after the issue of the final standard into the Handbook (apesb.org.au, 2019). The anticipated effective date for the implementation of this standard is the second-half of the financial year of 2020. It also needs to be mentioned that AASB would provide the permission for the early adoption of the standards of CSRS 4200. The main reason behind setting this time is that AASB needs time to analyse the comment letters on the proposed changes. In addition, following all the steps of the standard change process consumes time for AASB and for these reason, the date has been set to the mid of 2020 (apesb.org.au, 2019).
6. It needs to be mentioned that there are certain portions in the existing standard that will remain unchanged in the amended standard. The requirement of Paragraph 3-4 of Section 9200 is the exclusion from the scope of the standard. In the proposed CSRS 4200, paragraph 2 also sets out exclusions from the scope of the standard that are wider than that of Section 9200. Thus, this particular section is unchanged in the proposed CSRS 4200 (ifac.org, 2019).
After that, paragraph 12 of Section 9200 sets out the conditions to accept the audit engagement (ifac.org, 2019). At the same time, paragraph 22-23 of CSRS 4200 sets out the conditions to accept or continue the engagement that are absent in Section 9200. For this reason, this section also remains unchanged as it is proposed to be improved (ifac.org, 2019).
In addition, paragraph 25 of Section 9200 has the requirement that compiled financial statement’s each page needs to be labelled ‘Unaudited’. It can be seen that CSRS 4200 has not introduced any regulation for this particular area and thus, this section will be unchanged in the new standard. These are the areas that will be unchanged in the new standards of CSRS 4200 (Henderson et al., 2015).
7. The presence of certain requirements can be seen in the International Auditing and Assurance Standards Board (IAASB) for the compilation engagements. The first requirement is to comply with the relevant ethical requirements along with other professional judgements and quality control with the aim to maintain the overall ethical quality of the compilation engagement (Cole, 2014). After that, it is also required to ensure the engagement acceptance and continuance at the time of the compilation engagement. After that, all the regulations need to be considered at the time to perform the engagement program. At the same time, the auditors are needed to ensure the relevant requirements for communication as well as documentation for the compilation engagement. Lastly, it is needed to maintain the presence of the practitioner’s report for the compilation engagement program. These are the major requirements of ISSAB (Cole, 2014).
It needs to be mentioned that the IAASB started the revision of the project in March 2009. This project was considered as one major part of the strategic focus of IAASB for exploring standards for a range of services for meeting the requirements of the companies. The IAASB exposed the proposed revised standard in October 2010 and the comment period closed on March 31, 2011. Finally, the current requirements were adopted in March 2012 (Cole 2014).
8. There are certain differences between the timing and contents of AASB and IAASB. It needs to be mentioned that the task force of AASB has the responsibility to take into consideration the tasks done by the different standard-setting bodies and IAASB is considered as one of them. In the recent time, IAASB has issued a revised standard on compliance engagements (Kang & Gray, 2013). The content of IAASB is different from AASB as the IAASB is currently involved in the revision of ISQC 1 and it is expected that these changes will have a significant impact. At the same time, it needs to be mentioned that AASB is also involved in the process of standard-setting process such as AASB is currently involved in the standard-setting process of CSRS 4200. Thus, it can be seen that both the AASB and IAASB are involved in different standard-setting process (Semba, 2016).
9. It can be seen from the above discussion that there are certain benefits as well as merits of this particular project. The proposed standard of CSRS 4200 will play a crucial role in providing the required clarity on when the standard does or does not apply (Wijesinghe 2015). At the same time, the proposed standard will also help in establishing more vigorous work effort requirements for the improvements in consistency so that good auditing practice can be reflected (Kang & Gray, 2013). Apart from this, the new standards of CSRS 4200 will also be helpful in improving communication in engagement programs for deciding whether the audit engagement program should be accepted or not. However, it is needed for AASB to make all the stakeholders about the standards and principles of CSRS in order to get all these benefits (Handley 2013).
References
AASB Exposure Draft – Compilation Engagements. (2019). Iasplus.com. Retrieved 27 March 2019, from https://www.iasplus.com/en-ca/news/assurance/2018/aasb-exposure-draft-compilation-engagements
Apesb.org.au. (2019). Basis for Conclusions Prepared by the Staff of the IAASB March 2012. Retrieved 27 March 2019, from https://www.apesb.org.au/uploads/meeting/board_meeting/13112014024607_Attachment_14c_-_ISRS_4410_(Revised)_Basis_for_Conclusions.pdf
Cole, C. J. (2014). Audit partner accountability and audit transparency: Partner signature or disclosure requirement. Journal of Accounting and Finance, 14(2), 84.
Cole, C. J. (2014). Audit partner accountability and audit transparency: Partner signature or disclosure requirement. Journal of Accounting and Finance, 14(2), 84.
Exposure Draft, Agreed-upon Procedures Engagements. (2019). Frascanada.ca. Retrieved 27 March 2019, from https://www.frascanada.ca/en/other/documents/agreed-upon-procedures
Handley, K. (2013). Accounting standards for Australian SMEs: identifying, considering and incorporating the needs of users into financial statements. Macquarie University, Faculty of Business and Economics, Department of Accounting and Corporate Governance.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.
https://www.accaglobal.com, A. (2019). IAASB: proposed ISRS 4410 compilation engagements | ACCA Global. Accaglobal.com. Retrieved 27 March 2019, from https://www.accaglobal.com/in/en/technical-activities/technical-resources-search/2011/march/iaasb-isrs-4410.html
Iaasb.org. (2019). Compilation Engagements—Issues and IAASB Task Force Proposals. Retrieved 27 March 2019, from https://www.iaasb.org/system/files/meetings/files/5292.pdf
Ifac.org. (2019). Compilation Engagements. Retrieved 27 March 2019, from https:// https://www.ifac.org/system/files/meetings/files/6248.pdf
Kang, H., & Gray, S. J. (2013). Segment reporting practices in Australia: Has IFRS 8 made a difference?. Australian Accounting Review, 23(3), 232-243.
Semba, H. D. (2016). The Regulator’s View of Audit Quality: A Focus on Iaasb’s Proposed Framework from the Perspective of Institutional Theory. Academy of Accounting and Financial Studies Journal, 20(3), 37.
The standard-setting process . (2019). Aasb.gov.au. Retrieved 27 March 2019, from https://www.aasb.gov.au/About-the-AASB/The-standard-setting-process.aspx
Wijesinghe, M. C. (2015). Technical Update 2015.
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