Agreed-Upon Procedures. Minutes International Auditing and Assurance Standards Board (IAASB) June 2015 Meeting

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1 IAASB Main Agenda (June 2015) Agreed-Upn Prcedures Minutes Internatinal Auditing and Assurance Standards Bard (IAASB) June 2015 Meeting Mr. Salle intrduced the tpic and prvided the IAASB with an update n the Agreed-Upn Prcedures (AUP) Wrking Grup s (WG) effrts t date, including a summary f the existing practices regarding AUP engagements, the issues identified relating t ISRS 4400, 1 the use f hybrid engagements, and the WG s suggested way frward fr this prject. The Bard discussed the current differences between ISRS 4400 and the American Institute f Certified Public Accuntants (AICPA) and the Australian Auditing and Assurance Standards Bard s (AUASB) standards n AUP, as bth the AICPA and AUASB recently issued their respective standards n AUP. The Bard als discussed key features f AUP engagements, which by their nature are nt assurance engagements. The Bard nted that practitiners seem t experience mre challenges in reprting under ISRS 4400 and that reprting n findings may include mre references t assurance than what is envisaged in ISRS The Bard als nted that there may be a need fr greater educatin t explain what and AUP engagement is (and what it is nt) as cmpared t assurance engagements. Bard members variusly raised additinal matters fr the WG s cnsideratin befre undertaking a revisin f ISRS 4400 in the Clarity frmat, including: The need t mre fully understand hw engagements are being cnducted in practice, and where practitiners are departing frm ISRS 4400 and why, as this may identify changes needed t an AUP engagement r anther type f engagement t be develped t meet user demand. The implicatins f the practitiner s invlvement in develping the prcedures in an AUP engagement, nting the expertise that the practitiner may bring in this regard and the similarity between thse prcedures and audit prcedures. The demand fr, and implicatins f, AUPs addressing nn-financial infrmatin, in light f the evlving needs f users. The need t btain further infrmatin with respect t hybrid engagements that relate t specified prcedures that require the practitiner t prvide a cnclusin n subject matter infrmatin, with a fcus n the different types f engagements currently perfrmed in practice, including thse n nn-financial infrmatin. The ptential need fr the Grup Audit Wrking Grup t cnsider whether specified prcedures perfrmed by cmpnent auditrs as part f a grup audit cnstitute an AUP in accrdance with ISRS Hw best t btain further infrmatin, fr example thrugh a Discussin Paper r ther utreach, including surveys r ther frms, r direct engagement with natinal auditing standard setters (NSS), practitiners and users. Way Frward 1 Internatinal Standards n Related Services (ISRS) 4400, Engagements t Perfrm Agreed-Upn Prcedures Regarding Financial Infrmatin Prepared by: Jasper van den Hut and Chi H Ng (February 2016)

2 The WG will cntinue its infrmatin-gathering activities n the issues related t ISRS 4400, including via further utreach. Intrductin 1. ISRS 4400 was develped ver 20 years ag and cntinues t be widely used in many jurisdictins. Since the develpment f ISRS 4400, significant changes have ccurred in the business envirnment, including grwth in regulatins calling fr increased accuntability n hw funds and grants are used. 2. In respnse t brad calls frm stakehlders wh indicated that investrs, banks and ther prviders f capital ften request an entity t have an AUP engagement perfrmed by a practitiner, a prject t revise this standard was included in the Strategy and Wrk Prgram. One f the main bjectives f the planned prject was t draft the standard in the Clarity frmat. Hwever, the prject was delayed because f the acceleratin f wrk n the Auditr Reprting prject. In its Wrk Plan fr the IAASB included the prject again and a Wrking Grup was frmed in early The IAASB als nted that hybrid engagements, using a cmbinatin f prcedures derived frm audit, review, cmpilatin and AUP engagement were being perfrmed in sme jurisdictins as a means f meeting the emerging needs f small and medium-sized entities, amng thers. Accrdingly, wider cnsideratin was given t explring these evlving types f engagements t cnsider whether standard setting r ther activities may be apprpriate. 4. Since its inceptin and, mre extensively, fllwing the IAASB June 2015 meeting, the WG has reached ut t stakehlders t determine the extent and nature f AUP engagements being undertaken in practice and t explre evlving types f engagements with a view t determining if bradening f the existing standards r related activities were warranted. Objectives 5. The bjectives f this paper are t: Reprt n key messages frm utreach undertaken t determine the nature and extent f demands t braden the scpe f AUP engagements; Identify the key issues the prject needs t address; and Summarize the preliminary views f the WG n the issues and utline a way frward fr discussin by the Bard. Key Messages frm Outreach The Value and Limitatins f AUP Engagements 6. Stakehlders, including NSS, member bdies, practitiners, regulatrs and ther users, recgnize that AUP engagements fulfill an imprtant market need. They als identify the need fr increased awareness and educatin n the value prpsitin f AUP engagements. Several stakehlders 2 Page 2 f 15

3 reprt a high level f misunderstanding f AUP engagements and, nly when member bdies r practitiners highlight cmmn misunderstandings, d participants in AUP engagements prperly understand the value and limitatins f thse engagements. 7. A cmmn feature f AUP engagements, which is either absent frm r nt as imprtant in ther types f engagements, is the direct r indirect invlvement f third parties in determining specific prcedures t be perfrmed by the practitiner. Third parties are cmmnly regulatry authrities r fund r grant prviders, wh specify the exact prcedures r the type f prcedures they require. This helps prvide value in AUP engagements t relevant third parties because the AUP engagement fcuses n matters f interest t them, ften cmplementing ther infrmatin such as lan r grant applicatins and statutry annual financial statements. 8. Practitiners are required t exercise prfessinal cmpetence and due care when cnducting AUP engagements. While they are always a party t the agreement n the prcedures t be perfrmed, under extent ISRS 4400 they have n mandate, r basis n which, t frm cnclusins n the subject matter. A cncern expressed by sme is that users infer mre cmfrt than is warranted frm AUP engagements. They suggest that it is imprtant t highlight the limitatins f AUP engagements with illustratins f apprpriate and inapprpriate uses f such engagements. Sme stakehlders are f the view that a clear distinctin between an AUP engagement and an assurance engagement is necessary t avid users placing unwarranted reliance n the AUP engagement. Appendix A sets ut the WG s preliminary views n the distinctin between AUP engagements and assurance engagements. 9. The WG s utreach indicates that mst stakehlders are f the view that the value f AUP engagements can be increased by intrducing limited flexibility in a revised AUP standard t accmmdate user needs. In additin, sme prpsed revisins are husekeeping issues, such as adpting the clarity frmat and remving ambiguus terminlgy (e.g., prcedures f an audit nature ). Husekeeping issues aside, flexibility t accmmdate user needs might include: Bradening the scpe f ISRS 4400 by permitting such engagements t be perfrmed n nn-financial infrmatin; Recnsidering the restrictin n the reprt f factual findings. Demand fr Hybrid r Multi-Scpe Engagements? 10. There is significant cnfusin ver what cnstitutes a hybrid engagement. This term may be used t refer t many different types f engagements, such as: Engagements that cnsist f an AUP engagement and sme cmbinatin f an assurance engagement r recmmendatins, which clearly distinguish between the varius elements and are therefre mre prperly described as multi-scpe engagements. Many such engagements address unique requirements f particular regulatrs r prviders f grant funding r ther capital; Engagements that cnsist f an AUP engagement and sme cmbinatin f an assurance engagement, recmmendatins r a management letter, which d nt clearly distinguish between the varius elements, and blur the distinctin between the varius elements. Such engagements smetimes arise frm a lack f understanding, but smetimes they arise Page 3 f 15

4 because there is n perceived need r intentin t fllw IAASB s prnuncements r because f jurisdictin-specific requirements. 11. The results f the WG s utreach suggest that relatively few engagements fall int the latter categry and that the demand fr s-called hybrid engagements is in fact a demand fr multiscpe engagements (i.e., engagements which cnsist f clearly distinguished AUP and ther engagements). 12. Regulatrs r prviders f grant funding r ther capital may misunderstand the nature f IAASB s prnuncements, and dismiss the significance f differences as mere nuance. They ften ask practitiners t certify r verify that an entity has cmplied with requirements r agreements, and attempt t specify the prcedures t be perfrmed in supprt f the certificatin r verificatin. In many cases, the prcedures relate t whether a funding recipient has used the funds slely fr designated purpses. Individual practitiners, NSS and member bdies in receipt f such requests have, in many cases, successfully intervened t explain the nature f assurance and related services standards. This has resulted in greater acceptance f an AUP r a multi-scpe engagement as an effective mechanism fr regulatry and cmpliance purpses. 13. T assist practitiners in cnducting a multi-scpe engagement, sme NSS and prfessinal accunting bdies have develped guidance, such as the AUASB s Guidance Statement (GS) Grant Acquittals and Multi-Scpe Engagements. In anther case, a prfessinal accunting bdy develped guidance by taking a regulatry frm in cmmn use and separating ut the requirements int their cnstituent engagement cmpnents, and prviding guidance n which engagement is t be applied t each cmpnent. 14. In sme cases, regulatrs and ther users may require an engagement nt cvered by IAASB s standards. These engagements are ften driven by jurisdictin-specific requirements. Examples f standards prmulgated by NSS t address such engagements include: The Cnseil Supérieur de l Ordre des Experts Cmptables issued Nrme Prfessinnelle (NP) 2300, Nrme Prfessinnelle Applicable A La Missin De Presentatin Des Cmptes [Prfessinal Standard Applicable t the Engagement t Prvide Assurance n the Presentatin f Financial Statements], which deals with an engagement t prvide a level f assurance lwer than that in a review engagement n the presentatin f financial statements. The Institut der Wirtschaftsprüfer (IDW) issued Prüfungsstandard (PS) 840, Prüfung vn Finanzanlagenvermittlern i.s.d. 34f Abs. 1 Satz 1 GewO nach 24 Abs. 1 Satz 1 Finanzanlagenvermittlungs-verrdnung [Audit f Financial Investment Brkers Under Financial Investment Intermediary Regulatin], which deals with an engagement invlving specified audit prcedures t assist regulatrs f investment brkers in carrying ut their duties. 15. Develping an internatinal standard t address jurisdictinal-specific engagements such as thse set ut in the paragraph abve is nt practicable due t the lack f cmmnality acrss such engagements. Appendix B prvides additinal examples f engagements utside thse addressed by current IAASB prnuncements. Page 4 f 15

5 AUP Engagements that Include Recmmendatins 16. During the WG s utreach, tw stakehlders nted regulatrs request fr recmmendatins (referred as management letters in sme jurisdictins) in cnjunctin with AUP engagements. In the first case, the recmmendatins deal with imprving cntrls relating t deficiencies nted during the AUP engagement. In the secnd case, the funder used the recmmendatins arising frm the financial statements audit engagement t determine whether t request additinal prcedures t be perfrmed thrugh an AUP engagement. 17. The stakehlder wh prvided the example f the practitiner prviding recmmendatins arising frm an AUP engagement acknwledges that this practice may be cntrary t the premise f an AUP reprt, which is fcused n factual findings. Key Issues and Preliminary Way Frward 18. The key issues identified by the WG cmprise: Value and limitatins f an AUP engagement Multi-scpe engagements Use f judgment in an AUP engagement Recmmendatins Update and intrduce greater flexibility in ISRS The issues relating t value and limitatins f an AUP engagement, multi-scpe engagements and recmmendatins are subject t the WG s discussins with stakehlders as highlighted in the previus sectin. The summary f WG deliberatins belw was cnducted in the cntext f such discussins. Value and Limitatins f an AUP Engagement 20. In its deliberatins, the WG agreed that greater awareness f the value and limitatins f an AUP engagement wuld help remve cnfusin abut AUP engagements. AUP engagements meet the need fr undertaking prcedures specified by an entity (and a third party) that permit the entity t arrive at its cnclusins n the subject matter. Preliminary Way Frward The WG prpses t highlight the benefits (and limitatins) clearly in a Discussin Paper that will be develped as a next step. It will als seek pprtunities t reach ut t as wide a cnstituency as pssible in its first public cnsultatins. Multi-Scpe Engagements 21. A multi-scpe engagement is an engagement in which the practitiner is engaged t perfrm tw r mre distinct and cmplete engagements n the same r related subject matter infrmatin. The WG recgnized that, rather than hybrid engagements, mst market needs have been met by multi-scpe engagements. Hwever, discussins during utreach sessins indicate that what Page 5 f 15

6 cnstitutes multi-scpe engagements and hw such engagements are perfrmed are ften nt immediately apparent. 22. In the WG s view, guidance n multi-scpe engagements wuld be helpful t: Regulatrs and ther users in understanding the nature f multi-scpe engagements and hw these engagements can address the their needs; and Practitiners in cnsidering issues relating t engagement acceptance, reprting, etc. when perfrming such engagements. 23. In explring multi-scpe engagements, the WG will als explre the implicatins f including different engagements in a single reprt. Preliminary Way Frward The WG prpses t cnsider whether the issue f cmbining different engagements can be accmmdated in a revisin f ISRS 4400 and whether additinal cmplementary guidance is needed. The WG ntes that the Integrated Reprting WG is dealing with a similar issue and will crdinate with the Integrated Reprting WG regarding the cntent and the cmmunicatin f this issue. The WG als ntes that the Australian Assurance Standards Bard is cntemplating perfrming a pst-implementatin review n GS 022. The WG will take int accunt results frm this pst implementatin review in its deliberatins f multi-scpe engagements. Use f Judgment in an AUP engagement 24. ISRS 4400 states that the bjective f an AUP engagement is fr the practitiner t carry ut prcedures f an audit nature t which the practitiner and the entity and any apprpriate third parties have agreed and t reprt n factual findings. 3 ISRS 4400 ges n t explain that as the practitiner simply prvides a reprt f the factual findings f AUP, n assurance is expressed. Instead, users f the AUP reprt assess fr themselves the prcedures and findings reprted by the practitiner, and draw their wn cnclusins frm the practitiner s wrk A strict interpretatin f ISRS 4400 may imply, fr example, that the practitiner: Wuld apply little r n prfessinal judgment in determining and perfrming the prcedures; and Culd ignre matters that are nt part f the AUP. 26. During the WG s utreach, sme stakehlders (including sme NSSs and regulatrs) expressed the view that, in an AUP engagement, the prcedures shuld be s precisely specified that there is n need fr prfessinal judgment in perfrming the prcedures (althugh cmmn sense judgment is still required). These stakehlders indicated that they are clsely invlved with discussins between all the parties (practitiner, entity and user) regarding the nature and extent f the prcedures t be perfrmed. In their view, the user must take ultimate respnsibility fr the 3 ISRS 4400, paragraph 4 4 ISRS 4400, paragraph 5 Page 6 f 15

7 nature and extent f prcedures (including sample sizes); therwise, the premise f the AUP engagement wuld be undermined. 27. Other stakehlders (including sme NSSs and public accunting bdies) hld the view that a key difference between an AUP and an audit prcedure is that the AUP has been agreed with anther party. Accrdingly, the practitiner shuld nt exercise any less prfessinal judgment simply because the prcedure was perfrmed in an AUP engagement as ppsed t in an audit engagement. 5 These stakehlders have als infrmed the WG that restricting prfessinal judgment in an AUP engagement may be impracticable. Fr example, regulatrs ften request practitiners t perfrm prcedures specified by regulatins. Hwever, due t the fact that circumstances encuntered in each engagement are unique, the prcedures set ut in regulatin may require the practitiner t exercise sme degree f prfessinal judgment in determining the prcedures t be perfrmed (such as in determining the type f dcuments t lk at and/r sample size). 28. A related issue is the exercise f prfessinal judgment in the cntext f relevant ethical requirements. The Cde f Ethics fr Prfessinal Accuntants requires practitiners nt t be knwingly assciated with misleading infrmatin. Therefre, users f AUP engagements are likely t (and wuld rightfully) assume that the practitiner will exercise prfessinal judgment in matters such as: Assessing whether there is a ratinal purpse fr the engagement and whether the prcedures are suitable fr the users stated purpses. Determining actins t be taken if the practitiner becmes aware f a matter that, althugh nt part f the AUP engagement, cntradicts the subject matter f the AUP reprt. 29. The WG heard cncerns that the standard is currently t prescriptive, especially as it relates t the exercise f prfessinal judgment by the practitiner. Many stakehlders have indicated a desire fr enhanced flexibility. 30. The WG cncluded that while the standards need t be principles-based, they need t be sufficiently specific t allw fr cnsistent applicatin. Having the right balance is essential. As sme stakehlders suggested, maintaining a clear distinctin between an AUP engagement and an assurance engagement is vital t public interest. The WG will ensure that the right balance between principles and prescriptin is maintained. Preliminary Way Frward The WG will cnsider the use f prfessinal judgment in an AUP engagement and the balance between principles and prescriptin in drafting the revised ISRS This issue is related t whether specified prcedures perfrmed by cmpnent auditrs under ISA 600, Special Cnsideratins Audits f Grup Financial Statements (Including the Wrk f Cmpnent Auditrs), cnstitute an AUP. The WG will crdinate with the Grup Audit Wrking Grup n this issue. Page 7 f 15

8 Recmmendatins 31. As indicated in paragraphs 16 and 17, the WG has identified requests by regulatrs fr recmmendatins in cnjunctin with AUP engagements. The WG ntes that a cmparable situatin is addressed in a Canadian standard n derivative reprting. CSRS deals with the practitiner s respnsibilities when the practitiner is requested t reprt n a supplementary matter arising frm an audit r a review engagement, including prviding recmmendatins. Preliminary Way Frward The WG will cnsider CSRS 4460 in the cntext f AUP engagements and explre actins that can be undertaken t address the issues identified. Update and Intrduce Greater Flexibility in ISRS ISRS 4400 was issued befre the clarity prject and the drafting f the ISRS is utdated. Fr example, the ISRS uses terminlgy such as auditr and makes references t using the Internatinal Standards n Auditing (ISAs) as guidance. Such terminlgy and references are n lnger apprpriate under the clarity cnventin fr a nn-assurance engagement standard. The issues that need t be addressed as part f the ISRS 4400 revisin prject include husekeeping issues such as adpting the clarity cnventin and remving ambiguus terminlgy. Other issues, namely the distributin f AUP reprts and bradening the scpe t include nn-financial infrmatin, address issues that are beynd husekeeping issues. Ambiguus Terminlgy 33. The WG ntes that certain phrases have been assigned technical meanings by the accunting prfessin that differ frm their nrmal English meaning. Fr example, the phrase review means a limited assurance engagement t the accunting prfessin, but may mean ging thrugh a dcument t a laypersn. Sme natinal AUP standards (e.g., Australia s ASRS and the AICPA s standard n AUP) explicitly prhibit the use f such terminlgy in an AUP engagement. Hwever, discussins with stakehlders indicate that getting users t understand the technical meaning the accunting prfessin has assigned t certain terms is smetimes impracticable. 34. A related issue is the wrding f the AUP reprt. Based n examples f AUP reprts btained by the WG, the WG ntes that the shrt-frm AUP reprt as set ut in Appendix 2 f ISRS 4400 des nt appear t be cmmnly used in practice. It wuld be useful fr the illustrative AUP reprt in the revised ISRS t be mre reflective f AUP reprts issued in practice. Mre imprtantly, an examinatin f AUP reprts might als shw hw they can be enhanced t cmmunicate mre effectively. 6 Canadian Standard n Related Services (CSRS) 4460, Reprts n Supplementary Matters Arising frm an Audit r Review Engagement 7 Australia Standard n Related Services (ASRS) 4400, Agreed-Upn Prcedures Engagements t Reprt Factual Findings Page 8 f 15

9 Distributin f the AUP Reprt 35. ISRS 4400 requires that the practitiner s reprt include a statement that the reprt is restricted t thse parties that have agreed t the prcedures t be perfrmed since thers, unaware f the reasns fr the prcedures, may misinterpret the results. 8 There is ambiguity regarding whether the restrictin applies t use r distributin f the reprt. Paragraph 12 f ISRS 4400 suggests that the engagement letter includes a statement that the distributin f the reprt f factual findings wuld be restricted t the specified parties wh have agreed t the prcedures t be perfrmed. Hwever, a number f stakehlders, including NSSs and prfessinal accunting bdies as well as regulatrs and ther users have indicated that restrictins n distributin f the reprt is prblematic as the AUP reprt may be required t be prvided t ther parties (r psted nline) either by law r regulatin, r by cntractual agreement. 36. The WG ntes that standards in varius jurisdictins take different appraches regarding the restrictin f the AUP reprt. Fr example, ASRS 4400 prhibits the practitiner frm accepting an AUP engagement if the distributin f the AUP reprt cannt be restricted t the engaging party and any intended users identified. On the ther hand, the AICPA s AUP standard restricts the use, but nt the distributin, f the AUP reprt. 37. In the WG s preliminary view, a restrictin n use but nt the distributin f the AUP reprt may be able t address the cncern f users misinterpreting the results while allwing the reprt t be made available t a wider range f entities r peple. Nn-Financial Infrmatin 38. The scpe f extant ISRS 4400 is limited t AUP n financial infrmatin. Hwever, extant ISRS 4400 als states that ISRS 4400 may prvide useful guidance fr engagements regarding nnfinancial infrmatin, prvided the auditr has adequate knwledge f the subject matter in questin and reasnable criteria exist n which t base findings. Results frm the utreach indicate that AUP engagements are ften perfrmed n nn-financial infrmatin. Fr example, funders may ften request AUP engagements n internal cntrls in additin t an audit f the financial statements. 39. In the WG s preliminary view, the scpe f the revised AUP standard shuld be expanded t include nn-financial infrmatin. The WG ntes that input frm stakehlders did nt identify any specific issues with regard t applying ISRS 4400 t nn-financial infrmatin. Preliminary Way Frward The WG will explre the issues relating t updating and intrducing greater flexibility as part f the ISRS 4400 revisin prject. In additin t the issues relating t ambiguus terminlgy, distributin f AUP reprt and nn-financial infrmatin, the WG will examine circumstances when a funder, regulatr r ther user f AUP engagements sets ut the prcedures t be perfrmed, but is nt a party t the engagement t determine hw t address such circumstances in the revised ISRS. 8 ISRS 4400, paragraph 6 Page 9 f 15

10 Matters fr IAASB Cnsideratin 1. The Bard is asked t prvide input n the issues and preliminary way frward as set ut in the bxes abve. 2. Are there any ther issues the Bard feels that the WG shuld address? Prpsed Way Frward Date March May 2016 Activity Cnsultatins with Small-Medium Practice Cmmittee, NSS, and ther stakehlders befre finalizing a WG Discussin Paper fr presentatin t the IAASB in June The WG Discussin Paper wuld prvide backgrund infrmatin n the value prpsitin f an AUP engagement and ther key issues in ISRS The WG intends t use the Discussin Paper as a basis fr further cnsultatins with stakehlders t btain their views n the key issues that need t be addressed in revising ISRS An additinal benefit t public issuance f the Discussin Paper is that it may help prmte thinking n the value prpsitin f an AUP engagement (and in particular, hw it differs frm an assurance engagement). In the view f the WG, the Discussin Paper will assist prfessinal accunting bdies and firms t clearly explain t users hw standards in the existing IAASB prnuncements can address their needs. June 2016 July 2016 July Nvember 2016 December 2016 WG t present Discussin Paper t the IAASB fr cmments befre public issuance. A draft utline is included belw). Issuance f Discussin Paper fr public cmments. Further discussins with stakehlders t btain views n matters identified in the Discussin Paper. Discuss cmments received n Discussin Paper. Prject prpsal and frmatin f a Task Frce. 40. The WG has begun t lk at prpsed cntent f the Discussin paper. A preliminary draft Outline f the Discussin Paper wuld be as fllws: Intrductin Backgrund infrmatin n the AUP prject The WG s preliminary views n AUP engagements Page 10 f 15

11 Value and limitatins f AUP engagements Cmparisn with assurance engagements Examples f apprpriate AUP engagements Multi-scpe engagements What are multi-scpe engagements Examples f when multi-scpe engagements may be used Issues t be explred Use f judgment in an AUP engagement Recmmendatins in cnjunctin with an AUP engagement Terminlgy Distributin f AUP reprt Nn-financial infrmatin Implicatins relating t parties wh directly r indirectly set ut prcedures t be perfrmed but are nt a party t the AUP engagement Reprting n a multi-scpe engagement Matters fr IAASB Cnsideratin 3. Is the Bard supprtive f the prpsed timetable and prpsed cntent f the Discussin Paper? 4. Are there any ther matters that the WG shuld take int accunt in this prject? Page 11 f 15

12 Appendix A Preliminary Views n AUP Engagements and Assurance Engagements 41. T help members better under the relatinships between AUP engagements and assurance engagements, the fllwing prvides a summary f the WG s preliminary views n these engagements. Nature, timing and extent f prcedures Reprting AUP Engagement While the practitiner may prvide advice n the prcedures t be perfrmed, the intended user is ultimately respnsible fr whether the prcedures are suitable fr his r her purpses. Factual finding Fr a factual finding, bjective bservers wh made their bservatins at the same time and in the same cntext wuld, in all cases, agree n the factual finding. Having perfrmed the AUP, the practitiner describes the factual findings withut expressing a cnclusin. Assurance Engagement The practitiner is respnsible fr determining the nature, timing and extent f the prcedures, and fr assessing the sufficiency and apprpriateness f the evidence in accrdance with the applicable assurance standard(s). Assurance Cnclusin Assurance cnclusin invlves the exercise f prfessinal judgment regarding the sufficiency and apprpriateness f evidence btained. An assurance cnclusin is designed t enhance the degree f cnfidence f intended users (ther than the respnsible party) abut the subject matter infrmatin. Page 12 f 15

13 Appendix B Examples f Engagements nt Cntemplated by any IAASB Prnuncements 42. The fllwing presents examples f requests fr engagements that may be viewed by sme t be engagements utside f existing IAASB prnuncements. Independent Examinatin f Charity Accunts Prcedures may be perceived by sme as a cmbinatin f specified by regulatins and determined by practitiner; and Reprting that may be perceived by sme as a limited assurance cnclusin. 43. United Kingdm (UK) charity law requires charities ver a certain size t have an external scrutiny f their accunts, being an audit r an independent examinatin (depending n size and with different threshlds in different parts f the UK). Independent examinatins nly need t be carried ut by members f designated prfessinal bdies. The requirements fr cnduct f an independent examinatin are set ut in directins and assciated guidance f the relevant charities regulatr (the Charity Cmmissin f England and Wales, the Office f Scttish Charity Regulatr f the Charity Cmmissin f Nrthern Ireland), which require the practitiner t carry ut a set f high level prcedures such as: Reviewing the accunting plicies adpted and cnsidering their cnsistency with the applicable statement f recmmended practice and their apprpriateness t the activities f the charity. Cnsidering and reviewing any significant estimate r judgment that has been made in preparing the accunts. 44. The independent examinatin is a less rigrus than an audit and is intended t reflect a light tuch. The cnclusin f the independent examiner is ne f negative assurance: N matter has cme t my attentin which gives me reasnable cause t believe that in any material respect the requirements t prepare and keep accunting recrds in accrdance with [applicable regulatin] have nt been met, r t which, in my pinin, attentin shuld be drawn in rder t enable a prper understanding f the accunts t be reached. Cnsent Letter t Securities Regulatrs Prcedures determined by practitiner; and Reprting that may be perceived by sme as an assurance cnclusin althugh n assurance is intended. 45. In many jurisdictins, an entity invlved in a securities ffering is required t btain the practitiner s cnsent t the use f the practitiner s reprt fr inclusin in its prspectus. Securities legislatin may require the practitiner s cnsent t include a statement that the practitiner has read the prspectus and has n reasn t believe that there are any misrepresentatins in the infrmatin cntained therein. While this statement is similar t a negative cnclusin prvided in a limited assurance engagement, the practitiner makes this statement nly because f a securities Page 13 f 15

14 regulatry requirement t d s. In many f these cases, the securities regulatr des nt require r expect the practitiner t perfrm an assurance engagement (as cntemplated in ISAE r similar natinal standards) even thugh the practitiner is required t make a statement similar t a limited assurance cnclusin. T avid users misinterpreting the statement as limited assurance, the cnsent letter is nrmally restricted t the relevant regulatry bdy and may include a statement clarifying that the practitiner has nt perfrmed an audit r a review engagement n the prspectus. 46. In Canada, Sectin addresses the circumstance in which the practitiner is required, as a result f a securities regulatry requirement, t make a statement similar t an assurance cnclusin in a limited assurance engagement. Hwever, the securities regulatr des nt require r expect the practitiner t perfrm t perfrm a limited assurance engagement. Engagements t Reprt n a Supplementary Matter Prcedures determined by practitiner; and Reprting n supplementary matter may take varius frms. 47. A practitiner may be requested t reprt n a supplementary matter arising frm an audit r a review engagement. In such cases, the request may include, fr example: Cmpleting r reprting n supplementary infrmatin; Cmpleting r reprting n questinnaires; Reprting instances f nn-cmpliance with law, regulatin r agreement; Reprting facts r figures ther than the infrmatin n which the practitiner is perfrming an audit r a review engagement; Reprting bservatins made r items f interest; r Prviding recmmendatins. Engagement t Prvide Assurance belw Limited Assurance Prcedures determined by practitiner; and Reprting in the frm f negative assurance (but with caveat). 48. In France, NP deals with an engagement t prvide assurance n the presentatin f financial statements. The cnclusin is expressed in a negative frm, but the level f assurance cntemplated in such an engagement is less than that f a review Internatinal Standards On Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits Or Reviews Of Histrical Financial Infrmatin 10 Sectin 7150, Auditr's Cnsent t the Use f a Reprt f the Auditr Included in an Offering Dcument 11 NP 2300, Prfessinal Standard Applicable t the Engagement t Prvide Assurance n the Presentatin f Financial Statements 12 NP 2300, paragraph 2 Page 14 f 15

15 49. The reprting takes the frm f: Our prcedures were perfrmed in accrdance with the prfessinal standard f the French Ordre des experts-cmptables applicable t the presentatin engagement which is neither an audit nr a review. On the basis f ur wrk, nthing has cme t ur attentin that causes us t believe that the accmpanying annual (r interim ) financial statements taken as a whle are nt cnsistent and plausible. Engagement n Cmpliance with Regulatin Prcedures set ut in regulatins (but are als partially determined by practitiner); and Reprting includes a descriptin f prcedures perfrmed plus a cnclusin. 50. In Germany, IDW has develped a standard that deals with a practitiner s respnsibilities when the practitiner is engaged t perfrm an engagement invlving specified audit prcedures t assist regulatrs f investment brkers in carrying ut their duties. 51. Under this standard, the nature f the audit prcedures is agreed with the regulatrs in the relevant standard. Hwever, unlike an AUP engagement, the practitiner determines hw the prcedures are perfrmed and the extent f thse prcedures. With regard t reprting, a lng-frm reprt describes the nature f the audit prcedures perfrmed and their extent. N audit pinin r a review cnclusin is expressed. Hwever, unlike an AUP engagement, the findings resulting frm the perfrmance f the audit prcedures are described in the reprt; these findings are similar in nature t a cnclusin in an assurance engagement file. The IDW is currently engaging in discussins with ther regulatrs whether this type f engagement, in certain circumstances, may be mre useful than either assurance engagements r AUP engagements. A medium term cnsideratin is whether the IDW shuld develp a general standard t prvide requirements and guidance fr this type f engagement. Guidance n Multi-Scpe Engagements Regulatins require a reprt that, at first glance, appears nt t be cntemplated by any prnuncement by the Bard. Guidance is being develped t deal with the regulatry requirements using a multi-scpe engagement. 52. The Bank Act f Suth Africa requires regulatry reprting by auditrs f financial institutins thrugh the cmpletin f a Bank Frm. Practitiners need t use a cmbinatin f assurance and AUP engagements t meet the reprting requirements f the Bank Frm. The Suth Africa prfessinal accunting bdy is currently develping guidance detailing hw the cmpletin f the Frm can be segregated int distinct cmpnents. In effect, the guidance wuld re-frame an engagement utside f existing IAASB prnuncement int a multi-scpe engagement. Page 15 f 15