Review of agreed-upon procedures engagements questionnaire

Review of agreed-upon procedures engagements questionnaire Review code Reviewer Review date

Introduction Standards on Related Services (ASRSs) detail the responsibilities of an assurance practitioner, when engaged to undertake engagements other than assurance engagements covered by Australian Auditing Standards (ASAs), Standards on Review Engagements (ASREs) or Standards on Assurance Engagements (ASAEs). ASRS 4400 Agreed-Upon Procedures Engagements to Report Factual Findings sets the standard for assurance practitioners when accepting, undertaking and reporting on engagements to perform agreed-upon procedures. Agreed-upon procedures engagements provide no assurance and so are only appropriate when users will be able to draw their own conclusions from the factual findings reported and any other information available to them. ASRS 4400 replaces AUS 904 Engagements to Perform Agreed-Upon Procedures and is applicable to engagements for reporting periods commencing on or after 1 October 2011, with early adoption permitted. Note that although agreed-upon procedures engagements provide no assurance, ASRS 4400 contains a number of requirements that are consistent with those for assurance engagements (e.g. systems of quality control). Where there are two or more partners, separate questionnaires for each partner must be completed. The questionnaire should be marked Y, N, or N/A. In the event that any commentary is provided it should be clearly referenced to the particular question in the questionnaire. All non-compliance with mandatory professional or legislative requirements is to be reported in the quality review report. The reviewer is advised to comment on all non-mandatory breaches in the Other Matters Report. The reviewer should consult Appendix 1 for definitions, relevant sections of the standards, as well as related legislation. Privacy In this Privacy Statement, Personal Information has the same meaning as in the Privacy Act 1988 (Cth). CPA Australia Ltd is committed to protecting the privacy and security of the Personal Information which it holds about you. The Personal Information which you provide us with in this Questionnaire will be used by CPA Australia Ltd to process your Quality Review; and may be used for aggregated statistics for monitoring and research. This information may be viewed by the CPA Australia Board Quality Review Advisory Committee and also the Financial Reporting Council and any other Regulatory authority. If you do not provide us with this Personal Information, we may not be able to process your review. You have the right to access any Personal Information which CPA Australia Ltd holds about you, subject to the exceptions in the Privacy Act 1988 (Cth). You may also request the correction of information which is inaccurate. Access and/or correction requests can be made at your local CPA Australia office. For more information on CPA Australia s Privacy Policy, visit our website at cpaaustralia.com.au 2

Client Authority 1. Has permission been obtained from clients for the peer review of their file? Note: Please place the appropriate letter from the below list into the above box that corresponds with the type of file(s) being reviewed (i.e. a = Public Listed, b = Public Unlisted etc). Refer to Appendix 1 for guidance on proprietary companies. Type of engagement files to be reviewed: a. Public Listed g. Incorporated Association m. Trust Account b. Public Unlisted h. Unincorporated Association n. Compliance Plan c. Disclosing i. Partnership o. Individual d. Proprietary Large j. Joint Venture p. Sole Trade e. Proprietary Small k. Unit Trust q. Company Limited by Guarantee f. l. r. Superannuation Fund Discretionary Trust Other (please list)* * Each client s authority must be obtained before reviewing their file. If insufficient files exist for which client permission has been provided, and accordingly you believe it not possible to form an opinion based on the small sample size, contact the Quality Assurance Department at CPA Australia. Conduct 2. Has the member complied with ASRS 4400 and with the terms of the engagement agreed with the engaging party? (ASRS 4400.16) Note: If answered No to the above, the member is in breach of ASRS 4400.16. 3

Ethical Requirements 3. Has the member complied with ethical requirements applicable to Other Assurance Engagements, including those pertaining to independence, unless the engaging party has explicitly agreed to modified independence requirements in the terms of engagement? (ASRS 4400.17 and ASA 102.5) Specifically: ++ Integrity (APES 110.110); ++ Objectivity (APES 110.120); ++ Professional competence and due care (APES 110.130); ++ Confidentiality (APES 110.140); ++ Professional behaviour (APES 110.150); and ++ Independence (APES 110.291). Note: If answered No to the above, the member is in breach of ASRS 4400.17, ASA 102.5 and APES 110. If modified independence requirements have been agreed in the terms of the engagement, the level of independence applied shall be described in the report of factual findings (see below sections on Agreeing the Terms and Reporting ). 4

Acceptance 4. Has the member obtained an understanding of the needs and objectives of the intended users, including a class of intended users, of the member s report of factual findings and the purpose for which that report would be used? (ASRS 4400.18) Note: If answered No to the above, the member is in breach of ASRS 4400.18. 5. Where a regulator or other body has specified the agreed-upon procedures to be performed to meet the needs of a class of intended users, is there evidence on file that the member was satisfied that those needs had been appropriately considered and addressed? (ASRS 4400.19) Note: If answered No to the above, the member is in breach of ASRS 4400.19. 6. Before accepting the agreed-upon procedures engagement, did the member determine that the persons who were to perform the engagement collectively had the appropriate competence and capabilities to perform the procedures? (ASRS 4400.20) Note: If answered No to the above, the member is in breach of ASRS 4400.20. 5

7. Has the member accepted an agreed-upon procedures engagement if, in the professional judgement of the member: (a) the provision of factual findings alone which provide no assurance were unlikely to meet the needs of the intended users; or (b) the circumstances of the engagement indicated that the intended users were likely to construe the outcome of the engagement as providing an assurance conclusion about the subject matter; or (c) distribution of the report of factual findings could not be restricted to the engaging party and any intended users identified, due to legal requirements or other circumstances; or (d) all of the elements of an assurance engagement were met; or (e) the engagement had no rational purpose; or (f) the circumstances of the engagement indicated that it would be necessary for the member to do any of the following: (i) determine the sufficiency of the procedures to be performed; (ii) perform a risk assessment in order to determine the procedures to be undertaken; (iii) evaluate the findings in order to determine the sufficiency and appropriateness of the evidence gathered; or (iv) reach a conclusion or form an opinion based on the evidence gathered? (ASRS 4400.21) Note: If answered Yes to the above, the member is in breach of ASRS 4400.21. 6

8. In order to establish whether the preconditions of an agreed-upon procedures engagement were present, did the member obtain agreement from management [and, where appropriate, those charged with governance and intended users] that it acknowledged and understood its responsibility: (a) for determining the adequacy or otherwise of the procedures agreed to be performed; (b) for determining whether the factual findings reported, in combination with any other information obtained, provided an appropriate basis for any conclusions which management or the intended users wished to draw on the subject matter; (c) to provide the member with: (i) access to all information of which management was aware that would be necessary for the performance of the procedures agreed; (ii) additional information that the member may request from management for the purpose of the engagement; and (iii) unrestricted access to persons within the entity from whom the member required co-operation in order to perform the procedures agreed? (ASRS 4400.22) Note: If answered No to the above, the member is in breach of ASRS 4400.22. Agreeing the Terms 9. Has the member agreed the terms of the agreed-upon procedures engagement with the engaging party and, where applicable, other specified parties who received copies of the report? (ASRS 4400.23) Note: If answered No to the above, the member is in breach of ASRS 4400.23. If additional parties were intended users of the report of factual findings but were not signatories to the terms of the engagement, those parties should have been identified in the terms of the engagement and all other parties should have been excluded from using the report. 7

10. Has the member recorded the agreed terms of the engagement in an engagement letter or other suitable form of written agreement, and included: (a) the objective and scope of the engagement; (b) confirmation of the member s acceptance of the appointment; (c) the nature of the engagement, including a statement that the procedures performed will not constitute a reasonable or limited assurance engagement and that accordingly no assurance will be provided; (d) a statement that intended users are expected to conduct their own assessment of the findings, combined with other information available to them and, if necessary, perform further procedures in order to obtain sufficient appropriate evidence on which to base any conclusion on the subject matter; (e) the member s responsibilities to the engaging party and other specified parties; (f) confirmation that the member will apply ethical requirements equivalent to those applicable to Other Assurance Engagements or, if modified independence requirements have been agreed, the level of independence agreed; (g) identification of the subject matter to which the procedures will be applied; (h) the nature, timing and extent of the specific procedures to be performed; (i) management s responsibilities; (j) identification of the intended users of the report including those users who may not be party to the terms of the engagement, such as a class of user, regulator or bank; (k) a statement that the distribution of the report of factual findings would be restricted to the engaging party, who has agreed to the procedures to be performed, and the intended users identified; and (l) reference to the expected form of any reports to be issued by the member, which may be illustrated by attaching to the engagement letter a draft of the report of factual findings that will be issued, omitting the factual findings? (ASRS 4400.24) Note: If answered No to the above, the member is in breach of ASRS 4400.24. 8

11. Did the member specify the nature, timing and extent of procedures in the terms of the engagement in sufficient detail such that the member was not required, during the course of the engagement, to exercise professional judgement in determining or modifying the procedures to be performed? (ASRS 4400.25) Note: If answered No to the above, the member is in breach of ASRS 4400.25. 12. If the member was unable to perform the exact nature, timing or extent of procedures agreed, but alternative procedures could have been performed and the engaging party required those procedures to be performed, did the member agree the new terms of the engagement with the engaging party in writing? (ASRS 4400.26) Note: If answered No to the above, the member is in breach of ASRS 4400.26. 9

Planning 13. Is there evidence on file that the member planned the work so that the engagement could be performed in an effective manner, in accordance with the terms of the engagement and ASRS 4400? (ASRS 4400.27) Note: If answered No to the above, the member is in breach of ASRS 4400.27. 14. Did the member restrict the engagement plan to the nature, timing and extent of procedures agreed in the terms of the engagement? (ASRS 4400.28) Note: If answered No to the above, the member is in breach of ASRS 4400.28. The engagement plan should not include alternative or further procedures unless agreed with the engaging party in amended terms of the engagement. Risk Assessment 15. Did the member perform a risk assessment for the engagement? (ASRS 4400.29) Note: If answered Yes to the above, the member is in breach of ASRS 4400.29. The nature, timing and extent of procedures to be performed are agreed with the engaging party rather than determined by the member in response to assessed risks. 10

Materiality 16. Did the member apply materiality to designing the procedures to be performed or to assessing the factual findings to determine whether the subject matter information was free from material misstatement or non-compliance? (ASRS 4400.30) Note: If answered Yes to the above, the member is in breach of ASRS 4400.30. The application of materiality and the assessment of factual findings is the responsibility of the intended users. Quality Control 17. Has the member taken responsibility for the overall quality of the engagement and applied the firm s quality control procedures equivalent to those applicable to Other Assurance Engagements? (ASRS 4400.31) Note: If answered No to the above, the member is in breach of ASRS 4400.31. See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information and Other Assurance Engagements. 11

18. Throughout the engagement, is there evidence that the member remained alert, through observation and making enquiries as necessary, for evidence of non-compliance with relevant ethical requirements, including independence, by members of the engagement team? (ASRS 4400.32) Note: If answered No to the above, the member is in breach of ASRS 4400.32. If matters came to the member s attention that indicated that members of the engagement team did not comply with relevant ethical requirements, the member should have determined the appropriate action. 19. Was the member satisfied that the engagement team, and any experts engaged who were not part of the engagement team, collectively had the appropriate competence, capabilities and resources to perform the agreed-upon procedures in accordance with ASRS 4400? (ASRS 4400.33) Note: If answered No to the above, the member is in breach of ASRS 4400.33. Engagement team, as defined in ASQC 1.12(f) means all partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform procedures on the engagement, but excluding external experts engaged by the firm or a network firm. 12

Using the Work of Others 20. Has the member taken responsibility for the direction, supervision and performance of the engagement and the accurate reporting of factual findings? (ASRS 4400.34) Note: If answered No to the above, the member is in breach of ASRS 4400.34. 21. If the member used the work of another assurance practitioner, internal auditor or an expert, did the member evaluate: I. the adequacy of their work, including their objectivity and technical competence in conducting the procedures; II. whether the nature, timing and extent of procedures conducted agreed with procedures in the terms of the engagement; and III. whether the factual findings communicated detailed adequately the result of the procedures conducted? (ASRS 4400.35) Note: If answered No to the above, the member is in breach of ASRS 4400.35. 13

Documentation 22. Has the member documented: (a) issues identified with respect to compliance with relevant ethical requirements and how they were resolved; (b) conclusions on compliance with independence requirements equivalent to Other Assurance Engagements or modified independence agreed; (c) conclusions reached regarding the acceptance and continuance of client relationships and acceptance of the agreedupon procedures engagement; (d) the nature, timing and extent of procedures performed and the factual findings obtained, as identified in the agreedupon procedures report; and (e) evidence that the engagement was carried out in accordance with ASRS 4400 and the terms of the engagement? (ASRS 4400.36) Note: If answered No to the above, the member is in breach of ASRS 4400.36. Performing the Engagement 23. Has the member carried out only the procedures agreed in the terms of the engagement and used the results of the procedures to provide a report of factual findings? (ASRS 4400.37) Note: If answered No to the above, the member is in breach of ASRS 4400.37. No assurance is to be provided by the member. 14

24. If the engaging party s requirements altered during the course of the engagement, requiring the member to draw conclusions from the findings, did the member extend the terms of the agreed-upon procedures engagement to the provision of assurance? (ASRS 4400.38) Note: If answered Yes to the above, the member is in breach of ASRS 4400.38. In such situations, a new engagement should be agreed for the provision of assurance, if appropriate, to be conducted in accordance with applicable AUASB standards. Reporting 25. Has the member provided a report of factual findings for the agreed-upon procedures engagement? (ASRS 4400.39) Note: If answered No to the above, the member is in breach of ASRS 4400.39. In contrast to an assurance report, a report of factual findings does not include an evaluation of those findings in order to draw a conclusion or form an opinion. 26. Has the member expressed a conclusion or opinion on the agreed-upon procedures engagement? (ASRS 4400.40) Note: If answered Yes to the above, the member is in breach of ASRS 4400.40. For an agreed-upon procedures engagement, a member would not have performed a risk assessment, responded to assessed risks by determining the procedures to be performed or assessed whether sufficient appropriate evidence has been obtained as a reasonable basis for expressing a conclusion. 15

27. Where the member undertook an agreed-upon procedures engagement in parallel with an assurance engagement, did the member present the factual findings from the agreed-upon procedures engagement separately from the report on the assurance engagement? (ASRS 4400.41) Note: If answered No to the above, the member is in breach of ASRS 4400.41. 28. Has the member restricted use of the report to those parties that have either agreed to the procedures to be performed or have been specifically included as intended users in the engagement letter? (ASRS 4400.42) Note: If answered No to the above, the member is in breach of ASRS 4400.42. This restriction is required as other parties, unaware of the reasons for the procedures, may misinterpret the results. 16

29. Does the member s report of factual findings contain: (a) a title; (b) an addressee (ordinarily the engaging party); (c) identification of the specific information to which the procedures have been applied; (d) a statement that the procedures performed were those agreed with the engaging party; (e) a statement that the engagement was performed in accordance with ASRS 4400; (f) a statement that either ethical requirements equivalent to those applicable to Other Assurance Engagements have been complied with, including independence, or, if modified independence requirements have been agreed in the terms of the engagement, a description of the level of independence applied; (g) identification of the purpose for which the agreed-upon procedures engagement was performed; (h) a statement that the responsibility for determining the adequacy or otherwise of the procedures agreed to be performed by the member is that of the engaging party; (i) a listing of the specific procedures performed, detailing the nature, timing and extent of each procedure; (j) a description of the member s factual findings in relation to each procedure performed, including sufficient details of errors and exceptions found; (k) identification of any of the procedures agreed in the terms of the engagement which could not be performed and why that has arisen; (l) a statement that the procedures performed do not constitute either a reasonable or limited assurance engagement and, as such, no assurance is provided; (m) a statement that had the member performed additional procedures, a reasonable assurance engagement or a limited assurance engagement, other matters might have come to the member s attention which would have been reported; (n) a statement that use and distribution of the report is restricted to those parties identified in the report, who have agreed to the procedures to be performed or were identified in the terms of the engagement; (o) a statement (when applicable) that the report relates only to the elements, accounts, items or financial and nonfinancial information specified and that it does not extend to the entity s financial report, or other specified report, taken as a whole; (p) the date of the report; (q) the member s address; and (r) the member s signature? (ASRS 4400.43) Note: If answered No to the above, the member is in breach of ASRS 4400.43. 17

30. If the member has been required by law or regulation to use a specific layout or wording for the report of factual findings, has the report of factual findings referred to ASRS 4400 only if the member s report includes, at a minimum, each of the elements in ASRS 4400.43? (ASRS 4400.44) Note: If answered No to the above, the member is in breach of ASRS 4400.44. 31. Where law or regulation of the relevant jurisdiction prescribes the layout or wording of the report of factual findings in a form or in terms which are significantly different from the requirements of ASRS 4400, did the member evaluate: (a) whether intended users might misunderstand the factual findings reported and the fact that no assurance would be provided; and, if so; (b) whether additional explanation in the report of factual findings would mitigate possible misunderstanding? (ASRS 4400.45) Note: If answered No to the above, the member is in breach of ASRS 4400.45. If the member considered that additional explanation in the report of factual findings could not mitigate possible misunderstanding, the member should not have accepted the engagement unless required by law or regulation to do so. As an agreed-upon procedures engagement conducted in accordance with such law or regulation does not comply with ASRS 4400, the member should not have included any reference in the report of factual findings to the engagement having been conducted in accordance with ASRS 4400. 18

32. Has the member issued modifications or an emphasis of matter in a report of factual findings? (ASRS 4400.46) Note: If answered Yes to the above, the member is in breach of ASRS 4400.46. As no conclusion or opinion is expressed, modifications or an emphasis of matter are not required. Nevertheless, the following matters, if applicable, are reported as part of the factual findings: (a) errors or exceptions identified as a result of the procedures performed, regardless of whether they were subsequently rectified by the entity; and (b) the inability of the assurance practitioner to perform any of the agreed-upon procedures. 33. Has the member clearly distinguished the report of factual findings for an agreed-upon procedures engagement from an assurance report by ensuring it does not contain: (a) a statement of compliance with AUASB standards, except for reference to ASRS 4400; (b) inappropriate use of the terms assurance, audit, review, opinion or conclusion ; or (c) any statement that could reasonably be mistaken for a conclusion designed to enhance the degree of confidence of intended users about the outcome of the evaluation or measurement of a subject matter against criteria? (ASRS 4400.47) Note: If answered No to the above, the member is in breach of ASRS 4400.47. 19

Overall Findings: Breaches of mandatory requirements identified: Positive feedback to be conveyed to the member(s) in the Reviewer s Summary Other Matters Report: Deficiencies in the quality control system that will be noted in the Reviewer s Summary Other Matters Report with suggestions for improvement: 20

APPENDIX 1: ASRS 4400 Agreed-Upon Procedures Engagements to Report Factual Findings Introduction 1. An agreed-upon procedures engagement involves the performance of procedures of an assurance nature from which no conclusion or opinion is expressed by the assurance practitioner and no assurance is provided to intended users. Instead only factual findings obtained as a result of the procedures performed are reported. 2. An assurance practitioner may be asked to perform other types of engagements for which assurance is also not provided but in contrast to agreed-upon procedures engagements, the procedures conducted are not primarily of an assurance nature. These engagements are not dealt with in ASRS 4400 and include: (a) consulting (or advisory) services; (b) compilation engagements; and (c) business services, such as accounting and taxation services. Appendix 1 Differentiating Factors between Agreed-Upon Procedures Engagements and Assurance Engagements Differentiating Factor Agreed-Upon Procedures Engagement Assurance Engagement Nature, timing and extent of procedures responsibility of: Nature, timing and extent of procedures determined in: Changes to the nature, timing and extent of procedures are documented in: Extent of assurance practitioner s professional judgement exercised in selecting procedures: Sufficiency and appropriateness of evidence assessed by: Form and content of report: Reporting of procedures performed: Reporting of findings: Engaging party Terms of the engagement Terms of the engagement Professional judgement may be exercised in assisting the engaging party to identify procedures when agreeing the terms of the engagement, but only professional competence is exercised when conducting the agreed-upon procedures. Intended user Factual findings, no conclusion or assurance provided Detail of the exact nature, timing and extent of all procedures performed are reported Detail of exact findings resulting from each procedure performed, including errors and exceptions identified, even if rectified. Assurance practitioner Engagement plan Engagement plan Professional judgement exercised in selecting procedures Assurance practitioner Conclusion providing assurance Summary of work performed No detail of findings, unless a modified report is to be issued when the basis for modification is provided or if a management letter is provided in addition to the assurance report. 21

APES 110 Code of Ethics for Professional Accountants Section 100 Introduction and Fundamental Principles 100.5 A Member shall comply with the following fundamental principles: (a) Integrity to be straightforward and honest in all professional and business relationships. (b) Objectivity to not allow bias, conflict of interest or undue influence of others to override professional or business judgments. (c) Professional competence and due care to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards. (d) Confidentiality to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the member or third parties. (e) Professional behaviour to comply with relevant laws and regulations and avoid any action that discredits the profession. Each of these fundamental principles is discussed in more detail in Sections 110 150 of APES 110. Note: APES 110 Code of Ethics for Professional Accountants ( the Code ) requires a high level of subjectivity to be exercised by both members and reviewers. The objective of this professional standard is to ensure members identify, evaluate and eliminate/reduce threats to compliance with the fundamental principles listed above. The test for whether a member has breached the fundamental principles is whether the behaviour or activity engaged in is that which a reasonable person having full knowledge of the facts would deem appropriate. In conducting the quality review, if you believe the member has engaged in any activity that a reasonable person would not have, in relation to the fundamental principles, you are required to list this a breach of that particular standard in accordance with the reporting guidelines. When reviewing all Quality Review reports, the Quality Assurance Department will confirm or disagree on the suitability of all breaches of the Code listed in the report. 22

Corporations Act 2001 Section 45A: Proprietary companies 45A(2) Small proprietary company. A proprietary company is a small proprietary company for a financial year if it satisfies at least 2 of the following paragraphs: (a) the consolidated revenue for the financial year of the company and the entities it controls (if any) is less than $25 million; (b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is less than $12.5 million; (c) the company and the entities it controls (if any) have fewer than 50 employees at the end of the financial year. 45A(3) Large proprietary company. A proprietary company is a large proprietary company for a financial year if it satisfies at least 2 of the following paragraphs: (a) the consolidated revenue for the financial year of the company and the entities it controls (if any) is $25 million or more; (b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $12.5 million or more; (c) the company and the entities it controls (if any) have 50 or more employees at the end of the financial year. CPA217867_WL 10/2011 V: FEB 2012 23