The new CSRS 4200, Compilation Engagements. Too much work?
How much work is really involved under the proposed new standard?
VANCOUVER, January 15, 2019 – How much effort will be required of Canadian accountants in public practice under the new compilation engagement accounting standard proposed by the Auditing and Assurance Standards Board (AASB), presuming there is no re-exposure of the proposed standard?
The Canadian Standard on Related Services (CSRS) 4200 would replace Compilation Engagements, Section 9200; and Assurance and Related Services Guideline AuG-5, Compilation Engagements – Financial Statement Disclosures. The exposure draft is proposing significant changes from the currently effective standard, however, although I presume there are issues around the potential for legal liability, the work involved in the new standard is really not far off from our firm’s current practices.
At Clearline CPA, we are not waiting for the new standard to become effective before we start integrating some of the file documentation requirements. Due to the volume of compilation engagements in our firm, if we wait too long we will simply run out of time in the year of transition.
However close your files are to meeting the new proposed standards, rolling files into a new template and adding the five or six new requirements will take time. If these engagements are concentrated in the January to June tax season and represent a significant portion of your practice, you may not have the pure physical hours to process it all without increasing your resources (or losing your weekends).
Presuming a 2020 effective date, we are implementing a three-phase approach to updating our compilations — starting now — and would encourage all practitioners to do the same.
We will improve the documentation around the general operations of the entity including its accounting systems and records. We will also implement a formalized process for approval for the financial statements, which, in our case, is going to include the receipt of a representation letter, as this is just good practice management.
Presuming that the proposed standard is not re-exposed, we will spend our transition time identifying and grouping our client engagements: those where a simple accrual basis of accounting will be sufficient and those where it is not likely to be that simple (e.g., construction or other entities with more complicated revenue recognition issues). This will give us the time we need to discuss the basis of accounting with management and provide our thoughts and recommendations.
We will leave the more contentious issues such as the identification of users and agreement around the basis of accounting for the final stage. Other than these final touches we are hoping to limit this phase to pure file transition, including the finalization and issuance of a new engagement letter, and roll forward of the engagement file into the new template.
Honestly, I am not concerned with the work involved in the proposed standard. For me, the question is whether or not this new standard is moving the bar on my duty of care to lenders who, for a variety of reasons, continue not to ask for assurance, when there is a very deliberate intention to place such reliance.
Bridget Noonan, CPA, CA, is a partner at Clearline CPA and Clearline Consulting, which provides practitioners and their staff with the tools, training and advice they need to succeed and build thriving accounting firms. To receive our public practice newsletter, visit our website or provide your contact information here.