Proposed ISRS 4400 (Revised) - IFAC

Proposed ISRS 4400 (Revised) - IFAC

Proposed ISRS 4400 (Revised) Ron Salole, Agreed-Upon Procedure Task Force Chair IAASB Meeting, New York Agenda Item 5 September 18, 2018 Activities since March 2018 Task Force Activities since March 2018 1 physical meeting and 2 teleconferences Presented 2 issues to the IAASB at the August 2018 teleconference Outreach and coordination with other IAASB Task Forces Teleconference with IESBA staff in August 2018 and ongoing e-mail communications with IESBA staff and the IESBSA member responsible for coordination with the IAASB

Meeting with the SMPCs International Rapid Response Task Force in June 2018 Teleconference with Chair and staff of the ISQC Task Force in July 2018 Page 2 CAG Discussion Support for Support for project to revise ISRS 4400 Diverse views on independence Some representatives were of view that independence should be required o IESBA Code doesnt have separate standard on independence for AUP engagements Others supported Task Forces proposals Should the nature of the AUP engagement drive independence requirements? Questioned the change from factual findings to findings Suggestion made to enhance the illustrative reports

General support for proposals exposure period and effective date Page 3 SMPC Comments Project is very important Support the engaging party and intended users assessing for themselves the procedures and findings reported by the practitioner, and drawing their own conclusions Require a statement in the report where independence is required but the practitioner is not independent but render such a statement optional where independence is not mandatory Clarify that AUP engagements exclude the use of Professional Judgment in the performance of procedures after they have been agreed Agree that restrictions on the AUP report should not be required Refer to the Engagement Partner having review responsibilities in Engagement Level Quality Control Page 4 Public Interest Considerations

Updating ISRS 4400 to better meet the needs of users for increased accountability around the use of grants that are often provided from public funds, and facilitating innovation and enhancing services available to entities of all sizes Broadened scope to include both financial information and non-financial information. Added examples of AUP engagements that satisfy users, such as regulators and others.

Modernized the Explained that the ISRS by adding term information requirements encompasses all dealing with the role matters on which that professional AUP are performed judgment plays in an AUP engagement Page 5 Public Interest Considerations

Updating ISRS 4400 to better meet the needs of users for increased accountability around the use of grants that are often provided from public funds, and facilitating innovation and enhancing services available to entities of all sizes Added application Enhanced explanations material that identifies of what distinguishes areas in which assurance professional judgment engagements and AUP is applied engagements Enhanced requirements dealing

with compliance with laws and regulations and fraud Page 6 Public Interest Considerations Providing clarity in the AUP reportEnhancing the report for clearer, more consistent language which will help clarify what was done and the results therefrom, thereby reducing confusion that may arise in practice about AUP engagements. Enhanced requirements and application material on ensuring language used is clearer and more consistent

Added a requirement that the AUP report include a statement on the independence of the practitioner and referring to the ethical requirements followed Page 7 Public Interest Considerations Reducing inconsistency in the performance of AUP engagementsredrafting using the clarity drafting conventions and other changes for clarification and enhancement Drafted proposed ISRS 4400 (Revised)

in clarity convention Added a clear Set an objective and description of what establishing the an AUP engagement practitioners is and the value it obligation on relation provides to that objective Page 8 Public Interest Considerations

Reducing inconsistency in the performance of AUP engagementsredrafting using the clarity drafting conventions and other changes for clarification and enhancement Clarified the obligations Eliminated any possible imposed on ambiguity about the practitioners by the requirements a requirements of practitioner needs to proposed ISRS 4400 fulfil (Revised)

Improved the overall readability and understandability of proposed ISRS 4400 (Revised) Page 9 Overarching Considerations Option 3: Replicate ISRS 4410 (Revised) References to paragraphs 4, 23, A6-A11 and A25-A27 ISRS 4400 Quality Control (Revised) Effective date of ISRS 4400 (Revised) will not be contingent on revised ISQC 1 becoming effective Facilitate the drafting of conforming amendments to both ISRS 4400 (Revised) and ISRS 4410 (Revised) when the revised ISQC 1 is finalized

Allow for a more holistic approach to addressing conforming amendments arising from the revised ISQC 1 Page 10 Question 1 The Board is asked for its views on the Task Forces proposed approach to address references to quality control in ISRS 4400 (Revised). Page 11 Significant Items in Exposure Draft Scope of this ISRS

Para. 1-3, A1-A7 The AUP Engagement Professional judgment fraud and non-compliance with laws & regulations Para. 4-7 Authority of this ISRS Para. 8-11 Page 12 Significant Items in Exposure Draft Effective Date 18-24 months after issuance of final standard Para. 12

Objectives Para. 13 Definitions Findings Para. 14 and A10A Page 13 Significant Items in Exposure Draft Conduct of an AUP Engagement Para. 15-17 Relevant Ethical Requirements

Practitioners independence Reporting on relevant ethical requirements and independence (para. 29(f)) Coordination with the IESBA Para. 18, A11-A13 Page 14 Significant Items in Exposure Draft Professional Judgment

Role of professional judgment in an AUP engagement Fraud and non-compliance with laws and regulations (as discussed in para. 7) Knowledge acquired from other engagements Para. 19, A15-17 Engagement Level Quality Control As discussed in References to Quality Control Para. 20, A19-A21 Page 15 Significant Items in Exposure Draft

Engagement Acceptance and Continuance Clear understanding of procedures to be performed Terminology Other changes to engagement acceptance and continuance Para. 21-25 and A22-A36; Appendix 1 Performing the AUP Engagement Written representations Para. 26, A37-A38

Page 16 Significant Items in Exposure Draft Using the Work of a Practitioners Expert Additional example of a practitioners expert Referring to a practitioners expert in an AUP report (para. 30 & A46) Other considerations Para. 27, A39-A40 Page 17

Significant Items in Exposure Draft The AUP report Matters as previously discussed o Relevant ethical requirements para. 29(f) o Referring to a practitioners expert in an AUP report para. 30 and A46 Illustrations of AUP reports Date of report Other changes to reporting Para. 28-31 and A42-A46; Appendix 2 Page 18 Significant Items in Exposure Draft

Undertaking an Agreed-Upon Procedures Engagement at the Same Time as another Engagement Para. 32 and A47 Documentation Para. 33 and A48 Page 19 Other Matters Matters for Explanatory Memorandum

Public interest Significant changes Quality control Key issues Findings; Relevant Ethical Requirements; Professional Judgment; Engagement Acceptance; and Practitioners Expert Exposure Period 120 days Effective Date 18-24 months after issuance of final standard Page 20 Question 3 The Board is asked for its views on: a) Whether there are any other matters that should be addressed in the Explanatory Memorandum.

b) The exposure period and the planned effective date. Page 21 www.iaasb.org For copyright, trademark, and permissions information, please go to permissions or contact [email protected]

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