A key objective of the Auditing and Assurance Standards Board (AASB) is to set standards for a broad range of engagements, not just audits. The extant standards dealing with reviews and compilations date back to the 1980s, and with all the changes in today’s practice world, it’s time for an update.\nThe new review engagements standard: It’s here \nNew standards issued in April 2016 are effective in 2017. The new standards have all the requirements and application material needed to conduct a review engagement. The old standards did not cover all areas in enough depth, so users often analogized from the auditing standards when there were gaps, leading to inconsistent practices. \nExpanded requirements and application material will drive consistency in performance. The new, informative review engagement report provides greater transparency about the practitioner’s work effort. Changes from the extant standards are significant, but are closer to today’s practice. The standard does not permit early application, which should reduce confusion in the marketplace.\nWhat does this mean for you and your practice?\nDuring consultations I attended during the buildup to the standard, I was struck by the variation in practice that is out there today. Diversity exists across all sizes and types of firms. So, for some practitioners, the changes will be relatively minor. For others, look out.\nWith educational courses being rolled out across the provinces this year, now is the time to get familiar with the new standard and its implications for your practice.\nIn June, CPA Canada issued a helpful alert explaining the basics of the new standard. Another alert explains in more detail how the new standard differs from the old one. A more detailed guide is under development.\nCompilation engagements standard being overhauled\nDiscussions with practitioners and practice inspectors across the country over the last few years point to significant inconsistency in how compilation engagements are performed. Furthermore, surveys of compilation report users, primarily bankers, indicate that greater reliance is being placed on compiled financial statements than may be merited.\nIn response, the AASB commenced a project to update the existing standard that dates back to the 1980s. Staff is comparing and contrasting the Canadian standard with how other standard setters approach compilations. I see a number of complex questions that may need to be addressed, such as:\n\n What is the appropriate scope of the standard — is it for financial statements solely for management, or can financial statements be compiled for broader use?\n What is the appropriate work effort — and how does this tie in with the practitioner’s ethical responsibility not to be associated with misleading information?\n Does the compilation report need to include brighter red flags to draw attention to the limited nature of the practitioner’s involvement and of the financial statements?\n\nGiven these complexities, it is likely that the project will be of great interest to a broad range of practitioners and extensive consultation is going to be very important. This is where practitioners who operate in this space can provide invaluable input.\nProfessional Engagement Manual issued\nCPA Canada just issued its latest version of the Canadian Professional Engagement Manual. The manual can be a useful tool to performing efficient and effective audits, including best means of completing the working paper file. I particularly like the case study approach, which can be used to train more junior staff on how to use the manual appropriately.\nKeep the conversation going\nKeep up to date on latest developments on reviews and compilation engagements and get involved as the compilation project evolves. Do you agree it is time for a change?\nPost a comment below; or email me directly.\nConversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.