The only constant--is change. A year ago I addressed the changes to the Review Standard--now let's talk about the new Audit Report as well as the potential changes to the Compilation Standard.
There have historically been three levels of service provided by public accountants for financial statements, namely, audits, reviews and compilations (notice to reader).
As you may recall, the revised review standards were designed to increase the amount of assurance provided. While it is still more limited than that of an audit, it was reflected as a higher standard than the assurance previously. The new review standards apply to periods ending on or after Dec. 14, 2017.
The audit report is changing this year (for periods ending on or after Dec. 15, 2018). The level of assurance provided will not change, but the report provides an expanded description of responsibilities; the report is reordered to provide the opinion in the first section. This is to provide more clarity. The report has grown and you can't glance at the report to see if there are three paragraphs to know whether you are looking at a clean opinion as was the case years ago.
The compilation report has not historically provided ANY assurance. This standard was issued in 1987 and has not been revised significantly since that time. An exposure draft has been issued discussing proposed changes and why they are needed.
Consultations were conducted with representatives of the provincial accounting bodies, practitioners and lenders to better understand how compilation engagements are performed today and the issues identified by stakeholders.
These consultations identified:
* a gap between the premise that the financial statements are meant for use by management and the reality that the statements are often provided to a third party;
* variability in the extent of work performed by practitioners in compilation engagements;
* a gap between lenders' perception of the extent of work practitioners perform and what is required under the standards; and
* lack of clarity among lenders as to the basis of accounting applied in the preparation of compiled financial statements. In an attempt to provide further clarity, the proposed compilation engagement standard and report will:
Describe the responsibilities of management and the practitioner, and the nature and scope of the engagement.
Establish requirements for the minimum work effort by the practitioner.
Disclose the basis of accounting...