Changes to the standard on accounts preparation engagements
ACCA’s current guidance on accounts preparation engagements for limited companies and other incorporated entities – also referred to as compilation engagements – is included in Technical Factsheet 163 and is modelled on the International Standard on Related Services (ISRS) 4410 ‘Compilation Engagements’ issued by the International Auditing and Assurance Standards Board (IAASB).
Technical Factsheet 163 also includes an example of an accounts preparation report, which is a cross-profession report agreed in 2009 by the various members of the Consultative Committee of Accountancy Bodies (CCAB).
In March 2012 the IAASB updated ISRS 4410 by adopting the same format used for the ‘clarified’ International Standards on Auditing (ISAs) and by varying some of the standard’s requirements. The CCAB bodies are currently working to review the impact of the revised standard on their practising members in the UK and Ireland.
The aim of the review is to establish whether the approach to accounts preparation engagements in the UK and Ireland can be fully conformed to the new ISRS 4410. Additionally CCAB intends to work towards the production of joint guidance, including an example report, for the application of the new international standard in the UK and Ireland.
The revised ISRS 4410 includes a few additional requirements and some variations to the existing ones. Of particular importance is the new requirement that firms of accountants undertaking compilation engagements in accordance with ISRS 4410 should comply with ISQC 1.
The International Standard on Quality Control (ISQC) 1 requires a firm to establish and maintain a system of quality control to ensure that the firm and its staff comply with professional standards and applicable legal and regulatory requirements and that reports issued are appropriate. This usually translates into a requirement to document the process. In the UK and Ireland ISQC 1 is only mandated for firms that perform audits of financial statements, report on investment circulars or provide assurance services for public interest entities.
ACCA has published guidance on the application of ISQC 1 in Technical Factsheet 136.
The revised international standard also provides more detail about the items that should be documented by a firm performing an accounts preparation engagement and includes a specific requirement for the accountant’s report to be dated on the day when the engagement has been completed.
Although the adoption of ISRS 4410, and the CCAB guidance on its application in the UK and Ireland, will only be regarded as best practice and will therefore not be mandatory, as there is no official standard on accounts preparation in issue in the UK, it is likely to have a considerable effect on ACCA’s practising members.
ACCA UK therefore invites its members to provide their feedback on whether the adoption of ISRS 4410 in the UK should take place in full compliance with the revised standard or whether specific requirements should be ‘carved out’ or added in the future UK and Ireland application guidance.
Please send your feedback to ACCA UK via firstname.lastname@example.org