ISRS 4410 Guide for Compilation Engagements

ISRS 4410 (Revised) –
Compilation Engagements

A standard for today‟s financial reporting needs

Kuala Lumpur March 23, 2012
Page 1 | Confidential and Proprietary Information

ISRS 4410 (revised)

• A flexible standard for the professional accountant in
public practice

• Adaptable to a wide variety of non-assurance
engagements

• Effective for compilation reports issued on or after
September 1, 2013

• Early adoption permitted


Benefits to the engagement

What your client gains-
• Your expertise in accounting and financial reporting
tailored to their specific needs
• An objective view from a professional accountant
• A clear report outlining the nature of the engagement

What you gain from the engagement-
• Clearly communicated terms of engagement
• Flexibility to deliver a meaningful service
• A happy client 


Why and when to use 4410

• 4410 (Revised) can be tailored to your engagements

• The prescribed report clearly describes:
– Management responsibilities
– Your value added and your responsibilities
– That no assurance is being given by you

• If stating compliance with 4410, you must issue a report
prescribed by 4410


Flexibility in financial reporting

• The basis of accounting can be complex or simple

• It must be appropriate to the engagement

• The basis is always disclosed as part of the compiled
financial information


Understanding your client

• You need sufficient understanding of:

– The entity‟s business and operations and
– The financial reporting framework

To be able to perform the compilation.

This may require a lot or a little depending on the
engagement


Communicating with clients

Communication is required throughout the standard.

Specifically:

– In the engagement acceptance phase

– All significant matters during the engagement

– A report accompanying the compiled information


Significant judgments

Management is responsible for the reported information

• Not required to second guess management judgments

• You must discuss significant judgments with management
where you have provided assistance

• Discussion must be sufficient to allow management to take
responsibility for the compiled information


Ethical responsibilities

• Must comply with the IESBA Code

• No requirement for independence

• If you know compiled information to be materially
misstated or misleading, you must resign. No middle
ground.


Summing it up

ISRS 4410 (Revised)

 New opportunities for professional accountants

 Flexibility permits good client service

 A focus on communication throughout

 Promotes consistent high quality practice

 Clients and accountants will benefit

ISRS 4410 (Revised)

Try it.
You and your clients will benefit.


REVIEW ENGAGEMENTS
AN ASSURANCE ALTERNATIVE

ISRE 2400

• Under revision now
• Completes the suite of standards for professional
accountants and their clients
– Reasonable assurance - audits - the ISAs
– Limited assurance - reviews - ISRE 2400
– No assurance – compilations – ISRS 4410


2400 – Basic concepts

Limited assurance – what is it?

• Risk of undetected misstatement greater than in an audit

• Assurance must be meaningful to users of the information


A limited assurance engagement

• The report conclusion is evidenced based

• Specified procedures are required

• Professional judgment required throughout

• Ethics based (independence/competence/due care)

• Firms must be in compliance with ISQC1


Challenges in Defining a middle ground

• How much evidence is enough to support the conclusion
“nothing has come to my attention…”?

• Needs a practitioner with up-to-date assurance skills

• A review is not „audit-lite‟. If statements cannot be
audited, they likely cannot be reviewed either


The review process #1

Engagement acceptance

• Confirm management‟s responsibility

• Review management‟s integrity – critical for inquiry

• Are systems likely sufficient to produce data adequate for
meaningful analytical review?



Develop an understanding of what?

1) The entity and its environment and

2) The reporting framework

Sufficient to do what?

To identify areas where material misstatements are likely to
arise



Perform primarily inquiry and analysis on:

1) All material items and

2) Focus on areas where material misstatements likely to
arise

Inquiry to include questions on fraud and going concern

No prohibition on performing other procedures.


How much evidence is needed?

• Sufficient to be able to conclude that nothing has come
to your attention that the statements are materially
misstated.

• This is not a „did nothing, saw nothing‟ conclusion. It is a
conclusion based on a significant understanding of the
entity and evidence gathering procedures by a
professional accountant skilled in assurance techniques.



If you have cause to believe the statements may be
materially misstated, you must perform additional procedures
to:

1) Conclude „nothing has come to your attention…‟ or

2) Determine the statements are misstated and modify the
conclusion accordingly.


Communication critical

Communication is emphasized throughout 2400:

• At the engagement acceptance phase

• At the planning phase with the client and staff

• Inquiry of management and others at every stage

• All significant matters identified in the engagement

• In the review report itself

Summing it all up

• 2400 is a nuanced standard

• Part of the suite of standards covering services offered by
professional accountants to their client

• Result in a meaningful level of assurance to users at an
appropriate price


Reviews and compilations

Thank you for your attention.

Any questions?


ISRS 4410 Guide for Compilation Engagements

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