Comments from ACCA to the International Auditing and Assurance Standards Board (IAASB), 2011.
ACCA welcomes the opportunity to respond to the exposure draft of proposed International Standard on Review Engagements 2400 (Revised) Engagements to Review Historical Financial Statements issued by the International Auditing and Assurance Standards Board. Review engagements are important where there is no audit, as they allow a professional accountant to enhance the credibility of financial statements. While such engagements may involve relatively large companies and be a statutory requirement, they are more commonly commissioned in the small and medium-sized enterprise (SME) sector.
In our general comments on the exposure draft, we explore the commercial viability of the review engagement and the difficulty of achieving global acceptance of the proposed standard. We contrast the demands of the 'traditional markets' where the extant standard is used, and the different needs of emerging markets; arguing that key decisions have to be taken on the form of reporting and standards as the proposed compromises in ISRE 2400 may hinder its widespread adoption.
We refer to the difficulty of drafting requirements without the benefit of a theoretical base, such as would have been provided by work on the fundamental principles of assurance, which ACCA and others called for at the commencement of the International Standards on Auditing 'Clarity project'. We suggest that some work on the principles could be included in a current project on audit quality and indeed that the project ought to include quality issues for non-audit engagements, which are important for SMEs.
We also draw attention to the need to revise all of the engagement standards that are relevant to financial statements in the SME sector. While there are current projects relating to the standards for reviews and for compilations, we look forward to a revision of the standard for agreed-upon procedures. We also highlight the need, when finalising each standard, to ensure that it may be used in hybrid engagements that combine elements of the subject matter of individual standards to meet client needs. We further suggest that the standard needs to be consistent with any future changes in auditor reporting, especially where an audit is commissioned voluntarily.