How This New Accounting Standard Could Affect You
In the past, the standard format for Financial Statement presentation was the Notice to Reader communication. However, the Auditing and Assurance Standards Board (AASB) approved a new standard on compilation engagements in October 2019 (to be issued in February 2020).
This new standard takes effect for compiled financial statements for periods ending on or after December 14, 2021, with early implementation permitted.
The scope of services that fall under a compilation engagement is now more clearly defined. Therefore, it could affect whether a compilation engagement is actually required.
Valuable points to consider:
- A new note outlining the basis of accounting must be included with the compiled financial information.
- A new compilation engagement report will replace the Notice to Reader communication.
- A minimum level of documentation is now required, along with certain acknowledgments from management.
This new standard will provide the client with greater involvement in the process of compiling financial information through certain management acknowledgments. The client will, in turn, be provided a more thorough, insightful, and comprehensive compilation engagement report.
Some other significant benefits include:
- It’s a scope that sets out which services, including bookkeeping, financial information compilation, or tax preparation, are involved in a compilation engagement.
- Clear engagement acceptance considerations take effect when the compiled financial information is intended to be used by a third party.
- It offers specific guidance on the amount of work and documentation required.
- A note is included which describes the basis of accounting that was applied, eliminating uncertainty on how the compiled financial information was prepared.
- A new, more insightful compilation engagement report is more informative and transparent than the current Notice to Reader.
I’m excited about the new standard as it will benefit my clients significantly. If you need assistance interpreting the recent amendment, get in touch with Aimée Lococo-Sarabura, CPA, today. With over fifteen years of experience, I will help you with your accounting, bookkeeping, and taxation requirements in the South Georgian Bay region. I serve clients across Elmvale, Midland, Barrie, Wasaga Beach, and Collingwood, ON.