International Standard on Related Services

1 International Standard on Related Services ISRS 4410 (Revised), Compilation Engagements Basis for Conclusions Prepared by the Staff of the IAASB March 2012 2 This document was prepared by the Staff of the International Auditing and Assurance standards Board (IAASB). The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared Standard -setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The objective of the IAASB is to serve the public interest by setting high-quality auditing, assurance, and other Related standards and by facilitating the convergence of International and national auditing and assurance standards , thereby enhancing the quality and consistency of practice throughout the world and strengthening public confidence in the global auditing and assurance profession.

2 -------------------- The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). The mission of the International Federation of Accountants (IFAC) is to serve the public interest by: contributing to the development, adoption and implementation of high-quality International standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants; promoting the value of professional accountants worldwide; speaking out on public interest issues where the accountancy profession s expertise is most relevant.

3 International standards on Auditing, International standards on Assurance Engagements, International standards on Review Engagements, International standards on Related Services , International standards on Quality Control, International Auditing Practice Notes, Exposure Drafts, Consultation Papers, and other IAASB publications are published by, and copyright of, IFAC. The IAASB and IFAC do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. The IAASB logo, International Auditing and Assurance standards Board , IAASB , International Standard on Auditing , ISA , International Standard on Assurance Engagements , ISAE , International standards on Review Engagements , ISRE , International standards on Related Services , ISRS , International standards on Quality Control , ISQC , International Auditing Practice Note , IAPN , the IFAC logo, International Federation of Accountants , and IFAC are trademarks and service marks of IFAC.

4 Copyright March 2012 by the International Federation of Accountants (IFAC). All rights reserved. Permission is granted to make copies of this work provided that such copies are for use in academic classrooms or for personal use and are not sold or disseminated and provided that each copy bears the following credit line: Copyright March 2012 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact for permission to reproduce, store or transmit this document. Otherwise, written permission from IFAC is required to reproduce, store, transmit, or make other similar uses of this document, except as permitted by law. Contact by: 3 BASIS FOR CONCLUSIONS: ISRS 4410 (REVISED), COMPILATION ENGAGEMENTS This Basis for Conclusions has been prepared by staff of the International Auditing and Assurance standards Board (IAASB).

5 It relates to, but does not form part of, International Standard on Related Services (ISRS) 4410 (Revised), Compilation Engagements, which was approved by the IAASB in December 2011, with the affirmative votes of 18 out of the 18 IAASB Background 1. The IAASB commenced the project to revise the extant ISRS 44102 in March 2009. This project was part of IAASB s strategic focus to explore standards for a range of Services that are capable of meeting the unique needs of small- and medium-sized entities (SMEs), and the users of their financial information. In taking this initiative, the IAASB recognized the market demand for Services , other than the financial statement audit, relevant to enhancing the credibility of the financial information of SMEs.

6 This demand has been particularly apparent in jurisdictions where recent changes to law and regulation have resulted in a significant proportion of corporate entities no longer being required to have their financial statements subject to audit. 2. In undertaking the revision of extant ISRS 4410, the IAASB acknowledged the importance of compilation engagements for SMEs, both within jurisdictions where compilation engagements are already commonplace and those where use of these engagements is relatively new. It also was recognized that, in some jurisdictions, there may be existing types of Services performed by professional accountants that, in some respects, are similar to the compilation engagement as described in the International standards , but that also differ in key areas.

7 3. An important consideration of the project has therefore been to make clear the key distinguishing features of a compilation engagement performed in accordance with ISRS 4410 (Revised), and the value of the engagement in enhancing the usefulness of an entity s financial information. Through the revision of this Standard , the IAASB aims to help practitioners performing compilation engagements around the world converge to the use of a globally accepted benchmark for such engagements. 4. In October 2010, the IAASB exposed proposed revised ISRS 4410 (ED-4410). The comment period closed on March 31, 2011, with 49 comment letters from various respondents, including regulators and oversight authorities, national Standard setters, IFAC member bodies and other professional bodies, firms and individuals.

8 This Basis for Conclusions explains the more significant issues raised by respondents to the ED, and how the IAASB has addressed them. 5. The IAASB has discussed this project with its Consultative Advisory Group (CAG) on six separate occasions. 1 See minutes of the December 5 9, 2011 IAASB meeting at under the heading Minutes. 2 ISRS 4410, Engagements to Compile Financial Statements BASIS FOR CONCLUSIONS: ISRS 4410 (REVISED) Prepared by the Staff of the IAASB 4 Use and Applicability of the Standard 6. ED-4410 proposed that the Standard be applicable when the practitioner is engaged to compile historical financial information and provide a report for the engagement in accordance with ISRS 4410.

9 Accordingly, when a practitioner is engaged only to compile financial information without providing a report in accordance with ISRS 4410 (Revised), the practitioner does not assert compliance with ISRS 4410 (Revised). 7. The majority of respondents to ED-4410 who expressly commented on this issue agreed with this proposed scope. Several respondents, however, disagreed. Among the respondents who disagreed, some were of the view that reporting should be addressed only within the requirements of the Standard , and should not be specified as a part of the scope of the ISRS. The concern noted was that this formulation of the scope of the Standard could enable practitioners to opt out of using the ISRS by merely agreeing to undertake an engagement to compile financial information without providing the required report.

10 IAASB Decisions 8. The IAASB reaffirmed its view that ISRS 4410 (Revised) should address compilation engagements that involve the issuance of a report on the engagement in accordance with the ISRS, and that the matter of reporting should be explicitly acknowledged in the scope of the Standard . (See paragraph 1 of ISRS 4410 (Revised).) 9. The IAASB recognized that there are types of Services performed by professional accountants that, in some respects, are similar to the compilation engagement as described in the International standards , but that also differ in some areas. One such area is the need to report to users of the information on the nature of the engagement performed.