Compliance Review – CSRS 4200 Compilation Engagements

Many of the provincial CPA bodies have issued CSRS 4200 Compilation Engagement Alerts, such as the one issued in BC, putting practitioners on notice that inspection findings are highlighting deficiencies in the application of the requirements under CSRS 4200, Compilation Engagements.   

These deficiencies were summarized as follows:

Failure to transition to CSRS 4200, Compilation Engagements

If you are not aware there is a new standard applicable to all Notice to Reader engagements, you are welcome to contact us. We can provide you with a roadmap to transition your files based upon the specific subscriptions and resources your firm uses.

Acceptance and continuance including intended use and availability of future information

Prior to accepting or continuing an engagement you will need to confirm the uses of the financial statements and the basis of accounting to be used in the drafting of the financial statements with management.  The documentation of this discussion and its conclusions needs to be evidenced prior to the execution of the engagement letter and the related compilation engagement work. 

The importance of this documentation, in relation to compliance, is due to the further required considerations as to whether the firm may accept the compilation engagement depending on the availability of further information to various third parties.  

Although these requirements for acceptance and continuance are not difficult, they are a significant change in the operational processing of these types of engagements.  The challenge is implementing a process which does not require significant time and/or effort of senior staff within the firm.

Documentation of the accounting systems and processes

Finding the right balance in the provision of sufficient information as it relates to your clients’ accounting systems and processes has proven difficult.  This was not unexpected as there were very few examples and resources released and within many firms, it is the junior staff, with very limited business exposure at this stage in their careers, who are completing this documentation.

What level of documentation would be considered sufficient, without moving these engagements into a review engagement level of documentation?  If you can answer the following question for all significant cycles or areas of the financial statements the documentation is likely sufficient:

  • The client / accountant posts the transaction or journal entry for (revenue, payables, payroll, inventory acquisitions, other liabilities, etc.) when this triggering event is completed (cash is received, goods are delivered or received, invoice is received, etc).

When this question cannot be answered based on the documentation in your engagement file, it is difficult for any quality reviewer to reach a conclusion as to whether the accounting records, including journal entries, agree to the basis of accounting. 

Basis of accounting

The basis of accounting is disclosed in the Note(s) to the financial statements.  Although we now have considerable flexibility in the determination of an appropriate basis of accounting for our clients, the majority of the time a cash basis plus a number of specific accruals, which results in financial statements which meet general compliance with CRA requirements, is agreed upon by the firm and the client. 

Here are few tips related to deficiencies being noted in relation to the basis of accounting:

  • Do not reference a specific accounting framework (ASPE, ASNPO) unless you are fully compliant with all measurement, recognition, presentation and disclosure requirements (this would occur very rarely). 
  • Do not describe your basis of accounting as an accrual basis of accounting without specifically identifying which accruals were made to the cash basis amounts and/or accounts recognized.
  • Include all items on the balance sheet which are not, or where it may be uncertain as to whether or not these are, recognized at historical cost.
  • Do not include other disclosures in your financial statements which can be mistaken for accounting framework (ASPE / ASNPO) requirements such as a summary of other accounting policies or a significant number of disclosures that are ASPE / ASNPO complaint.    

How can Clearline Consulting help?

As a leading provider of professional consulting services to the Canadian CPA profession, we have the expertise and experience to help firms identify and address any deficiencies in engagement execution and documentation. As we are also partners in public practice, Clearline Consulting understands the importance of operational efficiency, in additional to standards compliance. We work closely with our clients to ensure that their documentation requirements are met in the most efficient and cost-effective way possible. We will examine existing processes and procedures and make recommendations on how to best streamline and improve them.

Completed Engagement Monitoring

We will review two completed compilation engagements and provide you with specific firm feedback as it relates to compliance with CSRS 4200, Compilation Engagement requirements and discuss any related process improvements, complete this short registration form and we will be in touch.

Common Deficiency Report

Alternatively you can purchase our common deficiency report from our online store and complete an internal review of a sample of your completed compilation engagements.

Internal Training

We are available to provide comprehensive training and support services to ensure that all stakeholders in the firm understand the documentation requirements and how best to execute this documentation. This training can be provided at an all staff level focusing on the documentation or with the senior levels of your firm to get everybody on the same page.

Share this blog with your colleagues, sign up for our newsletter and reach out to @ClearlineConsulting anytime through this contact us link if we can assist with standards implementation including compilation engagements, cyclical monitoring requirements, CPD and related training, or practice management considerations. Visit our store to see new products released for AuP engagements, redeemable shares and common deficiencies found on implementation of CSRS 4200.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.