COMPILATION, , IN INDEPENDENT REVIEW & AUDIT IT Prepared by: Rashied Small, Lucinda Smidt & Jade Jansen On behalf of SAIPA
Profession Accountant Compilation, Review & Audit 2
Public In Interest Score Public Interest Score: The public interest score is a mechanism introduced by the Companies Act that determines: (i) the type of engagement that must be performed, (ii) accounting framework that must be adopted, and (iii) corporate governance issues that should be complied with Compilation, Review & Audit 3
PUBLIC IN INTEREST SCORE - CRITERIA Compilation, Review & Audit 4
PUBLIC IN INTEREST SCORE - CRITERIA • A number of points that equal the average number of employees during the financial year. • One point for every R 1 million (or portion thereof) in third-party liabilities at the financial year end. • One point for every R 1 million (or portion thereof) in turnover during the financial year • One point for every individual who, at the end of the financial year, is known to directly or indirectly have a beneficial interest. Compilation, Review & Audit 5
PUBLIC IN INTEREST SCORE - APPLICATION Public Interest Score Financial Reporting Standard Audit PIS ≥ 350 IFRS / IFRS for SMEs YES PIS ≥ 100 and < 350 and AFS were IFRS / IFRS for SMEs / SA GAAP YES internally compiled PIS ≥ 100 and < 350 and AFS IFRS / IFRS for SMEs / SA GAAP NO independently compiled PIS < 100 and AFS independently IFRS / IFRS for SMEs / SA GAAP NO compiled PIS < 100 and AFS internally The Financial Reporting Standard NO compiled as determined by the company for as long as no Financial Reporting Standard is prescribed Compilation, Review & Audit 6
PUBLIC IN INTEREST SCORE - APPLICATION Compilation, Review & Audit 7
PUBLIC IN INTEREST SCORE - PRACTITIONERS Compilation, Review & Audit 8
Compilation Engagement [I [ISRS 4410] Compilation Engagement: The objective of a compilation engagement is to compile financial statements or any other form of financial report Preparation & Compilation Engagement: The differences between a preparation and compilation engagement are: (i) independence of the Professional (ii) compliance to accounting standards (iii) trust and reliance of users Compilation, Review & Audit 9
Compilation - Assurance Assurance: A compilation does not involve and audit or review, no assurance about the financial statements is provided Compilation provide “implied assurance” about the fair presentation and relevance of the financial statements (requirement of accounting standards) and the procedures prescribed in terms of ISRS 4410 Compilation, Review & Audit 10
Compilation - Legislation • S 29 and s30 • Qualitative requires the characteristics and compilation presentation of financial information Companies Accounting Act Standards ISQC 1 ISRS 4410 • Responsibilities of • Competence the compiler and required to the procedures to perform the follow compilation Compilation, Review & Audit 11
Compilation - Benefits Compilation, Review & Audit 12
Compilation - Benefits Compilation, Review & Audit 13
Compiler’s Responsibilities Financial statement risks Verification of Independence information Compiler Compilation, Review & Audit 14
Compilation – Engagement Letter Purpose & objective Financial Reporting statement risk Engagement letter Mgnt’s Procedures responsibility Accounting framework Compilation, Review & Audit 15
Compilation - Procedures Compilation, Review & Audit 16
Agreed upon Procedures Engagement [I [ISRS 4400] Agreed Upon Procedures Engagement: Agreed upon procedures engagements is a task agreed on by the practitioner and a third party to report on factual findings. Agreed Upon Procedures Engagement: Agreed upon procedures engagements is a factual findings report for specified users where no assurance is provided or opinion is expressed Compilation, Review & Audit 17
Agreed on Procedures – Engagement Letter Nature of task Purpose Use of task Engagement letter Format of Financial report information Procedure Compilation, Review & Audit 18
Agreed on Procedures - Procedures Inquiry & analysis Re- Confirmation computation Agreed on procedures Accuracy Inspection checks Observation Compilation, Review & Audit 19
Agreed upon Procedures - Report Information Governing Restricted use standards Report Factual Independent findings Purpose of engagement Compilation, Review & Audit 20
Review Engagement [I [ISRE 2400] Review Engagement: Review by an independent professional to express an opinion that the financial statements, in all material aspects, comply with the accounting framework – provide negative assurance Review Engagement: The reviewer must assess financial statement risk through the application of professional judgement/scepticism, analytical procedures and inquiry – only need to obtain evidence for items which were identifies to have material risks. Compilation, Review & Audit 21
Parties Responsibilities Management Reviewer Compilation, Review & Audit 22
Review – Engagement Letter Purpose & objective Financial Reporting statement risk Engagement letter Mgnt’s Procedures responsibility Restriction on scope Compilation, Review & Audit 23
Assessing Materiality Prior results Industry Material Transactions practice risks Mgnt’s judgement Compilation, Review & Audit 24
Review - Procedures Understand business Information Accounting risk systems Review procedures Financial Accounting statement framework assertions Analytical procedures Compilation, Review & Audit 25
Review – Expression an Opinion Negative Assurance: Reviewer is satisfied based on the evidence obtained that the financial statements are free of misstatements Qualification of Assurance: The nature of matters may render the financial statements misleading, a qualified or adverse opinion may be expressed. Compilation, Review & Audit 26
COMPARATIVE ANALYSIS Compilation Independent review Audit Level of assurance Accountant does not Accountant obtains The auditor obtains a obtained by Accountants obtain or provide any limited assurance that high, but not absolute, or Auditors that the assurance that there are there are no material level of assurance about financial statements are no material modification modification that should whether the financial not materially misstated that should be made to be made to the financial statements are free of the financial statements statements material misstatement Objective To assist management in To obtain limited To obtain a high level of presenting financial assurance that there are assurance about whether information in the form no material modification the financial statements of financial statements that should be made to as a whole are free of without undertaking to the financial statements material misstatement provide any assurance thereby enabling the that there are no material auditor to express an modifications opinion on whether the that should be made to financial statements are the financial statements presented fairly, in all material respects Compilation, Review & Audit 27
COMPARATIVE ANALYSIS Compilation Independent review Audit Assurance provided to the None – the report states that None – the report provides a None – the auditor provides user of the no assurance is provided statement that the an opinion as to whether the financial statements accountant is not aware of financial statements present any material modifications fairly, in all material respects, that should be made to the the company’s financial financial statements position, results of operations and cash flows Situations requiring different Generally appropriate or Often prepared for privately Often prepared for levels of service privately held companies and held companies because of companies because outside are often prepared for simple requirements third parties (such as banks, situations (e.g., a lender of outside third parties (such creditors, potential needs IFRS financial as banks, creditors and purchasers and outside statements instead of the potential purchasers) that are investors) require an statements the internal looking for comfort that the auditor’s opinion on the accounting system produces financial statements are not financial statements or the lender needs the materially misstated comfort provided by knowing that an accountant read the financial statements) Compilation, Review & Audit 28
ASSURANCES Non-assurance services Assurance services Services from which a level a Provide assurance through expression an credibility is derived opinion or conclusion Reasonable No assurance Moderate assurance assurance Compilation Review Audit [ISRS 4410] [ISRE 2400] [ISA 100 - 800] Compilation, Review & Audit 29
Quality Control [I [ISQC 1] ISQC 1 Monitoring Engagement performance Leadership Human responsibilities Resources . Ethical Acceptance and requirements continuance Compilation, Review & Audit 30
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