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    Sep 23, 2010

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    SMP Committee

     

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    SMP/SME

    SMP eNews

    In This Issue:

    Features

    1. IFAC, Member Bodies, G20 Collaborate on Financial Crisis Issues
    2. IFAC Explores SME Lending Issues
    3. Global Accountancy Profession Responds to IFRS for SMEs
    4. Developments in Alternative Assurance for SMEs

    News from IFAC

    5. IAASB Publishes Q&A for SMEs
    6. Implementation Resources Available for Revised Ethics Code
    7. New Translations of SMP Implementation Guides Now Available, New and Updated Guides Coming Soon

    More News from Around the Globe

    8. EC Consults on Adoption of ISAs, Stakeholders Express Support
    9. Auditing Practices Board Issues Guidance on Smaller Entity Audit Documentation
    10. AICPA Survey Highlights Economic Optimism, Top Issues Facing US CPA Firms
    11. Movement Grows to Promote Accountants as Trusted Business Advisers
    12. ICPAS Expands Resources for Training to Survive Economic Downturn
    13. Share eNews with Your Colleagues

    Features:

    1. IFAC, Member Bodies, G20 Collaborate on Financial Crisis Issues

    Over 60 leaders of the global accountancy profession met in London in late July to attend IFAC's G20 Accountancy Summit, where they developed a set of eight recommendations that was submitted to the leaders of the Group of Twenty (G20) Finance Ministers and Central Bank Governors prior to the Group's September meeting on the financial crisis in Pittsburgh, Pennsylvania. The leaders attending the Summit represented accountancy organizations in 17 of the G20 countries.

    These recommendations included:

    • accelerated efforts by G20 leaders to promote the adoption and implementation of a single set of high-quality standards for accounting, auditing, and auditor independence; and
    • explicitly addressing the needs and realities of small- and medium-sized enterprises (SMEs) in the formulation and implementation of policies and reforms.

    The letter to the G20 working groups, with the full list of recommendations, is available in the section of the IFAC website devoted to the global financial crisis at www.ifac.org/financial-crisis.

    IFAC has also dedicated resources to help SMPs and SMEs cope with the economic downturn. These resources are located in the section of the IFAC website devoted to the global financial crisis and the Resources section of the International Center for SMPs at www.ifac.org/smp.

    2. IFAC Explores SME Lending Issues

    Access to lending is one of the greatest challenges affecting small- and medium-sized (SMEs) in the global economic downturn. To better understand this issue, IFAC has collaborated with the Financial Times magazine The Banker, in a survey exploring the relationship between SMEs and the lending community. The results of the survey will be published in the October 2009 edition of The Banker and will be shared with IFAC member bodies.

    The survey will provide IFAC and stakeholders with a better understanding of the following:

    • The needs of lenders when serving SMEs
    • The perceived challenges for SMEs in acquiring financing
    • How the accountancy profession can best support SMEs and lenders

    Resources to help SMEs gain access to finance can be accessed under the Resources section of the International Center for SMPs at www.ifac.org/smp.

    3. Global Accountancy Profession Responds to IFRS for SMEs

    After a five-year consultation process, the International Accounting Standards Board (IASB) has published the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs), a self-contained standard designed to meet the needs and capabilities of SMEs. IFAC and many of its member bodies and others have responded to the publication.

    IFAC issued a press release welcoming the IFRS for SMEs and encouraging its 157 member organizations to consider carefully how to use the standard in their respective jurisdictions. IFAC, largely through its SMP Committee, has closely followed and supported this project since its inception, providing input at various stages of the standard's development.

    In addition, a number of stakeholders from around the world have already responded to the release:

      • ASEAN
        The ASEAN Federation of Accountants (AFA) welcomed the release of the IFRS for SMEs.
      • European Union
        a) The European Commission has decided to take more time for its ongoing review of the Fourth and Seventh Accounting Directives to carry out consultations on the standard. Commission staff will gather views of stakeholders on the reporting needs of SMEs and on other issues of relevance to the European Union's SME accounting framework.
        b) The Fédération des Experts comptables Européens (FEE) has issued a release supporting it.
      • South Africa
        South Africa is considered to be the first country to adopt the IFRS for SMEs. The South African Institute of Chartered Accountants has produced a summary of the standard.
      • United Kingdom
        The UK's Accounting Standards Board has issued a consultation paper, Policy Proposal: The Future of UK GAAP, which sets out proposals for the future reporting requirements for UK and Irish entities, including the role of the IFRS for SMEs.
      • United States
        The US may become a big market for the new standard after the American Institute of Certified Public Accountants' (AICPA) decision last year to recognize the IASB as an international accounting standard setter. In recognizing the IASB's role, AICPA members have the option to use the IFRS for SMEs. The AICPA has moved quickly to promote the voluntary use of the standard in the US with a press release welcoming the standard, a video discussing it, and publication of a Q-and-A resource on the IFRS for SMEs. More information and tools for the standard can be found at www.IFRS.com, the AICPA's website devoted to all IFRS issues.

     

    4. Developments in Alternative Assurance for SMEs

    Exploring alternate assurance services for small- and medium-sized entities (SMEs) continues to be a priority for the International Auditing and Assurance Standards Board (IAASB) and other organizations.  The IAASB's ongoing project within the Strategy and Work Program for 2009-2010 involves the revision of International Standard on Review Engagements (ISRE) 2400, Engagements to Review Financial Statements. The IAASB's current thinking is that such revisions, if undertaken with a sufficiently broad remit, should provide standards for services that provide acceptable alternatives to an audit. Exposure drafts are planned for 2010 and final standards for 2011.

    Other related developments include the following:

    • FEE: The Fédération des Experts comptables Européens' (FEE) Survey on the Provision of Alternative Assurance and Related Services Across Europe offers insights into the existence, implementation, and consistency of alternative assurance and related services in Europe. It appears that the increases in audit exemption thresholds over the last few years in a number of European countries have exacerbated the need for alternative assurance services for SMEs.
    • AICPA: Earlier this year, the American Institute of Certified Public Accountants (AICPA) had released an exposure draft (ED) setting out proposed changes to its standards related to compilation and review engagements. It has received an unprecedented 160 comments, which are now under consideration. The ED proposed that an accountant be permitted to issue a review report on financial statements when also performing non-attest services that were designed to improve the reliability of the client's financial information. More information on the project is available from the AICPA's website, including Part I and Part II podcasts, an article in the Journal of Accountancy, and a short video.
    • ICAEW: The Institute of Chartered Accountants in England and Wales (ICAEW) issued the report Alternatives to Audit, which presents the findings of a two-year consultation by its Audit and Assurance Faculty on a new assurance service, the ICAEW Assurance Service, which is based on the IAASB idea of limited assurance. Other ICAEW resources related to Alternatives to the Audit can be found here.

    News from IFAC

    5. IAASB Publishes Q&A for SMEs

    The International Auditing and Assurance Standards Board (IAASB) has published a question-and-answer (Q&A) paper, titled Applying ISAs Proportionately with the Size and Complexity of an Entity, which helps explain how the clarified International Standards on Auditing (ISAs) can be applied to the audits of entities of different sizes, in particular small- and medium-sized entities (SMEs).

    As a result of the IAASB Clarity Project, all 36 ISAs and the International Standard on Quality Control 1 were redrafted in a new clarified style that makes them easier to understand, translate, and implement. These standards were designed to be applied in a manner proportionate to the complexity and size of the entity being audited. The paper and additional resources being developed by the IAASB to support the adoption and implementation of the clarified ISAs, can be found in the IAASB Clarity Center at www.web.ifac.org/clarity-center/index  or via the Resources section of the International Center for SMPs at www.ifac.org/smp.  

    6. Implementation Resources Available for Revised Ethics Code

    The International Ethics Standards Board for Accountants (IESBA) issued in July, following the approval and consideration of due process by the Public Interest Oversight Board (PIOB), a revised Code of Ethics for Professional Accountants (the Code).

    The Code becomes effective on January 1, 2011.

    The full text of the revised Code can be accessed from the Ethics section of the IFAC online bookstore at www.ifac.org/Store.

    Recognizing the effect these changes will have on professional accountants in practice and business, the IESBA staff has developed a range of materials to facilitate adoption and implementation of the Code. The documents, which are non-authoritative and issued for information, include the following:

    • Slide Presentations: High-level and in-depth that can be used to explain the content of the Code
    • Overview of Independence Requirements: A short document providing an overview of the independence requirements contained in Section 290 of the Code
    • Comparisons: A high-level and more detailed comparison that will help people understand the differences between the July 2009 Code and the previous Code
    • Template: A comparison template containing the complete text of the Code, which can assist individuals who want to understand how the provisions in their jurisdiction match up to the Code

    All of these support materials can be accessed from the Resources section of the IESBA website at www.ifac.org/Ethics/Resources.php.

    7. New Translations of SMP Implementation Guides Now Available, New and Updated Guides Coming Soon

    New translations of the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-sized Entities (ISA Guide), and the Guide to Quality Control for Small- and Medium-sized Practices (QC Guide), are now available in the IFAC online Translations Database at www.ifac.org/Translations/database.php or via the Resources section of the International Center for SMPs at www.ifac.org/smp.  

    The ISA Guide has now been translated into the following languages:

    • French, by Néjib Sfayhi of Audit & Systems - Tunisia, with a summary prepared by Hechmi Abdelwahed, member of the IFAC Small and Medium Practices Committee
    • Spanish, by Samuel Mantilla with ECOE Ediciones

    The QC Guide has been translated into the following languages:

    • French, by CGA-Canada
    • Spanish, by Instituto Mexicano de Contadores Públicos
    • Portuguese, by the Federal Accounting Council (CFC) and the Brazilian Independent Auditors Institute (IBRACON)

    In the next 12 months, IFAC will be issuing a revised and improved ISA Guide, designed to support the newly clarified ISAs, a revised and improved QC Guide, and a new Guide to Practice Management for Use by Small- and Medium-sized Practices. All SMP publications can be downloaded for free via the Resources section of the International Center for SMPs at www.ifac.org/smp.

    More News from Around the Globe

    8. EC Consults on Adoption of ISAs, Stakeholders Express Support

    The European Commission (EC) has completed a public consultation to determine whether the International Auditing and Assurance Standards Board's International Standards on Auditing (ISAs) should be adopted in the European Union (EU) for the statutory audits of private entities. The survey sought comment from users of audit reports, companies, public authorities and regulators, academics, and members of the public on the use of ISAs within Europe.

    Several stakeholders have already embraced the move. In a statement, the Fédération des Experts comptables Européens (FEE) has stated that it "fully supports the adoption of ISAs for all statutory audits in the EU as the use of harmonized international auditing standards will increase audit quality and enhance confidence in the reliability, comparability and consistency of financial statements in the EU, as well as the acceptance of audit reports beyond their home jurisdictions whether within or outside the EU."

    The European Federation of Accountants and Auditors for SMEs has echoed the FEE's comments in its own public statement.

    9. Auditing Practices Board Issues Guidance on Smaller Entity Audit Documentation

    The Auditing Practices Board of the Financial Reporting Council has issued an exposure draft of Practice Note 26 (Revised), "Guidance on Smaller Entity Audit Documentation," which outlines proposed changes to the practice note, including guidance to auditors on the application of documentation requirements contained within the clarified International Standards on Auditing (ISAs) (UK and Ireland) to the audits of smaller entities.

    In particular, the revision focuses on areas where feedback regarding the implementation of the ISAs (UK and Ireland) has identified that further guidance could be helpful, for example, uncertainty about the extent of documentation required to evidence the auditor's understanding of the entity, especially with regard to internal control.

    10. AICPA Survey Highlights Economic Optimism, Top Issues Facing US CPA Firms

    Accounting firms appear to be weathering the economic downturn well, according to the latest 2009 CPA Firm Top Issues Survey released by the AICPA. When asked about the economy's greatest effect on them, many firms with 20 or fewer professionals picked "no impact." When projecting expected revenue in the year ending May 2010, roughly 45-60 percent of every firm segment expected some growth. Firms also generally expected little change in staffing this year, although the percentage varied widely by firm size.

    11. Movement Grows to Promote Accountants as Trusted Business Advisers 

    Movement is growing within the profession to promote accountants as trusted business advisers to their clients. The feature article in the Canadian Institute of Chartered Accountants publication, CA Magazine, makes the case for this evolution of the accountant's role to their small- and medium-sized entity clients by outlining ten new ways to add value, such as providing diagnoses of and proposing solutions to client fiscal problems and by providing input to strategic planning and refining business models.

    However, to capitalize from the role of trusted business advisers may demand practices taking a different approach to pricing. The June 2009 edition of the AICPA's Journal of Accountancy ran an article, "Pricing on Purpose: How to Implement Value Pricing in Your Firm," arguing that pricing by the hour doesn't adequately measure the value firms create for their clients. Instead, the article encourages CPAs to consider using "value pricing" which calculates value as perceived and determined by the client.

    12. ICPAS Expands Resources for Training to Survive Economic Downturn

    The Institute of Certified Public Accountants of Singapore (ICPAS) has contributed just over $1 million to its Continuous Professional Education Training Assistance Package in hopes of encouraging members to continue ongoing training and development during the economic crisis. The package is meant to assist individuals, as well as small and medium practices, manage their training costs and encourage firms to continue enrolling their CPAs in training programs. The package offers ICPAS members training credits worth 50 percent of their membership fees.

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    For more information about any of the items mentioned above or other information about the SMP Committee, please contact communications@ifac.org.

    About IFAC

    IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. Through its independent standard-setting boards, IFAC sets international ethics, auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high-quality performance by professional accountants in business.

     

     

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