March 31, 2011
Via website posting: www.iaasb.org
IAASB Technical Director
International Auditing and Assurance Standards Board
545 Fifth Avenue, 14th Floor
New York, New York 10017 USA
Re: Proposed ISRS 4410 (Revised), Compilation Engagements
CMA Canada is pleased to provide comments for ISRS 4410 (Revised), Compilation
Engagements.
Our responses are attached in Attachment A. The specified questions are addressed and comments provided within the context of recognizing the key principles following in ISRS 4410
(Revised) of:

Clearly distinguishable from audits and reviews of financial statements (assurance engagements)

Meaningful for users, in context of the benefit delivered from application of professional expertise in accounting and financial reporting, and compliance with relevant professional standards and ethical principles

Able to be performed on a cost-effective basis
With 50,000 members around the world, CMA Canada grants a professional designation in strategic management accounting
®
and is responsible for standards-setting, accreditation, and the continuing professional development of Certified Management Accountants (CMAs). CMAs provide an integrating perspective to business decision-making, applying a unique blend of expertise in accounting, management and strategy to identify new market opportunities, ensure corporate accountability, and help organizations maintain a long-term competitive advantage. To optimize the performance of global enterprises and build strategic management accounting skills,
CMA Canada offers innovative executive development programs, advanced online courses, and internationally recognized knowledge management publications.
Please contact me if you wish to discuss any of the points raised in this response.
Sincerely,
Richard B. Benn, FCMA, C.Dir.
Executive Vice President
Attachment
1 Robert Speck Parkway, Suite 1400, Mississauga, Ontario, Canada L4Z 3M3 tel: 905 949-4200 or 1 800 263 7622 fax: 905 949-0888 e-mail: info@cma-canada.org website: www.cma-canada.org

Attachment A
CMA Canada Comments on
Proposed ISRS 4410 (Revised), Compilation Engagements
Small and medium enterprises (SME’s) are a vital component of the economy, and a sector which we must ensure has the ability to be served by an accounting professional at a reasonable cost.
With added regulation has come cost, which is often a prohibiting factor in obtaining external financial reporting resources to facilitate compliance reporting for this sector. The compilation engagement is a cost effective alternative for the small business that has limited financial resources and lacks internal expertise. Maintaining a simple standard that is clearly nonassurance, meaningful to users and cost-effective is critical to serving the ever growing market of small business in the global economy.
Bringing clarity and consistency to the compilation engagement is recommended, however,
ISRS 4410 (Revised) extends the boundaries of a standard for compilation engagements too far and encroaches on assurance engagement standards in some areas.
Responses to Questions
Q1.
Proposed ISRS 4410 is designed to apply when the practitioner is engaged to compile financial information in accordance with an applicable financial reporting framework and to provide a compilation report for the engagement performed in accordance with this ISRS.
Do respondents believe this scope is appropriate, and is it clear when practitioners undertaking the compilation of financial information are required to apply the standard?
What practical challenges, if any might arise from the proposed scope of the standard?
R.
In making a determination as to financial reporting framework the reader may perceive that specified procedures have been undertaken, thereby distorting the lines between assurance and non-assurance services.
A financial framework such as accounting standards for private enterprise (ASPE) or IFRS would add significant complexity to an otherwise simple and cost-effective engagement.
The complexity drives process, procedure and cost. This defeats the core principle - “able to be performed on a costeffective basis”. In a simple form a global financial framework such as cash vs. accrual could add clarity without added burden of complexity and fulfill the cost effective principle.
It is proposed that the p ractitioner must identify management’s intended use of financial information to be compiled and users of such information, in the engagement letter. The implication is that the practitioner has far greater responsibility in the engagement than they otherwise should in a compilation engagement, which may lead uninformed readers to interpret this as an assurance engagement. Acquiring knowledge and understanding is not appropriate for a non-attest engagement.
An additional reality is that the uses and users of the information may not be known by the practitioner, in which case, the practitioner would be required to fulfill an unattainable requirement.
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Q2.
Do respondents believe the compilation engagement performed under the proposed ISRS is clearly distinguishable from assurance services (audits and reviews of financial statements) to user of compiled financial information and the pra ctitioner’s report, to those who engage practitioners to prepare and present financial information of an entity, and to practitioners undertaking these engagements?
R.
There is an implied perception that what is required under the proposed standard is not clearly distinguishable from assurance services. A few examples include; the proposal of
ISQC 1 as well as the client representation letter. (See additional comments on clarity with assurance in other areas).
Clarity in distinguishing between compilation and assurance engagements in the practitioner’s report is critical. The statement “A compilation engagement does not include gathering evidence for the purpose of expressing an audit opinion or a review conclusion.” is a clear indication that the engagement does not provide for assurance.
Some guidance as to the minimum level of documentation to support that the financial standards are not false or misleading would be helpful in practice. There is often a discrepancy in this area as to what is too much – thus encroaching on assurance engagements and what is too little – thus not fulfilling the requirement to ensure the compiled financial statements are found neither false nor misleading.
Q3.
Is the requirement for the practitioner to obtain management ’s acknowledgement of its responsibilities as specified under the proposed ISRS an acceptable premise for the practitioner undertaking a compilation engagement under the standard?
R.
Requiring separate disclosure of management’s responsibilities is not suitable for compilation services; the Engagement Letter addresses adequately the responsibilities of management and the fact that ensuring accuracy and completeness of financial information is a component of management’s responsibilities. The acknowledgement may also lead to a perception of assurance, a stark contradiction to the statement that no assurance has been provided.
Q4.
Do respondents believe the proposed requirements dealing with the responses and actions by the practitioner when the practitioner believes the compiled financial statements contain a material misstatement, or are misleading, are appropriate?
R.
Provision to withdraw from engagement should be clearly stated.
Extensive and non-explicit procedures performed to verify information promote undue reliance on the compilation engagement and obscure the distinction between compilation engagements and assurance engagements.
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Q5.
When the practitioner identifies the need to amend the compiled financial information so that it will not be materially misstated or misleading, do respondents agree that the practitioner may, in appropriate circumstances, propose the use of another financial reporting framework as long as the proposed alternative framework is acceptable in the circumstances of the engagement and is adequately described in the financial information?
R.
Identification of the financial reporting framework in the report implies a specific basis of accounting, policies, estimates, presentation and disclosures. This implication may entice users to believe that the compiled financial complies with the framework, which would require the practitioner to verify compliance; resulting in what could be undue reliance on the report.
Purposing the use of another financial reporting framework may put the professional in a position of risk. A foundation for the basis for the recommendation would be required and goes beyond the scope of what a compilation engagement is intended to provide.
Q6.
Appendix 3 of the proposed ISRS sets out several il lustrative practitioners’ compilation reports. Do respondents agree these reports provide useful additional material to illustrate some different scenarios for compilation engagements? Do respondents believe the communication contained in these illustrative reports is clear and appropriate?
R.
The proposed statement “a compilation engagement involves applying expertise in accounting and financial reporting…” may lead the reader to believe that a more thorough review was conducted by the practitioner than is otherwise required to determine if the information is false or misleading.
The statement “A compilation engagement does not include gathering evidence for the purpose of expressing an audit opinion or a review conclusion.” is a clear indication that the engagement does not provide for assurance.
Q7.
Proposed ISRS 4410 is premised on the basis that a firm providing compilation engagements under the standard is required to apply, or has applied ISQC 1 or requirements that are at least as demanding. In light of this, are the requirements concerning quality control at the engagement level sufficient? Does this approach to specifying quality control provisions in proposed ISRS 4410 create difficulty at a national firm level? If so, explain.
R.
Adherence to the requirements by larger firms that provide assurance services would likely require little to no modification, however smaller firms and sole practitioners that don’t provide assurance services would have to build a quality control system that may not be feasible in a smaller environment and would not promote cost effective services. This would defeat the principle of “ability to be performed on a cost-effective basis”. There is provision of quality standards by all professionals that are required to adhere to their respective code of conduct and practice review / inspection processes. The nonprofessionals that provide non-assurance services including compilations do not have a code of conduct to adhere to; an added layer of quality standards would only increase the cost of the professional service with no added benefit to the client. Professional accountants are subject to various layers of quality standards that are required to maintain their respective professional designation, including a professional code of conduct, practice review (monitoring adherence to rules of professional conduct / code of conduct), as well as continuous professional learning and development requirements to name a few.
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In Summary
It appears that overall the proposed standard for compilation engagements is a move closer to assurance engagements. Consistency among accounting professionals as to what constitutes a compilation engagement and the requirements to support such an engagement is desirable, however, if what is proposed is adopted it appears the user and the practitioner may be put in an unfair position relative to non-professional preparers of compilation engagements; with no added benefit to the client. It is important for the accounting professional to be distinguishable from the non-professional by using professional standards and best practices; however, this must be achieved in a cost-effective manner to ensure value added service to the client.
Unraveling the competitive position of the accounting professional by implementing additional standards that do not add value to the user and increase the cost to the client, does not promote the profession in being able to achieve the principles stated.
The recommendation as proposed in ISRS 4410 (revised) is not clearly distinguishable from audits and reviews of financial statements, and could not be delivered on a cost-effective basis.
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