INTERNATIONAL FEDERATION OF ACCOUNTANTS

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International Federation of Accountants
ADDRESSING THE NEEDS OF SMP IN THE DEVELOPMENT
OF IAASB PRONOUNCEMENTS
Jan Tyl, IAASB Technical Manager
IFAC SMP/SME and Developing Nations Consultative
Conference Prague, March 10-11, 2005
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Defining the Context

Intl. Fed. of Accountants

• Small and medium-sized practice (SMP) definition
  - IFAC
• Small and medium-sized entity (SME) definitions
• the European Union
• IFC
• Czech Republic
• USA
• IAASB

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SMP Permanent Task Force (SMP PTF)

Intl. Fed. of Accountants

• SMP/SME in IFAC Strategic Plan
• SMP Permanent Task Force
• To directly work with standard-setters
• To monitor IFAC committees work
• To facilitate communication

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SMP Permanent Task Force (SMP PTF)

Intl. Fed. of Accountants

• IAASB liaison with SMP PTF
• Composed of 15 members
• Rapid Response Teams (up to 4 members)
• Comments on standards and guidance 10 since
  January 2004

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SMP Permanent Task Force (SMP PTF)

Intl. Fed. of Accountants

• Comments on proposed revised ISA 260 result in
  changes to the exposure draft
• Proposed revised ISA 701 includes situations
  relevant for SMEs
• Practice aids development

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Applicability of ISAs to SMEs and SMPs

Intl. Fed. of Accountants

• The Wong Report
• Length and complexity of ISAs
• Cost of compliance
• Inconsistent application of standards
• Lack of SMP/SME involvement in standard-setting
• Focus on large entities

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Developing Standards Applicable to Audits of All
Entities

Intl. Fed. of Accountants

• Clarity project
• Requirements and presumptive requirements (shall
  and should)
• Bold type lettering and present tense
• Comments currently considered

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Developing Standards Applicable to Audits of
All Entities

Intl. Fed. of Accountants

• International Auditing Practice Statement 1005
  (IAPS)
• Introduced in 1999, revised in 2003
• Not designed to substitute ISAs
• ISA 240 and IAPS 1005
• Commentaries and considerations of SMP/SME issues

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Developing Standards Applicable to Audits of
All Entities
Intl. Fed. of Accountants

• Is IAASB meeting its objective of one set of
  standards applicable to all entities?
• Difficult to reconcile circumstances of large and
  small entities
• Significance of the public interest

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Developing Standards Applicable to Audits of
All Entities
Intl. Fed. of Accountants

• An audit is an audit
• Think-small-first standard-setting
• Consultative Advisory Group
• SMP/SME participation on IAASB Task Forces
• 2 IAASB members from SMPs
• SMP participation impediments

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Is Audit the Only Alternative for SMP/SMEs?
Intl. Fed. of Accountants

• Do SME owners and SME accounts users need an
  audit?
• Is audit a stamp purchase?

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Is Audit the Only Alternative for SMP/SMEs?
Intl. Fed. of Accountants

• What could replace audit?
• Two levels of assurance
• Canadian experience
• British experience
• IAASB study
• Moderate assurance ISRE 2400

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Questions to Participants

Intl. Fed. of Accountants

• What other steps should IAASB take to address the
  issues raised in the Wong Report?
• Would a different level of assurance serve the
  public interest?
• Are there other relevant questions?

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International Federation of Accountants