International standards on review and
compilation engagements need to be urgently revised to respond to
changing market needs, according to a survey by the Federation of
European Accountants (Fédération des Experts Comptables Européens –
FEE).
The survey found a variety of approaches to
the use of assurance and its alternatives in the EU.
The federation called for a “swift” response
from the International Auditing and Assurance Standards Board
(IAASB) to help limit national initiatives from going in different
directions.
The majority of the alternative assurance or
related services were developed for audit exempt entities.
The survey also found there has been an
increase in audit exemption thresholds in a number of EU countries
over the past few years.
This has intensified the need for alternative
services for SMEs.
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By GlobalDataA report released by the Institute of
Chartered Accountants in England and Wales backed FEE’s findings.
The report, Alternatives to Audit, was released after a
two year consultation on a new assurance service based on the
IAASB’s idea of limited assurance.
It found there is a need for alternatives to
audit to enhance the credibility of financial information and
recommended there should be choice when it comes to how companies
demonstrate the reliability of the information they present.
IAASB technical director James Gunn told
The Accountant the board recognises there is a growing
demand for alternatives to audit.
However, he noted the nature and extent of
this demand varies across different national markets.
The board is currently in the process of
revising its compilation and review standards. Exposure drafts are
expected to be released in mid-2010.
Gunn says there are widely differing views on
how to best create a set of services that provide an acceptable
alternative to audit, so the project is quite challenging.
“At my last meeting with the National Standard
Setters I looked at where some of the different jurisdictions were
going with their assurance,” Gunn said.
“Some were calling for a higher level of work
effort, some were calling for a lower level of work effort, some
were calling for a closer proximity to an audit and some were
calling for the changes to go further.
“It is difficult to prejudge where the board
will come down in terms of its changes to the standards.”
Gunn said the changes will certainly provide
practitioners with a better understanding of what level of
assurance they should attempt to provide under a review.
“Helping practitioners understand what work
effort is needed is going to have a big effect on cost,” he
explained.
The board could possibly take a more radical
approach and fundamentally change some of its positions within the
revised standards.
“I can’t anticipate at this stage,” Gunn
said.
