Changing Auditing and Accounting Standards

 Most PYC clients know that there are new standards coming into force this year and next.

These standard changes are creating challenges.

 What does this mean to PYC clients and will it affect audit fees?

 Audit Standards

 Commencing December 15, 2009 Canadian Auditing Standards (CAS) are aligned with International Standards on Auditing (ISA). New Quality Control Standards are effective immediately. New assurance standards are effective for years ended December 2010 and forward. The assurance standards have been changing for the past 5 years in preparation for this migration to CAS.

 Accounting Standards

 International Financial Reporting Standards (IFRS) have been adopted in Canada effective with 2011 year ends for public companies and publicly accountable enterprises.  Private Enterprise (PE) accounting standards (for small and medium size enterprises) have also been adopted and are available immediately for use by small business enterprises.

 An exposure draft is expected to be issued by the Accounting Standards Board in 2010 on the status of GAAP for not for profit organizations. PYC made representations as part of a group of CA firms in June 2009. Our recommendation was to give groups a choice between IFRS and PE. Once that choice is made the entity has to stick with that form of GAAP.  We feel PE GAAP with some additional not for profit principles would be the most appropriate choice for most not for profit entities.

 All entities will be affected by the change in assurance standards. Most not for profit entities will be affected by the accounting standards changes. Non profit housing organizations will be affected in a less significant fashion by the accounting standards changes. Most non profit housing entities in Ontario are bound either by operating agreements with funders or by legislation. Both determine the accounting principles to be used in reporting for these entities. The notes to the financial statements for these entities disclose these differences from GAAP. Adoption of new GAAP will simply result in additional differences being disclosed in the significant accounting policies note without any change to the actual accounting principles used.

 What does this mean to clients of PYC?

PYC has taken this opportunity to make changes to its systems to accommodate many of the new assurance standards and attempt to make implementation as efficient as possible.

The fieldwork for audits happening in 2010 and 2011 will probably take longer than usual.  This will be a result of PYC staff taking the time required to complete the audit in the new framework with which we are now working.  Much of this extra time will be set up and will not have to be repeated in subsequent years after 2011.

 Will this result in a significant increase in the audit fees for the current year? 

 In the short term we do not believe this will result in significant increases to audit fees if a client's internal controls remain strong with few system changes from year to year.  The requirements of the new assurance standards will further increase the amount of work required in 2011 and beyond. 

 Over the long term, as a result of the more stringent assurance standards, the number of hours to complete an audit will increase resulting in increased fees. 

 The keys to a timely and successful audit this year will continue to be good controls and strong planning.  Please ensure you:

 •  have received your pre audit planning package

•  have your letters signed and confirmations prepared and returned to PYC offices as soon as possible

•  send a copy of your books to PYC as soon as all year end adjustments have been completed

•  contact PYC for a fieldwork date if you have not already been contacted

•  maintain your internal controls to a high standard

•  discuss with your fieldwork auditor and agree on the timing for:

            - date drafts are to be delivered by PYC

            - date of Audit Committee/Finance Committee or Board meeting to approve the statements and agreement as whether a PYC representative is to attend

            - date approved draft financial statements and additional signed letters are to be signed off and sent to PYC

            - date final financial statements are to be delivered by PYC

            - date of AGM and agreement whether PYC is to attend

 If you have any questions about any of the preceding please feel free to contact David Robertson at PYC (416-366-9256 ext 234).