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IFAC SMP eNews - April 2011
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April 27, 2011
Thank you for signing up to receive eNews from the IFAC Small and Medium Practices (SMP) Committee. To subscribe to our other electronic publications or to edit your subscription settings, see below. For more news on global developments in the SMP/SME sector, follow the SMP Committee on Twitter.
SMP Quick Poll: Make Your Views Count!
Are you a small- or medium-sized practitioner? Then take our short poll! The poll should take only three minutes to complete, and the results will be highlighted in the next issue. Join the dialogue on current challenges and issues faced by SMPs by taking the poll now: SMP Quick Poll. Polling will close on May 18, 2011.
In This Issue:
Recent Survey Results
1. January/February SMP Quick Poll
2. Global Leadership Survey: Global Accountancy Leaders Urge IFAC to Increase Role in SMP Arena
Standards
3. IESBA SME/SMP Working Group: Progress and Next Steps
4. SMP Committee Contributes to Standard Setting
Education
Auditing and Assurance
5. Open for Comment
ISRE 2400
ISAE 3410
Reports, Guidance, and Tools
6. Business Reporting Supply Chain Report Features Recommendations from Key Business Leaders
7. Updated Sustainability Framework Published
8. Micro-Entity Auditing e-Book from CICA
9. IFRS for SMEs: Training Materials and Q&A Consultation
10. Translated Guides: An Update
Meetings and Events
11. 2011 IFAC SMP Forum, Latest SMP Committee Meeting
12. CReCER 2011 Features Events for SMPs/SMEs
13. EFAA Conference: SMEs as the Engine of the European Recovery
Recent Survey Results
1. January/February SMP Quick Poll
The first SMP Quick Poll, launched in the January issue of eNews, received 425 responses from all regions of the world over a 14-day period (January 27, 2011 to February 9, 2011). The results showed that professional accountants operating in small- and medium-sized practices (SMPs) are optimistic despite economic uncertainty for their small- and medium-sized entity (SME) clients. The following is a summary of key findings. The full January/February SMP Quick Poll results are also available.
Nearly 30% of respondents indicated that economic uncertainty is still the biggest challenge faced by SMEs, followed closely by burden of regulation (27%). Access to finance was a distant third with 17%. Similarly, when asked about the most important issue facing their practice right now, most cited keeping up with regulations and standards (41%), followed by attracting and retaining clients (27%). Despite economic uncertainty, respondents were generally optimistic about the future. When asked how they expect their practice to perform this year compared with last year, 38% said better than last year; only slightly more (43%) said about the same, and just 19% said worse than last year.
According to the poll results, SMPs continue to generate the largest proportion of their revenue from more traditional accountancy-based services. Most indicated that their main source of revenue is audit and assurance (45%), followed closely by accounting and compilation (40%). Tax, advisory, and consulting services comprise only 15% combined.
The IFAC SMP Quick Poll aims to take a snapshot of the key issues confronted by SMPs and their SME clients, and to help raise awareness of the SMP community and its vital role in supporting business and shaping policy. The poll will be issued quarterly in this e-newsletter throughout 2011. Thank you to everyone who participated in our first poll. Would you like to share your views? Take the April SMP Quick Poll!
2. Global Leadership Survey: Global Accountancy Leaders Urge IFAC to Increase Role in SMP Arena
In March, IFAC released the results of the 2010 IFAC Global Leadership Survey of the Accounting Profession (GLS). Ninety-five percent of respondents to the GLS said that addressing the needs of SMEs and SMPs is crucial. A number of participants called for greater recognition by IFAC of SMEs' needs, their economic value, and their significant importance in many national economies.
IFAC was also urged to build the profile of SMPs by emphasizing their professional capabilities, produce innovative ideas for alternatives to audit for use in the SME environment, and provide greater support for SMPs in terms of standards and guidelines tailored to their needs. A significant majority said that addressing the needs of SMEs and SMPs would increase in importance over the coming three years.
Standards
3. IESBA SME/SMP Working Group: Progress and Next Steps
Last November, the International Ethics Standards Board for Accountants (IESBA) approved the formation of the IESBA SME/SMP Working Group to help address the unique and challenging issues faced by this constituency in complying with the IESBA Code of Ethics for Professional Accountants (the Code). A progress report appears in the background papers for the February IESBA meeting. So far, the group has focused on research and data gathering to identify issues for consideration. As a part of its data gathering, the group hosted a breakout session at IFAC's recent SMP Forum in Istanbul. Following the forum, the Working Group Chair met with the SMP Committee to gain additional input. The group plans to present its recommendations to the IESBA at its October meeting.
Two questions about the Code have been included in this issue's SMP Quick Poll, the results of which will provide additional data for the Working Group to consider.
4. SMP Committee Contributes to Standard Setting
The SMP Committee recently submitted comments on the following exposure drafts. See the Exposure Drafts and Consultation Papers page of the IFAC site to view the comments (summarized below) from the SMP Committee and others.
Education
The International Accounting Education Standards Board (IAESB)'s exposure draft on International Education Standard (IES) 7, Continuing Professional Development: A Program of Lifelong Learning and Continuing Development of Professional Competence proposes revisions to align the standard with the IAESB drafting conventions.
The SMP Committee supports this initiative and believes that the requirements set out in the proposed standard are consistent with the current IES 7. However, in its submission to the IAESB, the SMP Committee did question whether the proposed standard gave sufficient recognition to the importance of workplace learning and offered suggestions for how this may be addressed.
Auditing and Assurance
The International Auditing and Assurance Standards Board (IAASB)'s Proposed Strategy and Work Program for 2012-2014 highlights issues facing the accountancy profession and suggests priority activities for the IAASB during 2012-2014.
The SMP Committee commended the IAASB for producing a comprehensive and balanced strategy document, which gives due regard to the needs of SMPs and SMEs, while recognizing the need for further proactive steps to be taken to ensure sufficient SMP representation on the IAASB and its project task forces. The committee's submission commented on the entire proposal, but with a particular focus on the assurance needs of SMEs. In particular, the committee emphasized the importance of developing standards for alternative assurance and non-assurance services for SMEs and the related need for implementation assistance for International Standard on Quality Control (ISQC) 1.
International Standard on Related Services (ISRS) 4410, Compilation Engagements, is the first step in the IAASB's work to create robust standards for services that can be used by entities, especially SMEs, that are either not required or do not elect to be audited to meet their business reporting needs.
The SMP Committee emphasized in its submission the need to develop standards covering the provision of alternative services to audit, especially now that audit exemption for SMEs is becoming increasingly prevalent in many jurisdictions. While generally in favor of the proposed new standard, the SMP Committee did suggest the potential need for further guidance to illustrate the scalability of ISQC 1 relative to compilation engagements.
5. Open for Comment
International Standard on Review Engagements (ISRE) 2400, Engagements to Review Historical Financial Statements, addresses the growing international need for robust standards for services that can be used by entities, especially SMEs, that are either not required or do not elect to be audited. The SMP Committee will submit a comment. Given the importance of the subject matter to the SME sector, SMPs are also encouraged to respond. Comment Deadline: May 20, 2011
International Standard on Assurance Engagements (ISAE) 3410, Assurance Engagements on Greenhouse Gas Statements, addresses the practitioner's responsibilities in identifying, assessing, and responding to risks of material misstatement, and contains illustrative assurance reports on greenhouse gas statements. In its input to the development of the proposed standard, the SMP Committee stressed the need for a standalone standard that is scalable and relevant to smaller engagements. Comment Deadline: June 10, 2011
Reports, Guidance, and Tools
6. Business Reporting Supply Chain Report Features Recommendations from Key Business Leaders
The financial reporting burden on smaller and non-listed entities should be limited. Audit choice should be increased; organizations should be encouraged to use smaller audit firms. These were among the key recommendations included in the recently published Integrating the Business Reporting Supply Chain, an IFAC report based on interviews with key business leaders from around the world.
Many of the recommendations in the report are as applicable to SMEs and SMPs as they are to larger firms and practices. Additional recommendations included the following:
• Governance codes should be principles based and stakeholder driven;
• Organizations should take social and environmental, as well as economic, factors into account; and
• A new integrated business reporting model should be developed to present a cohesive explanation of businesses.
To read the full final report and summary of key recommendations, see the Financial Reporting Supply Chain project page of the IFAC website.
7. Updated Sustainability Framework Published
The Professional Accountants in Business (PAIB) Committee of IFAC has significantly updated its Sustainability Framework, a comprehensive tool to support professional accountants and their organizations as they integrate sustainability into their strategy, operations, and reporting. Rich with examples from entities of all sizes, from small businesses to major international corporations, the Framework provides a comprehensive global view of current best practices in each of these areas.
The Framework applies equally well to entities of all sizes and acknowledges the particular importance of SMEs and SMPs embracing sustainability. In many countries, SMEs account for a sizeable portion of private sector employment and gross domestic product, and consequently their environmental and social impacts are considerable. The SME sector, therefore, has vast potential to contribute to more sustainable economies. The Framework highlights the important role that SMPs have to play in articulating and communicating to SMEs the benefits of accounting for and reporting on sustainability.
The Framework can be accessed in the International Center for Professional Accountants in Business as a digital magazine, from which a PDF can be downloaded.
8. Micro-Entity Auditing e-Book from CICA
Anatomy of a 12-Hour Audit of Micro-Entities: Using International Standards on Auditing, an e-book recently published by the Canadian Institute of Chartered Accountants (CICA), discusses the application of the International Standards on Auditing (ISAs) to micro-entity audits. Written by Phil Cowperthwaite, an IAASB member and audit practitioner who specializes in auditing micro-entities, the paper explores the idea that micro-auditing is an area that requires a clear understanding of both the application of the standards and the benefits of the knowledge and professional judgment of a skilled auditor. Mr. Cowperthwaite is also the author of the first article in a CICA CA Magazine series of articles that will focus on micro-entity audits in Canada. In addition, CICA is hosting a series of free webinars on micro-entity audits.
9. IFRS for SMEs: Training Materials and Q&A Consultation
The International Accounting Standards Board (IASB) regularly publishes IFRS for SMEs Update, a staff summary of news relating to the International Financial Reporting Standard for Small- and Medium-Sized Entities (IFRS for SMEs). The March 2011 issue, as well as previous editions, can be obtained at the IASB website. The March edition includes details of the latest set of training materials as well as recent and future "train the trainer" workshops.
The IASB's SME Implementation Group, on which SMP Committee member Ricardo Rodil and Technical Advisor Robin Jarvis participate, considers implementation questions raised by users of IFRS for SMEs. The group recently published for public comment proposed guidance on the standard in the form of questions and answer (Q&As). The proposed Q&As cover the following: captive insurance subsidiaries; interpretation of "traded in a public market"; and investment funds with only a few participants.
10. Translated Guides: An Update
The following shows the status of SMP Committee guides released in 2010: Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities, 2nd edition (ISA Guide, 2nd ed.); Guide to Quality Control for Small- and Medium-Sized Practices, 2nd edition (QC Guide, 2nd ed.); and Guide to Practice Management for Small- and Medium-Sized Practices (PM Guide). The translations in progress should be completed within the next six months.
| Guide |
In Progress |
Completed |
| ISA Guide, 2nd ed. |
Czech, Finnish, Italian, Portuguese, Spanish, Ukrainian |
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| QC Guide, 2nd ed. |
Albanian, Czech, Italian, Lithuanian, Portuguese, Slovak, Spanish, Turkish, Ukrainian |
French, Romanian |
| PM Guide |
Bulgarian, Italian, Spanish, Turkish |
Romanian |
For a complete list of translations by language, please visit IFAC's online Translations Database.
Meetings and Events
11. 2011 IFAC SMP Forum, Latest SMP Committee Meeting
On March 21 representatives from IFAC member bodies and other organizations convened in Istanbul for the fifth IFAC SMP Forum. The one-day event attracted over 200 participants from more than 45 countries and jurisdictions, making it the largest gathering in the event's history. Themed "Partnering with SMEs to Build and Sustain Value," the event gave delegates the chance to discuss key challenges and opportunities, share best practices and ideas, and contribute to the prioritization of future SMP Committee initiatives.
Panel sessions focused on public policy, regulation, and standards for SMPs/SMEs and how SMPs can evolve to better serve SMEs. Panelists were generally in agreement that:
• Steps need to be taken by regulators to take better account of the unique characteristics of SMEs and SMPs to ensure regulation and policy is better suited to these sectors; and
• SMPs may need to change their practice model, adapting the range of their services and skills, to meet the changing needs of their SME clients.
To see presentations and videos from this year's forum, as well as speaker bios and select summary reports from individual sessions, see the 2011 SMP Forum page on the IFAC website.
Following the forum, SMP Committee members convened for their first meeting of 2011. See the Meeting Summary for highlights from the meeting.
12. CReCER 2011 Features Events for SMPs/SMEs
SME considerations and challenges will feature prominently on the agenda at CReCER 2011. CReCER, which stands for Contabilidad y Responsabilidad para el Crecimiento Económico Regional (Accounting and Accountability for Regional Economic Growth), is the seminal conference for the accountancy profession in the Latin American and Caribbean region. Sponsored by IFAC, the World Bank, the Inter-American Development Bank, the Global Public Policy Committee, and the Argentine Federation of Professional Councils in Economic Sciences, this year's event will be held in Buenos Aires, Argentina.
Event I is invitation only, but the other two events are open. Event II will focus on the importance of better financial information to support economic development and will feature an ISA seminar and sessions that focus on SME financial reporting. SMP Committee member Ricardo Rodil will participate as a Discussion Leader for the session "IFRS for SMEs: Analysis and Differences with Full IFRS." The third and final event is the IFRS for SMEs Workshop (July 4-6). To be considered for a place in this workshop, participants must complete an application form. To register and learn more, see the CReCER 2011 website: www.creceramericas.org.
13. EFAA Conference: SMEs as the Engine of the European Recovery
The European Federation of Accountants and Auditors for SMEs (EFAA) will hold its next conference in Berlin on May 12, 2011, with the theme, "SMEs as the Engine of the European Recovery." A central focus will be SMPs addressing the financial reporting needs of SMEs and offering non-audit services (reviews and compilations) to increase effective external communication. SMP Committee member Ben Scicluna will give a keynote speech for the session, "Non-Audit Services to SMEs--Review and Compilation Engagements--Market Tools when a Voluntary Choice is the Only Solution." To register and learn more, see the Upcoming Events page on EFAA's website.
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 164 members and associates in 125 countries and jurisdictions, representing approximately 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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