CHAPTER OUTLINE Volume 1 Chapter Topic 1 Introduction, Background and Administration 2 Review Procedures 3 Review Engagement Report 4 Illustrative Review Working Papers 5 Form and Presentation of Financial Statements 6 Cash Flow Statements 7 Unincorporated Entities 8 Interim Financial Reporting 9 Related Party Transactions and Economic Dependence 10 Subsequent Events 11 Contingencies Volume 2 12 Contractual Obligations — Commitments 13 Accounting for Interests in Joint Arrangements 14 Compilation Procedures — Notice to Reader 15 Compilation of Forecasts and Projections 16 Personal Financial Statements 17 Illustrative Compilation Working Papers Appendix A Correspondence/Letters (CL) B Review Engagement Forms (REF) C Review Engagement Checklists (REC) D Compilation Engagement Checklists & Form (CEC) E Financial Statement Disclosure Checklists (DL) Index vii 02/16
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CHAPTER OUTLINE
Volume 1
Chapter Topic
1 Introduction, Background and Administration2 Review Procedures3 Review Engagement Report4 Illustrative Review Working Papers5 Form and Presentation of Financial Statements6 Cash Flow Statements7 Unincorporated Entities8 Interim Financial Reporting9 Related Party Transactions and Economic Dependence10 Subsequent Events11 Contingencies
Volume 2
12 Contractual Obligations — Commitments13 Accounting for Interests in Joint Arrangements14 Compilation Procedures — Notice to Reader15 Compilation of Forecasts and Projections16 Personal Financial Statements17 Illustrative Compilation Working Papers
Appendix
A Correspondence/Letters (CL)B Review Engagement Forms (REF)C Review Engagement Checklists (REC)D Compilation Engagement Checklists & Form (CEC)E Financial Statement Disclosure Checklists (DL)
Index
vii
02/16
CHAPTER 1
INTRODUCTION, BACKGROUNDAND ADMINISTRATION
Table of Contents
Section Description Page No.
100 OUTLINE AND PURPOSE OF GUIDE ...................................................... 1-1.21 Practitioner ...................................................................................... 1-2
105 PROFESSIONAL STANDARDS ................................................................ 1-4.01 CPA Canada Handbook ................................................................. 1-4.04 CPA Canada Auditing and Assurance Standards Board .......... 1-4.07 Assurance Standards..................................................................... 1-4.10 CPA Canada Handbook — Assurance ........................................ 1-5.13 Authority of Auditing and Assurance Standards ....................... 1-7.14 Guidelines ........................................................................................ 1-7.17 Other Publications (CPA Canada) ................................................ 1-8
.18 Auditing and Assurance Bulletins and Risk Alert .......... 1-8
.19 Practice Advice .................................................................... 1-8
.20 The Buzz ............................................................................... 1-9
.21 Articles in CA magazine ..................................................... 1-9.22 International Standards.................................................................. 1-9
107 ACCOUNTING AND FINANCIAL REPORTING STANDARDS ............... 1-10.01 Generally Accepted Accounting Principles (GAAP) .................. 1-10
.08 What Type of Issues Does GAAP Address?.................... 1-11
.10 Definition............................................................................... 1-11.12 What Are Primary Sources of GAAP? ......................................... 1-11.13 What Are Other Sources of GAAP? ............................................. 1-12.16 Statement Presentation.................................................................. 1-12.17 Reviewed Financial Statements .................................................... 1-12.19 Bases of Accounting Other than GAAP ...................................... 1-13.20 Compilation Engagements ............................................................ 1-13
108 ASSOCIATION ............................................................................................ 1-13
.17 Examples of Threats and Safeguards.......................................... 1-17
.23 Overview of Prohibitions ............................................................... 1-18
TOC 1-112/15
CHAPTER 1
INTRODUCTION, BACKGROUNDAND ADMINISTRATION
Table of Contents (continued)
Section Description Page No.
.27 Policies on Independence for the Practitioner ........................... 1-19.28 Written Statement ................................................................ 1-20
.32 Compilations ................................................................................... 1-20.34 Would a Compilation Suffice for a Particular Client?..... 1-20
.05 Comparison of Audit, Review and Compilation ......................... 1-22
115 DETERMINING THE CLIENT’S NEEDS.................................................... 1-23.04 Who Will Use the Financial Statements? .................................... 1-23
.07 Review (or Audit) of Consolidated Financial Statements—Compilation of Individual Statements......................... 1-24
.08 Dealing with the Needs of Banks and Other Creditors ............. 1-24
120 ACCEPTING A NEW CLIENT .................................................................... 1-24.06 Prospective Client’s Reputation ................................................... 1-25
.07 Sources of Information ....................................................... 1-28.08 Assessment of Required Services ............................................... 1-28
.10 Technical Expertise and Available Resources ................ 1-28
125 COMMUNICATION WITH PREDECESSOR ACCOUNTANT................... 1-29.14 Agreement With Successor in Writing ............................. 1-31
130 GENERAL FIRM PROCEDURES .............................................................. 1-31.02 Firm Policies, Appendix B (REF-1)............................................... 1-32.03 New Client Acceptance Form, Appendix B (REF-2)................... 1-32.04 Knowledge of Business Form, Appendix B (REF-4).................. 1-33.05 Financial Statement Disclosure Checklist, Appendix E (DC-1) 1-33.06 Technical Review Checklist, Appendix C (REC-6) ..................... 1-33.07 Engagement Partner’s Checklist—Reviewed or Compiled Financial
Statements, Appendix C (REC-7)............................................ 1-34.08 Pre-Release Review Form, Appendix B (REF-12) ...................... 1-34
TOC 1-2 12/15
CHAPTER 1
INTRODUCTION, BACKGROUNDAND ADMINISTRATION
Table of Contents (continued)
Section Description Page No.
.10 Routing Instructions for Processing Financial Statements,Appendix B (REF-13) ..................................................... 1-34
131 PRIVACY LAWS ......................................................................................... 1-34.01 Introduction ..................................................................................... 1-34.03 Why Is the Practitioner Concerned with Privacy Laws? ........... 1-35.06 What is Personal Information? ..................................................... 1-35.11 Principles for the Protection of Private Information .................. 1-36.12 Costs of Compliance ...................................................................... 1-37.15 Individuals’ Consent for Collection, Use, and Disclosure of
Personal Information................................................................ 1-37.18 Effect on Practitioner ..................................................................... 1-38
.26 Reading List for Practitioners ............................................ 1-39
132 QUALITY CONTROL .................................................................................. 1-39.09 Practice Inspection ......................................................................... 1-41.10 Deficiencies Found in Quality Control Procedures ................... 1-41
.12 Compilation Engagements ................................................. 1-42.13 Continuing Professional Development ........................................ 1-42
135 APPROVAL OF FINANCIAL STATEMENTS ............................................ 1-42
.08 Damage Control ................................................................... 1-45.09 Engagement Letters ....................................................................... 1-45
155 OTHER SERVICES ..................................................................................... 1-45.06 Accounting (Bookkeeping), such as Computer-Produced
Records ...................................................................................... 1-46.08 Computerized Financial Statements ............................................ 1-46.12 Assisting Clients to Prepare Financial Statements ................... 1-47.14 Typing and Reproduction Services.............................................. 1-47.15 Processing Financial Data for Clients of Other Accounting
Firms........................................................................................... 1-47.16 Preparing Government Forms ...................................................... 1-48.17 Income Tax Returns ....................................................................... 1-48
160 CONSULTATION ON TECHNICAL AND ETHICAL ISSUES .................. 1-49.02 When and How to Document Consultation................................. 1-49
.04 Consultation Documentation Form ................................... 1-50.05 In-firm Consultation Versus Outside-firm Consultation ............ 1-50
205 STANDARDS............................................................................................... 2-2.01 Plausibility ....................................................................................... 2-2.02 General Standards .......................................................................... 2-2.06 Business and Professional Considerations................................ 2-3.11 Withdrawal from an Engagement ................................................. 2-4
215 ENGAGEMENT LETTERS ......................................................................... 2-6.02 Why Engagement Letters? ............................................................ 2-7.05 Overcoming Client Resistance ..................................................... 2-8.09 Timing of Engagement Letters ..................................................... 2-9.10 Updating Engagement Letters ...................................................... 2-9.13 Additional Engagement Letter Provisions for Limiting a Firm’s
Liability ....................................................................................... 2-9.14 Requiring the Client to Indemnify the Firm for Any
Third-Party Suits ............................................................ 2-10.15 Release from Claims Because of Management
Representations ............................................................. 2-10.16 Specifying a Time Limitation.............................................. 2-10
220 CHANGE IN TYPE OF ENGAGEMENT .................................................... 2-11.02 Increase in Level of Service .......................................................... 2-11
.03 Comparative Financial Statements.................................... 2-12.04 Decrease in Level of Service from Audit to Review .................. 2-12.06 Documentation ................................................................................ 2-12
225 KNOWLEDGE OF THE BUSINESS .......................................................... 2-12.02 What Level of Knowledge Is Necessary?.................................... 2-12.09 How to Acquire Knowledge of the Business .............................. 2-14
.09 Industry ................................................................................. 2-14
230 PERFORMANCE OF A REVIEW ............................................................... 2-15.02 Professional Judgment Regarding Extent of Procedures ........ 2-15.06 Procedures Not Normally Required ............................................. 2-15
TOC 2-112/15
CHAPTER 2
REVIEW PROCEDURES
Table of Contents (continued)
Section Description Page No.
235 MATERIALITY AND RISK .......................................................................... 2-16.02 Materiality......................................................................................... 2-16.05 Quantitative Materiality .................................................................. 2-17.31 Qualitative Materiality..................................................................... 2-24.34 Possible Management Abuse of Materiality................................ 2-26.37 Risk ................................................................................................... 2-26
240 INQUIRIES ................................................................................................... 2-27.01 What is Required? .......................................................................... 2-27.07 Illustrative Inquiries ........................................................................ 2-29
245 ANALYTICAL PROCEDURES ................................................................... 2-29.01 Purpose of Analytical Procedures ............................................... 2-29.03 What are Analytical Procedures? ................................................. 2-32.06 Selecting Appropriate Analytical Procedures............................. 2-32.08 Examples of Analytical Procedures ............................................. 2-33
.11 Reasonableness or Overall Tests ..................................... 2-34
.12 Ratio Analysis ...................................................................... 2-34.15 Developing an Analytical Ratio History ....................................... 2-37.16 Evaluating the Results of Analytical Procedures....................... 2-37.17 When the Results of Procedures Are Unfavourable.................. 2-38.19 Dealing with Differences or Deviations ....................................... 2-38
.20 Deciding when a difference should be investigated....... 2-38
.27 Considering the significance of a difference ................... 2-40
.31 Investigating significant differences ................................. 2-40.36 Limitations of Analytical Procedures........................................... 2-42.37 Analytical Procedures on Initial Engagements .......................... 2-42
260 WORKING PAPER DOCUMENTATION .................................................... 2-44.01 Standards......................................................................................... 2-44
TOC 2-2 12/15
CHAPTER 2
REVIEW PROCEDURES
Table of Contents (continued)
Section Description Page No.
.05 Working Paper Contents................................................................ 2-45
.08 Documenting the Use of Analytical Procedures ........................ 2-46
265 REPRESENTATION LETTERS.................................................................. 2-47.08 Illustrative Representation Letter ................................................. 2-49
270 OBTAINING REPORTS FROM OTHER ACCOUNTANTS....................... 2-49
275 COMMUNICATIONS WITH THOSE HAVING RESPONSIBILITY FORFINANCIAL REPORTING ..................................................................... 2-49
280 FINANCIAL INFORMATION OTHER THAN FINANCIAL STATEMENTS—CPA Canada 8500 ............................................................................ 2-50
285 COMPLIANCE WITH AGREEMENTS AND REGULATIONS—CPA Canada 8600 ............................................................................ 2-51
290 REVIEW ENGAGEMENT CHECKLISTS AND FORMS ........................... 2-52.03 Planning Notes to Engagement Form (and Time and Budget
Summary) (Appendix B, REF-3).............................................. 2-52.04 Knowledge of Business Form (Appendix B, REF-4).................. 2-52.05 Review Engagement Checklists (Appendix C, REC-1 and REC-2)
2-52.10 Analytical Procedures Worksheet (Appendix B, REF-8) ........... 2-53.11 Materiality Guideline Worksheet (Appendix B, REF-5) .............. 2-53.12 Schedule of Unadjusted Differences (Appendix B, REF-6)....... 2-53.13 Year End File — Table of Contents (Working Papers)
293 STREAMLING ENGAGEMENT TO BECOME MORE EFFECTIVE ANDEFFICIENT............................................................................................. 2-54
325 RESERVATIONS......................................................................................... 3-7.12 Qualified Report—Departure from Appropriate
Criteria (GAAP).......................................................................... 3-10.17 Adverse Report ............................................................................... 3-12.18 Changes in Accounting Principles............................................... 3-13.20 Qualified Report—Inability to Complete Review ........................ 3-14.23 Denial of Assurance ....................................................................... 3-16.25 Application of Review Engagement Report to the Notes
to the Financial Statements..................................................... 3-18
330 BASIS OF ACCOUNTING OTHER THAN GAAP..................................... 3-19.02 Acceptable Circumstances for Basis of Accounting
Other than GAAP ...................................................................... 3-19.06 Reporting Framework..................................................................... 3-19
345 OTHER CHANGES TO THE REPORT...................................................... 3-31.01 Comparative Financial Statements............................................... 3-31
TOC 3-112/15
CHAPTER 3
REVIEW ENGAGEMENT REPORTS
Table of Contents (continued)
Section Description Page No.
.04 Review of Opening Figures ........................................................... 3-32
505 TITLE PAGE................................................................................................ 5-2.01 General ............................................................................................. 5-2.02 Name of Entity................................................................................. 5-2.03 Title of Financial Statements......................................................... 5-3.06 Date or Period Covered ................................................................. 5-3
510 TABLE OF CONTENTS.............................................................................. 5-4
520 BASIC FINANCIAL STATEMENTS ........................................................... 5-7.01 What Are They? .............................................................................. 5-7.02 Approval........................................................................................... 5-7.03 Comparative .................................................................................... 5-7.08 Headings .......................................................................................... 5-8.09 Reference to Practitioner’s Communication ............................... 5-9
.09 Review Engagements.......................................................... 5-9.10 Use of Term “Unaudited” .............................................................. 5-9
525 BALANCE SHEET ...................................................................................... 5-10.01 Title ................................................................................................... 5-10.04 Format .............................................................................................. 5-11
530 STATEMENT OF INCOME ......................................................................... 5-11.01 Title ................................................................................................... 5-11.03 Format .............................................................................................. 5-11
535 STATEMENT OF RETAINED EARNINGS ................................................ 5-12.01 Title ................................................................................................... 5-12.02 Combined Statement of Income and Retained Earnings .......... 5-12.1.03 Restatement of Retained Earnings............................................... 5-13
TOC 5-112/15
CHAPTER 5
FORM AND PRESENTATION OF FINANCIAL STATEMENTS
Table of Contents (continued)
Section Description Page No.
.04 Separate Statement of Retained Earnings .................................. 5-14
545 SIGNIFICANT ACCOUNTING POLICY NOTES ....................................... 5-14.01 When Required? ............................................................................. 5-14.02 What Should Be Included?............................................................ 5-14.03 Manner of Disclosure ..................................................................... 5-15.04 Basis of Presentation ..................................................................... 5-15.05 Other Disclosures ........................................................................... 5-15.07 Sample Disclosures........................................................................ 5-16
550 OTHER NOTES TO FINANCIAL STATEMENTS...................................... 5-16.01 General ............................................................................................. 5-16.03 Format .............................................................................................. 5-16.05 Title ................................................................................................... 5-17.08 Referencing Notes in the Financial Statements ......................... 5-17.09 Content (Disclosure Checklists) ................................................... 5-17
555 SUPPLEMENTARY OR OTHER INFORMATION ..................................... 5-18.01 General ............................................................................................. 5-18.02 Content............................................................................................. 5-18.04 Presentation .................................................................................... 5-19.07 Reporting ......................................................................................... 5-19.08 Schedule Headings......................................................................... 5-19.09 Reference to Communication ....................................................... 5-20
TOC 5-2 12/15
TOC 5-308/12
CHAPTER 5
FORM AND PRESENTATION OF FINANCIAL STATEMENTS
Table of Contents (continued)
Section Page No.Description
560 ENTITIES THAT CHANGE FISCAL PERIOD ............................................. 5-20
Appendix
5A Illustrative Financial Statements with ReviewEngagement Report .............................................................................. 5-35
605 HOW CASH IS DEFINED ........................................................................... 6-1.03 Bank Overdraft (Indebtedness) ..................................................... 6-2.04 Definitions........................................................................................ 6-2.05 Disclosure of Cash ......................................................................... 6-2
.06 Details of Cash Components ............................................. 6-3
.10 Policy of Reporting.............................................................. 6-3
610 BASIC ELEMENTS ..................................................................................... 6-4.04 Types of Cash Flows...................................................................... 6-4
.05 Income Taxes ....................................................................... 6-6
.06 Cash Flows from Investments using the EquityMethod............................................................................. 6-6
.08 Business Combinations and Disposals ofBusiness Units ............................................................... 6-6
.09 Cash Flows in Foreign Currencies.................................... 6-6
615 GROSS AND NET CASH FLOWS ............................................................ 6-7.01 Items Reported on a Gross Basis ................................................ 6-7.03 Items Reported on a Net Basis..................................................... 6-7
620 FORMAT CONSIDERATIONS.................................................................... 6-8.02 Analysis of Cash for Reporting Period........................................ 6-8.04 Title ................................................................................................... 6-8.05 Order of Presentation..................................................................... 6-8.06 Captions ........................................................................................... 6-8
625 CASH FLOWS FROM OPERATING ACTIVITIES .................................... 6-9.01 What Is Included? ........................................................................... 6-9.04 What Is Excluded?.......................................................................... 6-9.05 Basic Format ................................................................................... 6-10.07 Direct Method .................................................................................. 6-10.10 Indirect Method ............................................................................... 6-10.15 Which Method Is Better? ............................................................... 6-11.19 Further Considerations for the Indirect Method ......................... 6-12
.19 Changes in Current Assets and Liabilities ...................... 6-12
TOC 6-112/15
CHAPTER 6
CASH FLOW STATEMENTS
Table of Contents (continued)
Section Description Page No.
.20 Supplemental Information .................................................. 6-12.1
.21 Groupings of Accounts....................................................... 6-12.1
.23 Non-Cash Entries to Current Assets and Liabilities ....... 6-13
630 CASH FLOWS FROM INVESTING ACTIVITIES ...................................... 6-14.04 Capital Expenditures ...................................................................... 6-14.07 Disposal of Capital Assets ............................................................ 6-15.08 Short-Term Investments ................................................................ 6-16.12 Interest and Dividend Income ....................................................... 6-17
635 CASH FLOWS FROM FINANCING ACTIVITIES ...................................... 6-17.04 Cash Dividends ............................................................................... 6-17.06 Withdrawals (Drawings) by Partners or a Sole Proprietor........ 6-17.07 Short-Term and Long-Term Debt.................................................. 6-17.10 Shares Acquired by Company for Cancellation ......................... 6-18
.05 Owner’s Salaries and Interest on Invested Capital ...................... 7-5
715 EQUITY SECTION OF BALANCE SHEET ............................................... 7-5.03 Sole Proprietorships ......................................................................... 7-5.06 Partnerships ...................................................................................... 7-6
720 CHANGES IN PARTNERSHIP INTEREST ............................................... 7-7.03 Admission of a New Partner ........................................................... 7-8
.10 Transactions During the Year ................................................. 7-11.11 Withdrawal or Death of a Partner ................................................... 7-11
.16 Goodwill Method ....................................................................... 7-13.17 Sale of Partnership Interest ............................................................. 7-14
805 WHAT ARE INTERIM FINANCIAL STATEMENTS? ................................ 8-1.03 Disclosure ........................................................................................ 8-2.08 Changes in Accounting Estimates ............................................... 8-3
810 INTERIM REPORTING PERIODS .............................................................. 8-4.01 General Application ........................................................................ 8-4.03 Highly Seasonal Business............................................................. 8-5
815 MATERIALITY FOR INTERIM REPORTING ............................................. 8-5
820 RECOGNITION AND MEASUREMENT..................................................... 8-5.01 General Criteria — Revenues and Expenses.............................. 8-5.04 More Specific Guidance on Application ...................................... 8-6
825 RESTATEMENTS........................................................................................ 8-8.01 Reporting Changes in Accounting Policies ................................ 8-8
905 WHAT ARE RELATED PARTY TRANSACTIONS? ................................. 9-3.01 Definitions........................................................................................ 9-3
910 HOW ARE RELATED PARTY TRANSACTIONS MEASURED?............. 9-4.01 Measurement Issues and Definitions........................................... 9-4.03 Revised Standard ........................................................................... 9-4.05 Carrying Amount............................................................................. 9-4.06 When is Carrying Amount Used?................................................. 9-5.07 Illustration Using Carrying Amount ............................................. 9-5.08 Exchange Amount .......................................................................... 9-6
.15 Leasing Arrangements with Related Parties ................... 9-10.16 Summary — Graphic Illustration of Measurement Principles .. 9-11
920 DISCLOSURE.............................................................................................. 9-13.06 Examples of Note Disclosure........................................................ 9-14
930 ECONOMIC DEPENDENCE....................................................................... 9-16.03 Examples of Note Disclosure........................................................ 9-16.05 Significant Volume of Transactions — But No Economic
Dependence ............................................................................... 9-16.1.06 Examples of Note Disclosure........................................................ 9-16.1
1005 WHAT ARE SUBSEQUENT EVENTS ....................................................... 10-1.02 Type 1 — Subsequent Events....................................................... 10-1.04 Type 2 — Subsequent Events....................................................... 10-1
1010 ACCOUNTING AND FINANCIAL REPORTING........................................ 10-2.01 Type 1 — Subsequent Events....................................................... 10-2.02 Type 2 — Subsequent Events....................................................... 10-2
1105 WHAT IS A CONTINGENCY? ................................................................... 11-1.01 Definition.......................................................................................... 11-1.03 Three Categories of Contingencies.............................................. 11-2
1110 ACCOUNTING AND FINANCIAL REPORTING........................................ 11-2.01 General Disclosure ......................................................................... 11-2.04 Contingent Losses.......................................................................... 11-3
.05 Likely — Loss Reasonably Determinable ........................ 11-3
.07 Likely — Loss Not Reasonably Determinable ................. 11-4
.08 Outcome Not Determinable ................................................ 11-4
1205 WHAT ARE CONTRACTUAL OBLIGATIONS? ....................................... 12-1.01 Definition.......................................................................................... 12-1
1210 FINANCIAL STATEMENT DISCLOSURE ................................................. 12-2.01 What Should Be Disclosed? ......................................................... 12-2.06 What Would Not Be Disclosed? ................................................... 12-3.07 Examples of Note Disclosure........................................................ 12-3
.09 Amount of Commitment Is Abnormal in Relation to theEntity ............................................................................... 12-3
.11 Commitments that Affect the Level of Future Activities 12-3
.12 Leases ................................................................................... 12-4.13 Commitments with Related Parties .............................................. 12-4
1305 WHAT ARE JOINT ARRANGEMENTS? ................................................... 13-1.02 Definitions........................................................................................ 13-1.06 Other Investments .......................................................................... 13-2.07 Types of Joint Arrangements ....................................................... 13-2
1310 POLICY CHOICES FOR INTERESTS IN JOINT ARRANGEMENTS ...... 13-3.02 Accounting for Joint Operations .................................................. 13-3.03 Accounting for Jointly Controlled Assets ................................... 13-3.04 Accounting for Jointly Controlled Enterprises........................... 13-3.05 Cost method .................................................................................... 13-3.06 Equity method ................................................................................. 13-4.07 Proportion of Assets, Liabilities, Revenue and Expenses........ 13-4
.08 Advantages ........................................................................... 13-4.09 Loss of Joint Control ..................................................................... 13-4
1315 ACCOUNTING FOR AN INVESTOR’S CONTRIBUTIONS TO AJOINT ARRANGEMENT....................................................................... 13-4
.02 Contributions to the joint arrangement at the inceptionof the joint arrangement ............................................... 13-5
.03 Contributions to the joint arrangement subsequent toits inception .................................................................... 13-5
.06 Related Party Transactions ........................................................... 13-5
.08 Statements at Different Dates ....................................................... 13-5
.09 Summary of Changes from ASPE 3055 to ASPE 3056 ............. 13-6
.11 Contributions to a Joint Venture Under Section 3055 .............. 13-6
.12 Accounting for a Venturer’s Contributions to a JointVenture - Section 3055............................................................. 13-6
.13 Recognition of Losses on Disposal of Net AssetsContributed to a Joint Venture .................................... 13-6
.14 Recognition of Gains on Disposals of Net AssetsContributed to a Joint Venture .................................... 13-6
.15 Contributions of Assets to a Joint Venture;Consideration Received is Cash and Other Assets . 13-6
.17 Arm’s Length Transactions ................................................ 13-7.18 Transactions Between a Venturer and a Joint
Venture - Section 3055............................................................. 13-7.18 Sales of Assets by a Venturer to a Joint Venture .......... 13-7.19 Purchases of Assets by a Venturer From a Joint
1405 STANDARDS............................................................................................... 14-2.02 Nature and Terms of Engagement ............................................... 14-3.04 Professional Standards.................................................................. 14-3.05 Withdrawal from an Engagement ................................................. 14-3.07 Notice to Reader ............................................................................. 14-4.08 Business and Professional Considerations................................ 14-4
1415 CHANGES IN TYPE OF ENGAGEMENT.................................................. 14-7.02 Decrease in Level of Service from Audit or Review to
Compilation................................................................................ 14-7.07 Change from Full Disclosure to Omission of Substantially
All Disclosures .......................................................................... 14-8
1420 COMPILATION PROCEDURES ................................................................. 14-8.01 Basic................................................................................................. 14-8.08 Professional Judgment Regarding Extent of Procedures ........ 14-9.18 Procedures Not Normally Required ............................................. 14-10.23 Knowledge of the Client and Industry ......................................... 14-12.26 Subsequent Events and Contingencies ...................................... 14-13.28 Documentation ................................................................................ 14-13.29 Example of Note Disclosure.......................................................... 14-13.30 Withdrawal from Engagement....................................................... 14-13
1430 SUGGESTED WORKING PAPERS ........................................................... 14-13
1440 FINANCIAL STATEMENT DISCLOSURE AND GAAP ............................ 14-14.11 Income Taxes .................................................................................. 14-16.15 Management .................................................................................... 14-17.18 Final Comment on Possible Misleading Financial Statements 14-18
1450 PRACTITIONER’S COMMUNICATION — NOTICE TO READER........... 14-19.02 Standards......................................................................................... 14-19.10 Notice to Reader Communication ................................................ 14-22
.29 Other Financial Information................................................ 14-27
1455 FORM AND PRESENTATION OF COMPILED FINANCIALSTATEMENTS....................................................................................... 14-28
.02 Title page ......................................................................................... 14-28
.11 Reference to Practitioner’s Communication ............................... 14-29
1456 COMPILATION OF INTERIM FINANCIAL STATEMENTS ...................... 14-30.01 Standards and Procedures............................................................ 14-30.02 Communication ............................................................................... 14-30
1460 EXAMPLES OF OTHER SERVICES AND THE APPLICATION OFCPA Canada 9200 ................................................................................ 14-31
1465 CURRENT DEVELPOPMENTS — COMPILATIONAGREEMENTS...................................................................................... 14-32
1505 DEFINITIONS .............................................................................................. 15-2.02 Future-Oriented Financial Information (FOFI) ............................. 15-2.03 Forecasts and Projections............................................................. 15-2.04 How is FOFI Presented? ................................................................ 15-3.06 Time Period ..................................................................................... 15-3.07 Assumptions ................................................................................... 15-3
1510 GENERAL STANDARDS ........................................................................... 15-3.02 Basic Standards for FOFI Engagement ....................................... 15-3.04 Unresolved Issues .......................................................................... 15-4
1515 FORM AND STYLE OF PRESENTATION ................................................ 15-4.01 “Unaudited — See Notice to Reader”.......................................... 15-4.02 Statement Titles .............................................................................. 15-4.03 Comparative FOFI and Historical Financial Statements ........... 15-4.04 Title Page and Table of Contents ................................................. 15-4.05 Column Headings ........................................................................... 15-5.07 Summary of Disclosures ............................................................... 15-5
1520 ENGAGEMENT LETTER ............................................................................ 15-6.01 AuG-15 Requirement ...................................................................... 15-6
1525 UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT .................. 15-7.03 Sources of Knowledge................................................................... 15-7.04 Level of Understanding.................................................................. 15-7
.05 Deficiencies in Assumptions ............................................. 15-8
1530 COMPILATION PROCEDURES ................................................................. 15-8.02 AuG-16 Procedures ........................................................................ 15-8.05 Letter of Representation ................................................................ 15-9
1535 DOCUMENTATION ..................................................................................... 15-9.03 Contents of Working Paper File ................................................... 15-9
1600 GENERAL .................................................................................................... 16-1.04 Personal Financial Statements Guidance ...................................... 16-1.06 Completeness of Information .......................................................... 16-2.07 Type of Engagement ........................................................................ 16-2
1605 ENTITY TO BE COVERED .......................................................................... 16-3.02 Ownership Information ..................................................................... 16-3
1610 BASIS OF PRESENTATION ....................................................................... 16-3.01 Estimated Current Value Basis ....................................................... 16-3.02 Historical Cost ................................................................................... 16-4.05 Cash or Accrual? .............................................................................. 16-4.06 Other Bases of Accounting ............................................................. 16-4
1615 FINANCIAL STATEMENTS ......................................................................... 16-5.01 Balance Sheet ................................................................................... 16-5.03 Statement of Changes in Net Worth ............................................... 16-5.04 Statement of Changes in Cash Resources .................................... 16-5.05 Comparative Financial Statements ................................................. 16-5
1620 CARRYING VALUES OF ASSETS AND LIABILITIES .............................. 16-5.01 Estimated Current Values ................................................................ 16-5.08 Range of Values ................................................................................ 16-9.10 Tax Shelters ....................................................................................... 16-9.12 Potential Tax ...................................................................................... 16-10
1630 PERSONAL FINANCIAL STATEMENTS ENGAGEMENT ......................... 16-11.01 General ............................................................................................... 16-11.02 Acceptance of Clients ...................................................................... 16-11.04 Engagement Letters ......................................................................... 16-12.05 Inadequate Accounting Records/Gathering Information .............. 16-12.09 Personal Financial Statements Worksheet .................................... 16-13.10 Client Representation Letters .......................................................... 16-13
TOC 16-2 10/12
CHAPTER 16
PERSONAL FINANCIAL STATEMENTS
Table of Contents (continued)
Section Page No.Description
1640 COMPILATION OF PERSONAL FINANCIAL STATEMENTS ................... 16-14.01 Standards and Procedures .................................................... 16-14.05 Communication ....................................................................... 16-14
1645 ILLUSTRATIVE PERSONAL FINANCIAL STATEMENTS ......................... 16-15
Appendix
16A Illustrative Personal Financial Statement with Notice to Reader(“Bare-Bones”) ...................................................................................... 16-17
TOC 17-112/10
CHAPTER 17
ILLUSTRATIVE COMPILATION WORKING PAPERS
Table of Contents
Section Page No.Description
1700 INTRODUCTION .......................................................................................... 17-11705 WORKING PAPERS .................................................................................... 17-2
[Next page is 17-1]
APPENDIX A
CORRESPONDENCE/LETTERS (CL)
Instructions
This Appendix provides samples of the correspondence that is commonly used during review and compilation
engagements. Your firm’s own lettersmay also be added to the Table of Contents andmaintained in this binder.
Professional judgment—Theuseof these sample letters depends on the practitioner’s professional judgment
and each letter should be tailored, where necessary, to meet both the needs of the client and your firm.
Table of Contents
CL-1 Communication with Predecessor ...........................................................................................A-3
CL-2 Illustrative Engagement Letter — Review ...............................................................................A-5
CL-3 Illustrative Engagement Letter — Compilation........................................................................A-9
CL-11 Transmittal Letter for Computer-Produced Records and Returning Documents andVouchers .............................................................................................................................A-31
CL-12 Transmittal Letter for Practitioner Acting in the Capacity of a Typing Service Only...........A-33
CL-13 Transmittal Letter for Processing Financial Data for Clients of Other Accounting Firms ...A-35
CL-14 Transmittal Letter for Personal Income Tax Returns............................................................A-37
CL-15 General Transmittal Letter — Drafting Form.........................................................................A-39
CL-17 Journal Entries Approval Form ..............................................................................................A-41
1 For a general representation letter, see Appendices 2A and 2B.
A-102/16
APPENDIX B
REVIEW ENGAGEMENT FORMS (REF)
Instructions
This Appendix provides various forms that can be used for review engagements as discussed in this Guide.
Some firms, however, maymodify some of these forms also for compilation engagements. Any other forms that
your firm uses may also be added to the Table of Contents and maintained in this binder.
Professional judgment—The use of these forms depends on the practitioner’s professional judgment. Forms
should be tailored, where necessary, to meet the needs of the engagement.
For those forms that are updated and carried forward annually, the original may be removed from the prior year
working paper file before making any changes, and replaced with a photocopy.
REF-9 Consultation Documentation Form ........................................................................................B-39
REF-10 Personal Financial Statement Preparer’s Worksheet ...........................................................B-41
REF-12 Pre-Release Review Form .....................................................................................................B-53
REF-13 Routing Instructions for Processing Financial Statements ...................................................B-57
REF-14 Staff and Partners Acknowledgement of Independence ......................................................B-59
B-102/16
APPENDIX C
REVIEW ENGAGEMENT CHECKLISTS (REC)
Instructions
This Appendix provides checklists for review engagements as discussed in this Guide starting with a general review engagementchecklist and continuing with specialized checklists for specific circumstances and types of financial statements. Any otherchecklists that your firm uses may also be added to the Table of Contents and maintained in this binder.
Professional judgment—The use of these checklists depends on the practitioner’s professional judgment. Checklists that areused should be tailored, where necessary, to meet the needs of the engagement.
This Appendix provides checklists and forms for compilation engagements as discussed in this Guide.Any other checklists and forms that your firm uses may also be added to the Table of Contents andmaintained in this binder.
Professional judgment — The use of these checklists and forms depends on the practitioner’s pro-fessional judgment. Checklists and forms that are used should be tailored, where necessary, to meetthe needs of the engagement.
Table of Contents
CEC-1 Preparation Checklist — General .............................................................................. D-3
CEC-5 Supplementary Compilation Procedures Checklist Personal FinancialStatements ............................................................................................................ D-15
E-112/10
APPENDIX E
FINANCIAL STATEMENT DISCLOSURE CHECKLIST (DC)
Table of Contents
DC-1 Presentation and Disclosure Requirements for Financial Statements Prepared under Ca-nadian Accounting Standards for Private Enterprises ................................................ E-3