The Impact of Change: Good or Bad for Accounting? Essay

There have been rather a few alterations applied to the accounting profession in respects to the new Canadian and US criterions in the old old ages. Besides, there are traveling to be alterations applied in the hereafter such as the transition to International Financial Reporting Standards ( IFRS ) in 2011, the switch to Canadian Auditing Standards ( CAS ) and the switch to Canadian Standards on Quality Control ( CSQC 1 ) which is replacing the current General Standards of Quality Control for Firms Performing Assurance Engagements ( GSF-QC ) . CASs are coming into consequence for periods stoping on or after December 14, 2010 while CSQC 1 is effectual December 15, 2009 ( Ho Ng, 2009 ) . There will be 36 International Standards on Auditing ( ISA ) included in the new CASs and they will necessitate to be adjusted for Canada ( Stevens, 2009 ) . To be successful in implementing these alterations every bit smooth as possible, many concerns will happen it dearly-won and clip devouring. Most of the big houses will hold the resources available at manus to finish the readying, planning and preparation recommended for the needed alterations. However, many of the smaller houses will be fighting with the costs and clip needed for this passage and therefore may endure an information overload. Hearers should get down fixing every bit shortly as possible for the passage to let plentifulness of clip to familiarise themselves with the ISAs and the CASs ( Buckstein, 2009 ) . The more clip allocated to this passage will diminish the sum of emphasis and defeat from the employees within the public accounting houses. There will be many important countries of alteration ensuing from the passage to ISAs. This will imply plentifulness of focal point, readying and forbearance from the hearers.

The first includes the passage from GSF-QC to CSQC 1. The Canadian Auditing and Assurance Standards Board ( AASB ) has decided to follow from ISA a modified version of one quality control criterion. This quality control criterion will be applied merely to confidence battles. This new system will be of a benefit because it will let public accounting houses to expose their dedication to quality control ( Ho Ng, 2009 ) . It is of great importance for the house to understand this as it will assist guarantee the quality of the work done for their clients. This passage includes two major facets that are of importance.

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The first one requires that the Engagement Quality Control Reviews ( EQCR ) be finished well before the audit study day of the month ( Ho Ng, 2009 ) . The determination to this alteration was generated utilizing CAS 700 ( Ho Ng, 2009 ) . Sing this alteration along with the alteration to CSQC 1 may convey the day of the months of the study and issue closer together. In some instances, the engagement study day of the month may be much earlier than the issue day of the month and for those houses they will necessitate a alteration in pattern when implementing the new CSQC 1 ( Ho Ng, 2009 ) .

The 2nd requires that the file proctors be independent of the house when executing quality control reviews ( Ho Ng, 2009 ) . The EQC referee must non be portion of the house ‘s engagement squad. Therefore, CSQC 1 provides a more precise suitableness when it comes to inspecting the completed battles. This will impact many of the smaller houses because they will now necessitate to engage an external professional to reexamine their EQC ( Ho Ng, 2009 ) . Another option for the smaller houses is that they can smooth the advancement of these supervising maps by set uping with other organisations to apportion their resources ( Ho Ng, 2009 ) . This will be an added cost and professional consideration to the two spouse houses and exclusive practicians. An EQCR will help in cut downing the sum of inappropriate studies issued every bit good as prevent menaces to independence.

First, there was a alteration made referred to as the new CAS 200. Presently, hearers are describing on conformity with Canadian Generally Accepted Accounting Principles ( GAAP ) . The new CAS commissariats states that hearers are traveling to be permitted to utilize any acceptable fiscal coverage model to give an audit sentiment on the fiscal statements ( Stevens, 2009 ) . However, direction may necessitate to show specific revelations outside of what the model requires to explicate their logical thinking. Along with make up one’s minding upon utilizing different acceptable fiscal coverage models, the hearer is required to utilize their professional judgement while making so ( Buckstein, 2009 ) . This will surely impact public accounting within houses every bit good as the hearers within the Canada Revenue Agency ( CRA ) . The hearers will necessitate to cognize or be familiar with the model in order to understand it. If they are non able to understand the dissimilar fiscal model, they may happen it more hard to execute their responsibilities that are required of them and hence may go defeated. Consequently, this passage will do the hearer to pass more clip seeking to understand and calculate out the new fiscal model that they are approached with. Therefore, this addition for clip used to calculate out the model will do for an addition in disbursals to the concerns because of the excess hours that the hearer will necessitate to make this. In decision, for the CRA staff, it means more preparation, which means more taxpayer dollars will be wasted. The audits will besides take a longer period to finish ; it may besides bring forth a more wide range if uncertainnesss develop within the audit reappraisal. In add-on, the point of an audit at CRA is to bring forth new collectable revenue enhancement dollars, non give it back. Furthermore, this once more will be passed down the clients, as their audits will be more.

A important alteration made was the new CAS 570 – “ Traveling Concern. ” There is no Canadian criterion as of right now similar to the new CAS 570. The traveling concern premise evaluates the entity ‘s fiscal statements for that period and will foretell whether the entity is able to go on in the subsequent 12 months ( Beaudin, 2009 ) . Presently, there is non a particular subdivision covering straight with this issue but because of the economic downswing, this issue has become more serious. As of now, when there is a concern about whether the client is able to last there will be suggestions made about the traveling concern premise ( Buckstein, 2009 ) . The new CAS 570 will imply the hearer to execute specific responsibilities relevant to the traveling concern premise. This will include reexamining the direction ‘s rating related to the traveling concern premise. The hearer will necessitate to reexamine the fiscal statements if there is a material uncertainness to see if they include the vacillation on whether the entity is able to go on as a traveling concern ( Beaudin, 2009 ) . As good, the hearer should verify what direction ‘s programs are to handle the traveling concern and its possible effects ( Beaudin, 2009 ) . This will impact the public accounting houses because the hearers will happen it hard to be true in give voicing of direction ‘s manner of traveling concern. An consequence is that the accounting house may lose their client if the client does non hold with what the hearer has assumed about the direction ‘s rating. A scenario to see would be an audit of a publically traded corporation, where a figure of stockholders require audited fiscal statements to do their determination on investing schemes. If the hearer indicated on their audit study that this entity was following the traveling concern rule but went bankrupt 6 months subsequently due to hapless direction, will these stockholders be able to action the hearers for the audit study that they relied on? Stockholders are a 3rd party to the hearer and hence are non the clients of the hearer. The Ultramares Doctrine says, “ Ordinary carelessness is deficient for liability to third parties because of the deficiency of privity of contract between the 3rd party and the hearer ” ( Arens, Elder, Beasley, Splettstoesser-Hogeterp, pg. 92 ) . However, since every instance is different this may non ever be the instance so there are five defences that the hearer may utilize against third-party suits. They include “ responsibility of attention, absence of misstatement, non-negligent public presentation, absence of insouciant connexion and contributory carelessness ” ( Arens, Elder, Beasley, Splettstoesser-Hogeterp, pg. 94 ) . Therefore, the new CAS subdivision will help Canadian hearers on suitably covering with affairs related to the traveling concern subdivision by supplying them with stronger demands and counsel as than with the old criterion.

There is an of import new demand included in the new CAS 600 – “ Particular Considerations – Audited accounts of Group Financial Statements. ” This new criterion will hold an copiousness of theories and alterations, hence demanding add-on work every bit compared to Section 6930 ( Beaudin, 2009 ) . This will impact the public accounting within different organisations as “ this CAS provides more expressed and extended demands on the consolidation procedure, subsequent events, and communications with component hearers, direction and those charged with administration of the group ” ( Beaudin, 2009 ) . For illustration, if the amalgamate entity has an hearer non included in all of the cardinal subdivisions ( Beaudin, 2009 ) .

The alteration adopted from ISA 700 contains a considerable sum of diction and structural alterations sing the audits study. The following new standard requires that the direction and hearer report their duties under separate headers in the audits study ( Stevens, 2009 ) . These headers will be placed after the debut and before the range paragraphs. The direction ‘s duty subdivision should depict the duty of direction in fixing the fiscal statements ( CICAHB, CAS 700 ) . As good, they must make up one’s mind upon the appropriate internal controls necessary to forestall material misstatements on the fiscal statements from fraud or mistake ( CICAHB, CAS 700 ) . Under the hearer ‘s duty subdivision it will province that an hearer has expressed their sentiment based on the audit of the fiscal statements and will province that they performed their audit in conformity to Canadian by and large accepted auditing criterions ( GAAS ) ( CICAHB, CAS 700 ) . It is besides stated that the hearer will measure the company ‘s internal controls by obtaining adequate grounds from the suited audit processs ( CICAHB, CAS 700 ) . The impact of this alteration to the public accounting houses is that it will necessitate more duty from the hearer to derive a better apprehension of the client ‘s concern while roll uping grounds to measure the company ‘s internal controls. In making this, you may be able to diminish your control hazard. This will ensue in a greater cost while making this that will be passed down to the client.

Another alteration involves the day of the month required on an hearers study. Currently hearers are utilizing the day of the month when their work has been significantly completed ( Beaudin, 2009 ) . However, under the new criterion it requires that the day of the month can non be any earlier than the fiscal statements that have non been approved ( Beaudin, 2009 ) . Therefore, the hearer must wait until the person ( s ) that are accountable for fixing those fiscal statements hold given their blessing. This in some instances will do a ulterior audit study day of the month than it presently is and in decision, subsequent events will hold to be audited mediate the fiscal statements effectual day of the month and the audit study day of the month ( Buckstein, 2009 ) . This will consist a important alteration because it could necessitate extra work to be done hence hold the audit ‘s stopping point off procedures ( Buckstein, 2009 ) . Therefore, this difference in alterations may widen the period of audit work doing the audit to be longer and increasing the costs anyplace from every bit small as 1 % to every bit much as 10 % depending on each separate instance ( Buckstein, 2009 ) . This impact can further impact the public accounting house ‘s clients as good. This is because the additions in cost of an audit will most likely consequence in an addition in the monetary value charged for the client ‘s audits. In add-on, it may do the audit more hard to complete depending on how rapidly the fiscal statements have been approved. If the hearer ‘s are left waiting for these fiscal statements they may go impatient or frustrated that they can non complete their audit. Therefore, this in bend will consequence direction of the entities being audited, as they will necessitate to O.K. their fiscal statements for audit quicker than earlier.

A farther passage that will take topographic point on December 14, 2010 includes the new CAS 705 – “ Alterations to the Opinion in the Independent Auditor ‘s Report. ” This new subdivision provides alterations in content diction of an hearer ‘s study ( Stevens, 2009 ) .

The hearer should mention to the modified sentiment in the engagement missive ( CICAHB, CAS 210 ) . This new subdivision will impact the profession of public accounting by necessitating the hearer to roll up more grounds on their client ‘s entity to be able to publish an unmodified sentiment. It will necessitate that the hearer is up to day of the month with the new rubrics of the audit ‘s study and requires the hearer to understand the appropriate definitions of each of the rubrics.

Another important alteration is the new CAS 706 – “ Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent Auditor ‘s Report. ” This subdivision is where the hearer is entitled to describe a affair of importance to users of the fiscal statements. In add-on, the hearer may put any other appropriate stuff that is relevant to the users apprehension of the audit. The hearer will include the Emphasis of Matter paragraph predating the Opinion paragraph and must hold obtained adequate grounds to back up that the fiscal statements are non materially misstated. The hearer will include an Emphasis of Matter paragraph if there is a permeant consequence caused to the fiscal statements due to a new accounting criterion that has been applied in progress ( CICAHB, 706 ) . In add-on, the hearer will include catastrophes and judicial proceedings that have a effect on the entity ‘s fiscal place ( CICAHB, 706 ) . An of import fact to observe is that this paragraph does non impact the sentiment made by the hearer. The Other Matter paragraph is besides included following the Opinion subdivision of the hearer ‘s study and sometimes its arrangement will change depending on the information that needs to be included. An point that the hearer could include in the Other Matter paragraph is an account of why they were non able to retreat from the battle even though there may hold been a restriction of range during the audit ( CICAHB, CAS 706 ) . More points include if the hearer used more than one set of fiscal statements and issued a study, or if the undermentioned study is non meant for other parties and hence should non be distributed ( CICAHB, CAS 706 ) . A item of importance to observe is that the Other Matter paragraph should non include direction information. This new criterion will impact a public accounting house greatly. For illustration if the audit study referred to an application of a new accounting criterion and it showed higher Numberss on the fiscal statements the stockholder may be mislead into believing the entity is making better and purchases more stock when in fact there was n’t a alteration at all. The public accounting house may lose their clients after including such events because the client may non hold wanted this information to be exposed to the populace. Therefore, this could destroy a corporation due to the troubles they may hold in achieving new stockholders or merely keeping their current stockholders. In add-on, exclusive proprietaries may seek to avoid being audited if they feel that there is something they do non desire being revealed to the populace.

Last, there are the new CAS 315 and CAS 330 each stand foring a relation to appraisal of hazard. Presently, these regulations have been in Canada and hence the new regulations will non hold much of an impact. The public accounting houses should be presently following the AASB ‘s hazard appraisal demands and will non necessitate to alter much ( Buckstein, 2009 ) . As for the houses who are non staying by these regulations there will be a greater passage for them as opposed to the houses who are ( Buckstein, 2009 ) . These criterions will necessitate to be treated otherwise in regard to the size of the organisation, for illustration, if the organisation is big measuring the hazard becomes more hard and more in deepness as opposed to a smaller organisation.

A determination that may involvement a exclusive owner may be whether to integrate their concern. There are many advantages for taking this attack, which include “ a separate legal entity, limited liability, lower corporate revenue enhancement rates, greater entree to capital and uninterrupted being ” ( Industry Canada, 2009 ) . Some disadvantages may include “ higher start-up costs, increased formalities, and a more complex construction ” ( Industry Canada, 2009 ) . Will this be of an advantage to the exclusive owner to do this move before the passage of CASs? There are many grounds as to why this may be an advantage to the exclusive owner. The chief ground being that the person will non be apt for the debts made by the company. Corporations as a whole are an advantage during this passage because they will hold the financess or be able to hold entree to a greater sum of capital to afford the costs in fixing, planning and preparation for this passage.

These alterations may non look relevant for a client to inform himself or herself, nevertheless the client should go cognizant of the many alterations to take topographic point in the following twosome of old ages. These alterations will be impacting the client straight in the pocketbook. For many clients if non all clients there will be a monetary value addition for their audits compared to old old ages. This may be due to the current economic conditions in Canada every bit good as the AASB ‘s determination to follow international criterions. Many of the criterions cause an addition in the audit work to be done and hence will do for a lengthier audit, which in bend will do for an addition in the monetary value of an audit. The clients can educate themselves by reading articles posted in magazines or even nearing their comptroller with inquiries they may hold sing the passage.

In decision, many different parts of the accounting profession will be affected by these alterations. So why would the AASB follow these alterations? Furthermore, how did the AASB take this option? The AASB had the option of taking from three options, which were as follows: to go on with the bing Canadian criterions, transportation to the US criterions or reassign to the International criterions. There were many disadvantages of keeping the Canadian criterions. Continuing with these current criterions was regarded as being dearly-won and inefficient due to the studies that had to be duplicated. The option of following US criterions had been present for many old ages but was geared in a different way after the Enron restructurings that took topographic point in the US ( Buckstein, 2009 ) . It was noted that there is a difference in power between the Canadian Public Accountability Board ( CPAB ) and the Public Company Accounting Oversight Board ( PCAOB ) and this would hold caused jobs if these criterions were adopted ( Buckstein, 2009 ) . As good, the US criterion scene was more of a rules-based as opposed to Canada ‘s principle-based ( Buckstein, 2009 ) . They have decided to follow ISAs for Canada for many grounds. The first being that many states all over the universe have accepted ISAs or have decided upon accepting ISAs in the close hereafter ( Stevens, 2009 ) . The 2nd ground being that the Canadian attack used for standard scene is rather similar with the International Auditing and Assurance Standards Board ‘s ( IAASB ) attack ( Stevens, 2009 ) . The 3rd ground is that the thorough and clear process used to develop and publish criterions is suiting to the CAASB ‘s input ( Stevens, 2009 ) . Another ground refers to the suiting IAASB ‘s guidelines to do necessary accommodations to adhere to the national regulative demands ( Stevens, 2009 ) . The concluding ground for the acceptance of these alterations is that a “ Clarity Format ” was created by the IAASB to let for an easier passage for the hearers ( Stevens, 2009 ) . The “ Clarity Format ” is broken down into five separate parts including an debut, aims, definition, demands, and an application and other explanatory stuff subdivision. The debut describes the CAS ‘s intent and range, the aims are where demands are described, the definition describes what a Calcium means, demands explain the footings that must be met by the hearer and the application/other explanatory stuff subdivision provides more counsel on the demands for CASs ( Stevens, 2009 ) . Each of these parts will supply the hearer with clear and consistent information to understand each of the new CASs more easy. This is to help in doing the passage go every bit smooth as possible in regard to the public accounting profession. In respects to the passage of CSQC 1, this is about a hebdomad off and will necessitate the attending from the public accounting profession. Nevertheless, in respects to the acceptance of ISAs, this is about one twelvemonth off so hence, the accounting houses should get down preparing, planning and developing their employees every bit shortly as possible if they have non done so.


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