CPA Alberta Upcoming Standards and Advisory Update CPA

CPA Alberta Upcoming Standards and Advisory Update CPA FORUM NORTH 2018 OCTOBER 22 ND, 2018 JASPER, ALBERTA Larry Brownoff CPA, CA Director, Professional and Career Services

Agenda • • • CPA Canada Firm Benchmarking Surveys Standards Update Practice Tools Risk Areas – Future Oriented Financial Information (FOFI) CPA Alberta Achievement Awards

CPA Canada Firm Benchmarking Surveys • Mid-September 2018 email from CPA Canada inviting you to participate in the new and comparatively brief CPA Firm Benchmarking Survey. • Staff compensation questionnaire is the first of a series of brief benchmarking surveys for CPA firms. • Provide respondents with valuable data that they can use to compare themselves with other similar practices. • Only firms who participate in the survey will receive the results. • You will receive the results free of charge within six weeks of the survey closing. • The survey is open to all CPA firms with a minimum 500 billable hours in their most recent fiscal year and at least one full-time equivalent staff.

CPA Canada Firm Benchmarking Surveys Topics for 2018/19: • Compensation – released September 2018 • Billing Rates and Collection • Partnership Consideration • Hours of Work/Over-time

CPA Canada Firm Benchmarking Surveys Future Survey Topics: • Staff benefits • CPA Students • Types of services being offered (% of Revenue by Service) • Income statement ratios (WIP turnover ratio, expense by category) • Office space • Technology Internal (paperless, software used, website/social, outsourced, cloud, backups, disaster recovery) • Technology Client focused (bookkeeping software recommended, web conferencing, client portal, clients in cloud, time and billing, workflow/scheduling, tax prep software) • Marketing/advertising (ad spend and media used)

Standards/Resources Update • • New Compilation Engagement Exposure Draft Agriculture Exposure Draft Cryptocurrency Resources Sample Review Engagement File New Special Report Requirements CPA Canada Practitioner’s Pulse Webinar Professional Engagement Guide (PEG) Update Dealing with Technology Issues

Standards/Resources Update New Compilation Engagement Exposure Draft • September 2018, AASB issued exposure draft proposing a new Canadian Standard on Related Services 4200, Compilation Engagements. • Audit and assurance alert to learn the significant changes in the new proposed standard to replace Section 9200. • Scope of proposals is to: • better assist practitioners in performing compilation engagements in the current environment; and • communicate more clearly to users the responsibilities of management and the practitioner, and the nature and scope of a compilation engagement. • To better understand, CPA Canada archived webinar. Registration is free using this link.

Standards/Resources Update Agriculture Exposure Draft • Do you provide services to Canadian private agricultural producer? • Review the proposed standards for the agriculture sector. • You and your clients can learn more about the proposed guidance for agriculture by registering to watch the free archived ASPE exposure draft on agriculture webinar.

Standards/Resources Update Cryptocurrency Resources • As cryptocurrencies become more popular, CPA Canada continues to develop resources to aid members in dealing with this new way of doing business. • Two free resources to help members learn about cryptocurrencies and the primary issues involved in accounting for them under International Financial Reporting Standards: • A webinar on Accounting for Cryptocurrencies under IFRS; and • A downloadable guide: An Introduction to Accounting for Cryptocurrencies under IFRS

Standards/Resources Update Sample Review Engagement File • New product is available for purchase from CPA Canada: Review Engagements: A Sample File on the Application of CSRE 2400. • Sample file intended to provide practical guidance to assist practitioners in ensuring sufficient work is performed and documented to meet the requirements of CSRE 2400.

Standards/Resources Update New Special Report Requirements • Do you prepare any special reports for clients under CPA Handbook – Assurance Sections 5815 and 8600? • Be aware of new compliance reporting standards going into effect April 1, 2019. • Sections 5815 and 8600 are being replaced by CSAE 3530 Attestation Engagements to Report on Compliance and CSAE 3531 Direct Engagements to Report on Compliance. • Audit and assurance alert learn about: • the differences between an attestation and a direct compliance reporting engagement; • the relationship between CSAE 3530/3531 and CSAE 3000/3001; and • what you can do to be ready for these new standards.

Standards/Resources Update CPA Canada Practitioner’s Pulse Webinars • 90 minute webinars featuring a panel of presenters providing four short segments that explain recent developments or hot topics in accounting, assurance, tax and practice management. • Register to watch the September 2018 Practitioner's Pulse, areas covered: • the new exposure drafts for compilation engagements standard and CAS 315, • developments in accounting for cryptocurrencies, • reporting of key performance indicators, • passive income proposals from the 2018 budget, and • working with Millennials.

Standards/Resources Update Professional Engagement Guide Update • Significant changes this year include: • A new case study for CSRE 2400 to provide guidance on completing review engagements using the PEG templates (Volume 2), • Updates to review engagement templates to provide additional guidance and clarity (Practice Aids), and • Updates to engagement letters to include common legal terms and conditions (Practice Aids).

Standards/Resources Update Dealing with Technology Issues • How are you responding to changes in technology? • Free Technology Issues Facing CPAs webinar to learn how certain technology trends such as: • cybersecurity, • big data and data analytics, • artificial intelligence, Blockchain, and • cloud computing are affecting business and CPAs. • Learn about key technological issues that you need to be aware of today.

Risk Areas – Future Oriented Financial Information (FOFI) • Client requests for FOFI typically from one of the following: • client's banker, • potential purchaser of the client's business, • investor in the client's business. • Where do you turn for guidance? • When searching, you cannot locate anything in the CPA Canada Handbook-Accounting. • The FOFI Section 4250, formerly in Part V of the CPA Canada Handbook-Accounting, has been withdrawn. • Refer to an earlier edition of this withdrawn section.

Risk Areas – Future Oriented Financial Information (FOFI) Resources for FOFI Guidance 1. Au. G-6 (located in the CPA Canada Handbook-Assurance) • financial forecast or projection included in a prospectus or other public offering document 2. Au. G-16 (located in the CPA Canada Handbook – Assurance) • compilation of a financial forecast or projection 3. PROFESSIONAL ENGAGEMENT GUIDE (PEG) • Chapter 39 deals specifically with FOFI engagements. • RECOMMENDED THAT REFERENCE BE MADE TO THE MOST RECENT PEG EDITION PRIOR TO PERFORMANCE OF FOFI ENGAGEMENTS.

Risk Areas – Future Oriented Financial Information (FOFI) • CAUTION! • Although conceptually an option, PEG specifically does NOT RECOMMEND DOING FOFI REVIEW LEVEL ENGAGEMENTS. • Most frequent engagements requested and provided: • services provided pursuant to Au. G-16 • assistance in compiling a financial forecast or projection but not requiring that the CPA firm provide assurance on the FOFI.

Risk Areas – Future Oriented Financial Information (FOFI) Two Categories of FOFI 1. FORECAST - management's best estimate of future results 2. PROJECTION - a HYPOTHESIS which is NOT management's best ESTIMATE

Risk Areas – Future Oriented Financial Information (FOFI) Types of FOFI Outlined in the PEG • Typically n the format of historical financial statements, the following are examples: • Financial forecasts/projections • Cash flow forecasts/projections • Computer-generated spreadsheets • Projected tax loss realization worksheets • Projected tax liability worksheets • Projected personal financial statements

Risk Areas – Future Oriented Financial Information (FOFI) Areas to Address • Assumptions used by management in preparing FOFI • should be reasonable, supportable, appropriate, complete and internally consistent • FOFI should be clearly labeled as either a forecast or projection • Intended users and purpose of FOFI - general or specific purpose use • A cautionary note stating that actual results will likely vary from that reflected in FOFI • Format of FOFI • Effective date of assumptions used

Risk Areas – Future Oriented Financial Information (FOFI) Acceptance of a FOFI Engagement • The following will impact acceptance of a FOFI engagement: • CPA firm’s knowledge of the client's business • Difficulty in assessing management assumptions may be difficult to assess • Potential use of and reliance by users of FOFI • Possible limitations of FOFI • The CPA firm’s limited involvement • Management's experience and knowledge in preparing FOFI

Risk Areas – Future Oriented Financial Information (FOFI) Work Effort • Compilation engagement - ensure the information is mathematically correct and not false or misleading. • Usually involves assembling the financial forecast or projection based on management's assumptions, including hypotheses. • Goes beyond the requirements in a compilation of historic information, will require the practitioner to perform the following: • Obtain a sufficient understanding of the entity to understand the events, transactions and practices that may have a significant effect on the engagement - less detailed than required in an audit. • Inquire about the information supplied as the basis for the forecast or projection.

Risk Areas – Future Oriented Financial Information (FOFI) Work Effort • Perform procedures to determine whether the financial forecast or projection obviously appears not to be prepared in accordance with the requirements of the CPA Canada Handbook – Accounting, Part V. • Compilation procedures do not include evaluating the support for the assumptions or other information. • Purpose of the procedures: • to enable the practitioner to compile a financial forecast or projection from information provided by management, • not to provide assurance on such information.

Risk Areas – Future Oriented Financial Information (FOFI) Typical Procedures for the Compilation of a Financial Forecast or Projection • Assemble financial forecast or projection based on information provided by management. Include a list of assumptions and historical financial statements together with accompanying notes. • Perform computations that translate those assumptions into the financial forecast or projection. • Inquire whether the accounting policies used are the same as those expected to be used in presenting the historical financial statements for the future periods or otherwise as agreed to for special purpose FOFI. • Inquire how management developed its assumptions.

Risk Areas – Future Oriented Financial Information (FOFI) Typical Procedures for the Compilation of a Financial Forecast or Projection • Determine whether the following scenarios exist. • The financial forecast or projection obviously appears not to be prepared in accordance with the accounting standards of the CPA Canada Handbook – Accounting, Part V. • Assumptions obviously appear to be inappropriate. • There are obvious omissions or internal inconsistencies in the assumptions. • It is obvious the statements appear to be incorrectly identified as a financial forecast or projection. • The time period obviously appears to extend beyond the point that can be reasonably estimated.

Risk Areas – Future Oriented Financial Information (FOFI) Typical Procedures for the Compilation of a Financial Forecast or Projection • If a significant part of the time period covered by the financial forecast or projection has expired, inquire about the results of the operations and cash flows. Consider their effect on the financial forecast or projection

Risk Areas – Future Oriented Financial Information (FOFI) False or Misleading Forecast / Projection • When it becomes apparent that the representations or other information received appear to be inappropriate, incomplete, incorrect or otherwise unsatisfactory. • It is likely that the resulting financial forecast or projection will be false or misleading. • Additional or revised information should be requested to complete the financial forecast or projection. • If management does not provide the information requested, the firm should not release the financial forecast or projection and should withdraw from the engagement.

Risk Areas – Future Oriented Financial Information (FOFI) Reporting • The communication is called "Notice to Reader on the Compilation of a Financial Forecast (or Projection). " • You can access the PEG templates, which contain examples of these reports.

Risk Areas – Future Oriented Financial Information (FOFI) Reporting Example [LETTERHEAD] Notice to Reader on the compilation of a financial forecast We have compiled the financial forecast of Small Business Ltd. consisting of a balance sheet as at December 31, 20 X 1, and the related statement of income (loss) and deficit, statement of cash flow and statement of cash receipts and disbursements for the year ending December 31, 20 X 1, with actual comparative financial statements for the year ended December 31, 20 XX, using assumptions with an effective date of February 1, 20 XX, and other information provided by management. Our engagement was performed in accordance with applicable Canadian guidelines on the compilation of a financial forecast. A compilation is limited to presenting, in the form of a financial forecast, information provided by management and does not include evaluating the support for the assumptions or other information underlying the forecast. Accordingly, we do not express an opinion or any other form of assurance on the financial forecast or assumptions. Further, since the financial forecast is based on assumptions regarding future events, actual results will vary from the information presented and the variations may be material. We have no responsibility to update this communication for events and circumstances occurring after the date of this communication. [Signature] [Date of report] [Address]

CPA Alberta Achievement Awards • The CPA Alberta Achievement Awards honour those who are making a difference and bringing value to organizations and the community. • You can nominate a colleague for an Early Achievement Award, Distinguished Service Award, or Fellowship. • The deadline for nominations is October 31. • You can find more information on the CPA Alberta website, and I would be more than happy to chat to you about the nomination process.

Qusetions & Comments

Contact Larry Brownoff CPA, CA Director, Professional and Career Services Phone: (780) 670 -2428 Email: lbrownoff@cpaalberta. ca