Proposed ISRS 4400 Revised Ron Salole AgreedUpon Procedure

Proposed ISRS 4400 (Revised) Ron Salole, Agreed-Upon Procedure Task Force Chair IAASB Meeting, New York Agenda Item 5 September 18, 2018

Activities since March 2018 Task Force Activities since March 2018 • 1 physical meeting and 2 teleconferences • Presented 2 issues to the IAASB at the August 2018 teleconference Outreach and coordination with other IAASB Task Forces • Teleconference with IESBA staff in August 2018 and ongoing e-mail communications with IESBA staff and the IESBSA member responsible for coordination with the IAASB • Meeting with the SMPC’s International Rapid Response Task Force in June 2018 • Teleconference with Chair and staff of the ISQC Task Force in July 2018 Page 2

CAG Discussion Support for project to revise ISRS 4400 Diverse views on independence • Some representatives were of view that independence should be required o IESBA Code doesn’t have separate standard on independence for AUP engagements • Others supported Task Force’s proposals • Should the nature of the AUP engagement drive independence requirements? Questioned the change from ‘factual findings’ to ‘findings’ Suggestion made to enhance the illustrative reports General support for proposals exposure period and effective date Page 3

SMPC Comments Project is very important Support the engaging party and intended users assessing for themselves the procedures and findings reported by the practitioner, and drawing their own conclusions Require a statement in the report where independence is required but the practitioner is not independent but render such a statement optional where independence is not mandatory Clarify that AUP engagements exclude the use of Professional Judgment in the performance of procedures after they have been agreed Agree that restrictions on the AUP report should not be required Refer to the Engagement Partner having review responsibilities in Engagement Level Quality Control Page 4

Public Interest Considerations Updating ISRS 4400 to better meet the needs of users for increased accountability around the use of grants that are often provided from public funds, and facilitating innovation and enhancing services available to entities of all sizes Broadened scope to Added examples of include both AUP engagements financial that satisfy users, information and non such as regulators -financial and others. information. Modernized the ISRS Explained that the by adding term “information” requirements encompasses all dealing with the role matters on which that professional AUP are performed judgment plays in an AUP engagement Page 5

Public Interest Considerations Updating ISRS 4400 to better meet the needs of users for increased accountability around the use of grants that are often provided from public funds, and facilitating innovation and enhancing services available to entities of all sizes Added application Enhanced explanations Enhanced requirements material that identifies of what distinguishes dealing with areas in which assurance compliance with laws professional judgment engagements and AUP and regulations and is applied engagements fraud Page 6

Public Interest Considerations Providing clarity in the AUP report—Enhancing the report for clearer, more consistent language which will help clarify what was done and the results therefrom, thereby reducing confusion that may arise in practice about AUP engagements. Enhanced requirements and application material on ensuring language used is clearer and more consistent Added a requirement that the AUP report include a statement on the independence of the practitioner and referring to the ethical requirements followed Page 7

Public Interest Considerations Reducing inconsistency in the performance of AUP engagements—redrafting using the clarity drafting conventions and other changes for clarification and enhancement Drafted proposed ISRS 4400 (Revised) in clarity convention Added a clear Set an objective and description of what establishing the an AUP engagement practitioner’s is and the value it obligation on relation provides to that objective Page 8

Public Interest Considerations Reducing inconsistency in the performance of AUP engagements—redrafting using the clarity drafting conventions and other changes for clarification and enhancement Clarified the obligations Eliminated any possible imposed on ambiguity about the practitioners by the requirements a requirements of practitioner needs to proposed ISRS 4400 fulfil (Revised) Improved the overall readability and understandability of proposed ISRS 4400 (Revised) Page 9

Overarching Considerations Option 3: Replicate ISRS 4410 (Revised) References to paragraphs 4, 23, A 6 -A 11 and A 25 -A 27 ISRS 4400 Quality Control (Revised) • Effective date of ISRS 4400 (Revised) will not be contingent on revised ISQC 1 becoming effective • Facilitate the drafting of conforming amendments to both ISRS 4400 (Revised) and ISRS 4410 (Revised) when the revised ISQC 1 is finalized • Allow for a more holistic approach to addressing conforming amendments arising from the revised ISQC 1 Page 10

Question 1 The Board is asked for its views on the Task Force’s proposed approach to address references to quality control in ISRS 4400 (Revised). Page 11

Significant Items in Exposure Draft Scope of this ISRS • Para. 1 -3, A 1 -A 7 The AUP Engagement • Professional judgment – fraud and non-compliance with laws & regulations • Para. 4 -7 Authority of this ISRS • Para. 8 -11 Page 12

Significant Items in Exposure Draft Effective Date • 18 -24 months after issuance of final standard • Para. 12 Objectives • Para. 13 Definitions • Findings • Para. 14 and A 10 A Page 13

Significant Items in Exposure Draft Conduct of an AUP Engagement • Para. 15 -17 Relevant Ethical Requirements • Practitioner’s independence • Reporting on relevant ethical requirements and independence (para. 29(f)) • Coordination with the IESBA • Para. 18, A 11 -A 13 Page 14

Significant Items in Exposure Draft Professional Judgment • Role of professional judgment in an AUP engagement • Fraud and non-compliance with laws and regulations (as discussed in para. 7) • Knowledge acquired from other engagements • Para. 19, A 15 -17 Engagement Level Quality Control • As discussed in References to Quality Control • Para. 20, A 19 -A 21 Page 15

Significant Items in Exposure Draft Engagement Acceptance and Continuance • Clear understanding of procedures to be performed • Terminology • Other changes to engagement acceptance and continuance • Para. 21 -25 and A 22 -A 36; Appendix 1 Performing the AUP Engagement • Written representations • Para. 26, A 37 -A 38 Page 16

Significant Items in Exposure Draft Using the Work of a Practitioner’s Expert • • Additional example of a practitioner’s expert Referring to a practitioner’s expert in an AUP report (para. 30 & A 46) Other considerations Para. 27, A 39 -A 40 Page 17

Significant Items in Exposure Draft The AUP report • Matters as previously discussed o Relevant ethical requirements – para. 29(f) o Referring to a practitioner’s expert in an AUP report – para. 30 and A 46 • Illustrations of AUP reports • Date of report • Other changes to reporting • Para. 28 -31 and A 42 -A 46; Appendix 2 Page 18

Significant Items in Exposure Draft Undertaking an Agreed-Upon Procedures Engagement at the Same Time as another Engagement • Para. 32 and A 47 Documentation • Para. 33 and A 48 Page 19

Other Matters for Explanatory Memorandum • Public interest • Significant changes • Quality control • Key issues – Findings; Relevant Ethical Requirements; Professional Judgment; Engagement Acceptance; and Practitioner’s Expert Exposure Period – 120 days Effective Date – 18 -24 months after issuance of final standard Page 20

Question 3 The Board is asked for its views on: a) Whethere any other matters that should be addressed in the Explanatory Memorandum. b) The exposure period and the planned effective date. Page 21

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