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

Support for Support for project to revise ISRS 4400 CAG Discussion Support for Support for project to revise ISRS 4400 Diverse views on independence Some representatives were of view that independence should be required 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

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

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 include both financial information and non-financial information. Added examples of AUP engagements that satisfy users, such as regulators and others. Explained that the term “information” encompasses all matters on which AUP are performed Modernized the ISRS by adding requirements dealing with the role that professional judgment plays in an AUP engagement

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 material that identifies areas in which professional judgment is applied Enhanced explanations of what distinguishes assurance engagements and AUP engagements Enhanced requirements dealing with compliance with laws and regulations and fraud

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

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 description of what an AUP engagement is and the value it provides Set an objective and establishing the practitioner’s obligation on relation to that objective

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 imposed on practitioners by the requirements of proposed ISRS 4400 (Revised) Eliminated any possible ambiguity about the requirements a practitioner needs to fulfil Improved the overall readability and understandability of proposed ISRS 4400 (Revised)

Overarching Considerations Option 3: Replicate ISRS 4410 (Revised) paragraphs 4, 23, A6-A11 and A25-A27 ISRS 4400 (Revised) References to Quality Control 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

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).

Significant Items in Exposure Draft Scope of this ISRS Para. 1-3, A1-A7 The AUP Engagement Professional judgment – fraud and non-compliance with laws & regulations Para. 4-7 Authority of this ISRS Para. 8-11

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 A10A

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, A11-A13

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, A15-17 Engagement Level Quality Control As discussed in References to Quality Control Para. 20, A19-A21

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 A22-A36; Appendix 1 Performing the AUP Engagement Written representations Para. 26, A37-A38

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 & A46) Other considerations Para. 27, A39-A40

Significant Items in Exposure Draft The AUP report Matters as previously discussed Relevant ethical requirements – para. 29(f) Referring to a practitioner’s expert in an AUP report – para. 30 and A46 Illustrations of AUP reports Date of report Other changes to reporting Para. 28-31 and A42-A46; Appendix 2

Significant Items in Exposure Draft Undertaking an Agreed-Upon Procedures Engagement at the Same Time as another Engagement Para. 32 and A47 Documentation Para. 33 and A48

Matters for Explanatory Memorandum Other Matters 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

The Board is asked for its views on: Question 3 The Board is asked for its views on: Whether there are any other matters that should be addressed in the Explanatory Memorandum. The exposure period and the planned effective date.