professional standard for (chartered/certified) · pdf file6 • the certified/chartered...

Professional standard for Certified/Chartered Accountant (NP 2300) © CSOEC ■ Edition October 2016

1

PROFESSIONNAL STANDARD APPLICABLE TO

THE ENGAGEMENT TO PROVIDE ASSURANCE

ON THE PRESENTATION OF

THE FINANCIAL STATEMENTS (NP 2300)

Professional standard for (Chartered/Certified) Accountants

2 Professional standard for Certified/Chartered Accountant (NP 2300) © CSOEC ■ Edition October 2016

PROFESSIONAL STANDARD APPLICABLE TO THE ENGAGEMENT TO PROVIDE ASSURANCE ON THE PRESENTATION OF THE FINANCIAL STATEMENTS

(NP 2300)

Standard approved by French ministerial Order dated September 1

st, 2016 which cancels and replaces

the June 21st, 2011 approval.

Applicable to financial statements with periods ending on or after December 31st, 2016.

Contents Paragraphs

INTRODUCTION ......................................................................................................... 1

NATURE AND PURPOSE OF THE ENGAGEMENT .............................................. 2-3

DEFINITIONS .............................................................................................................. 4

RESPONSIBILITY OF THE MANAGEMENT OF THE ENTITY ................................. 5

REQUIREMENTS

Professional skepticism, professional judgement ....................................................... 6

Acceptance of the engagement .................................................................................. 7

Engagement letter ....................................................................................................... 8

Procedures to be performed .................................................................................. 9-15

Documentation of work performed ............................................................................ 16

Report ....................................................................................................................... 17

Expressing the conclusion ................................................................................... 18-21

Content of the report ................................................................................................ 22

APPLICATION MATERIAL ............................................................................. A1-A10

APPENDIX: EXAMPLES OF THE REPORT Favourable conclusion without comment(s) ............................................................. E1 Favourable conclusion together with one or more comment(s) affecting the consistency and plausibility of the financial statements taken as a whole (disagreements, uncertainties, limitations) .............................................................. E2 Refusal to attest (inconsistencies, disagreements, uncertainties, limitations) ........ E3 Possible report on work performed when the entity’s financial statements are subject to statutory audit ....................................................................................................... E4


Introduction

The term certified/chartered accountant used in this standard covers certified/chartered accountants and employees authorised to exercise the accountancy profession in accordance with the terms of Article 83 iii or 83 iv of the Order of 19 September 1945 (France).

1 • The purpose of this professional standard is to state the principles that chartered/certified accountants apply when they are engaged to provide assurance on the presentation of financial statements (hereafter called “presentation engagement”). It also specifies the form and content of the report that the certified/chartered accountant issues at the end of the engagement (Ref. Par. A1).

This standard is part of the framework and, in that respect, implies compliance with general professional standards, common to all engagements.

The acceptance and maintenance by certified/chartered accountant of an engagement to provide assurance on the presentation of financial statements are in principle compatible with other engagements or services that he may be engaged by the entity to carry, subject to certain incompatibilities, to be assessed by the certified/chartered accountant.

Nature and purpose of the engagement

2 • The engagement to provide assurance on the presentation of financial statements is an engagement of moderate level resulting in the expression of a conclusion as to the consistency and plausibility of an entity’s financial statements taken as a whole.

The presentation engagement relates to annual or interim financial statements. It is not applicable to consolidated financial statements.

The level of assurance is less than that of an audit or a review. The conclusion is expressed in a negative form (Ref. Par. A2).

3 • The purpose of a presentation engagement is to obtain moderate assurance as to the consistency and plausibility of the entity’s financial statements. Certified/chartered accountant concludes that nothing came to his attention that causes him to believe that the financial statements taken as a whole are not consistent and plausible.

The purpose of the presentation engagement is not to provide an opinion on the true and fair view of the financial statements. Nor is it to identify errors, non-compliance with laws or other irregularities, for example possible frauds or misappropriation of assets.

Definitions

4 • The terms used in the present standard are detailed in the “Glossary of terms”, which forms an integral part of the professional standards for certified/chartered accountants.

Responsibility of the management of the entity


5 • Financial statements are produced under the responsibility of the management of the entity, in accordance with the applicable financial reporting framework.

Consequently, the management of the entity is responsible towards third parties for the completeness, reliability and accuracy of financial information and for internal control procedures necessary for producing the financial statements. Thus the management of the entity is responsible for information provided to the chartered/certified accountant for the needs of his engagement.

Requirements

Professional skepticism, professional judgement

6 • The certified/chartered accountant uses his professional judgement in particular to decide the nature, timing and extent of procedures to be performed on the basis of information obtained, in demonstrating professional skepticism (Ref. Par. A3).

Acceptance of the engagement

Understanding the entity prior to accepting the engagement

7 • Prior to accepting the engagement, the certified/chartered accountant obtains an understanding of the entity and its environment including its most recent changes.

Engagement letter

8 • In accordance with the Code of Ethics, certified/chartered accountant issues an engagement letter in which he details the terms and conditions of the engagement and the reciprocal obligations of each party.

The letter is a contract which purpose is to define the engagement. It helps planning the work and confirms the acceptance (or maintenance) of the engagement of the certified/chartered accountant (Ref. Par. A4).

Procedures to be performed

Obtaining an understanding of the entity

9 • The certified/chartered accountant obtains or updates his general understanding of the entity so as to be able to assess at the end of his engagement whether the financial statements give consistent and plausible information.

Assessing the accounting system

5


10 • The certified/chartered accountant assesses the accounting system and, where applicable, issues recommendations for procedures adapted to the entity’s size and needs and compliance with current legislation (Ref. Par. A5).

The presentation engagement does not include an assessment of the entity’s internal control.

Assessing proper books and records

11 • When the accounting is kept by the entity, the certified/chartered accountant checks that the statutory accounting journals required under French commercial law exist and are up to date.

The certified/chartered accountant tests the quality of entries taking into account the principle of significance and materiality.

The tests consist in particular in:

- checking that entries are backed by a supporting document,

- checking the relevance of the classification in the proper accounts,

- checking the posting that is made for the right period.

Preparing financial statements

12 • When the certified/chartered accountant keeps the accounting of the entity, on the basis of information and estimations provided by management, he proposes the closing journal entries and verifies that they are posted correctly.

When the entity keeps its own accounting, the certified/chartered accountant performs tests on supporting documents underlying the closing journal entries recognised in the accounts.

He checks, where applicable, the relevance of information disclosed in the notes to the financial statements (Ref. Par. A6).

Examining the financial statements consistency and plausibility

13 • The certified/chartered accountant undertakes analytical procedures when examining the consistency and plausibility of financial statements at the end of his work. Applying this technique enables him to verify the consistency and plausibility of the financial statements taken as a whole in light of evidence obtained during his work (Ref. Par. A7).

14 • When the analytical procedures reveal information that is inconsistent with other information, significant variations or unexpected trends, the certified/chartered accountant determines additional procedures to be performed to explain such variations and inconsistencies.

15 • When, on conclusion of additional procedures performed, the inconsistencies are confirmed, the certified/chartered accountant endeavours to obtain explanations from management. If the explanations obtained are not pertinent and the accounting information presented is considered by the certified/chartered accountant to be


insufficient for users of the financial statements, the certified/chartered accountant notes the consequences in his report stating, as appropriate, a conclusion with comment(s) or a refusal to attest.

Documentation of work performed

16 • The certified/chartered accountant prepares a working file containing the documentation of his work and in particular important evidence on which his conclusions are based (Ref. Par. A8-A9).

Report

17 • The report issued on conclusion of a presentation engagement takes the form of an attestation which includes a conclusion giving an assurance stated in a negative form on the consistency and plausibility of the financial statements taken as a whole. The financial statements are attached to the report.

In addition to his report, the certified/chartered accountant may express recommendations in an appropriate form, to the entity management of the entity. They should not call into question the conclusion stated in the report.

Expressing the conclusion

18 • In the report, the certified/chartered accountant expresses either:

- a favourable conclusion without comments,

- or a favourable conclusion together with one or more comments,

- or a refusal to attest.

Favourable conclusion without comments

19 • The certified/chartered accountant expresses a favourable conclusion without comments when he has been able to perform without limitation all procedures necessary for a presentation engagement and has not noted, during his work, any items that would have questioned the consistency and plausibility of the financial statements taken as a whole.

Favourable conclusion with comment(s)

20 • The certified/chartered accountant gives a conclusion with comment(s):

- when he has encountered, during his work, limitations to the procedures to be performed,

- or has noted one or more uncertainties affecting the financial statements,

- or is in disagreement with the client on one or more options decided by the client,

7


and is however of the opinion that the effect of those facts on the financial statements is not sufficiently significant to refuse to attest the consistency and plausibility of the financial statements taken as a whole, but that those facts should be brought to the attention of users of the financial statements.

Refusal to attest

21 • The certified/chartered accountant states his refusal to attest when he considers that the effect on the financial statements of facts noted (multiple inconsistencies, limitations to the procedures to be performed, uncertainties or disagreements) are of such importance that he cannot obtain sufficient assurance.

Content of the report (Ref. Par. A10)

22 • The certified/chartered accountant issues a report (called “attestation”) that contains the following elements:

(a) a title,

(b) confirming confirmation that the engagement was conducted in accordance with the present professional standard and that it was neither an audit nor a review,

(c) an introductory paragraph reminding his quality as a certified/chartered accountant and of the nature of his engagement to provide assurance on the presentation of the financial statements, the identification of the entity and of the financial statements covered by the engagement which are attached to the report, and the period covered by those financial statements,

(d) key data extracted from the financial statements: total balance sheet, turnover and net profit or loss,

(e) a conclusion expressed in a negative form,

(f) the date of the report,

(g) the certified/chartered accountant’s signature.

Application material

The application material of this presentation engagement’ standard is not of a mandatory nature.

Introduction (Ref.: Par.1)

A1 • Prior to the presentation engagement, the entity may task the certified/chartered accountant with keeping its accounting books and records. Moreover, the presentation engagement may be supplemented by other


engagements, in particular providing payroll services and tax and social security returns.

Nature and purpose of the engagement (Ref.: Par.2)

A2 • The procedures to be performed in a presentation engagement include in particular:

- obtaining an understanding of the entity,

- assessing the accounting system,

- assessing proper books and records,

- participating, where applicable, in the preparation of the financial statements,

- examining the financial statements consistency and plausibility.

Professional skepticism, professional judgment (Ref.: Par.6)

A3 • The certified/chartered accountant exercises his professional skepticism in assessing documents and information received.

Engagement letter (Ref.: Par.8)

A4 • The engagement letter includes at least the following elements, without prejudice to other elements relating to particular features of the entity that the certified/chartered accountant may consider necessary to add:

- the nature and purpose of the engagement including the fact that it is neither an audit nor a review,

- the respective responsibilities of the certified/chartered accountant and the management of the entity in respect of the engagement,

- reference to the professional Code of Ethics and to the present standard,

- the fact that the engagement is not intended to identify errors, non-compliance with laws or other irregularities,

- the fact that the procedures performed do not include either checking the occurrence and completeness of transactions, or checking the entity’s physical inventories of assets at the financial year-end (stock, fixed assets and cash-in-hand in particular), or assessing internal control procedures,

- the fact that the entity is responsible for the reliability, completeness and accuracy of information provided to the certified/chartered accountant,

- the financial reporting framework on the basis of which the financial statements are presented,

- the fact that the engagement will lead to an assurance report on the consistency and plausibility of the financial statements taken as a whole.

9


It also includes the general terms and conditions and the respective tasks of the client and the certified/chartered accountant.

Assessing the accounting system (Ref.: Par.10)

A5 • The certified/chartered accountant checks that the entity is using a suitable chart of accounts that complies with the applicable financial reporting framework.

He draws management’s attention to best professional practices as regards administrative organisation procedures (standard documents, filing accounting documents, payment authorisations, etc.).

In entities where the accounts are kept on a cash basis during the financial year, the certified/chartered accountant pays particular attention to the implementation of document filing and classification procedures that enable the collection of year-end receivables and payables.

Preparing financial statements (Ref.: Par.12)

A6 • The certified/chartered accountant collects from the entity the information necessary to determine the closing entries, in particular:

- the depreciation rates applicable,

- a summary of inventories and work in progress prepared by the entity,

- any work done by the entity for itself,

- bad debts,

- depreciation of assets,

- provisions.

He takes into consideration the significance of data, which may result in simplifying certain closing procedures.

The certified/chartered accountant tests as appropriate the most significant accounts balances and transactions for the entity’s activity, for example proving balances, reconciliation with supporting documents, unwinding bank transactions existing at the period-end, etc..

These tests can be reduced when the accounting records have been kept by the certified/chartered accountant.

Examining the financial statements consistency and plausibility (Ref.: Par.13)

A7 • After the recording of the closing entries, the certified/chartered accountant reads the financial statements to consider whether:

- there are no obvious misstatements,


- there are consistent and plausible in light of his knowledge of the entity and its environment acquired during the engagement, and in light of the information provided by the client.

To that effect, the certified/chartered accountant

- compares certain balance sheet and profit and loss accounts with the same elements of the previous financial period,

- analyses significant variations and information that he considers to be essential in forming the financial result in light of significant events and transactions of the period,

- compares, where applicable, to similar entities.

Documentation of work performed (Ref.: Par.16)

A8 • The certified/chartered accountant prepares a working file that can be in electronic form. The working file contains the documentation of the work performed; this documentation must allow other experienced certified/chartered accountants not involved in the engagement to understand the issues encountered in the course of the engagement and assess the relevance of work done by the certified/chartered accountant. The certified/chartered accountant documents in the working file the work performed. He also records discussions with management or with other persons on issues that might have a significant effect on the financial statements.

Where the certified/chartered accountant has identified contradictory or inconsistent information that might mislead the reader of the financial statements, he documents in the working papers the way in which the contradiction or inconsistency was resolved for the final presentation of the financial statements. He documents any impact this may have on his report.

A9 • The working file includes:

- relevant information on the entity for the current and subsequent engagements,

- working papers related to the financial statements for the period concerned.

In a presentation engagement, the file must include, without prejudice to other elements related to the particular features of the entity that the certified/chartered accountant considers relevant to add:

- a copy of the engagement letter,

- legal documents of the entity and important contracts,

- the description of the entity and its activity,

- the description of the accounting system,

- a suitable work programme,

11


- the general ledger if it has been used for performing tests and if it shows the tests performed,

- the worksheets relative to the preparation of the financial statements,

- the documented examination of consistency and plausibility,

- a general final memorandum,

- a copy of the final financial statements,

- a signed copy of the report issued. The signature of the report can be electronic.

Content of the report (Ref.: Par. 22)

Particular case of entities subject to statutory audit

A10 • In entities subject to statutory audit, the certified/chartered accountant does not have to issue, unless there are particular considerations, an assurance report on the presentation engagement, as the statutory auditor will issue at the end of its engagement an assurance of a higher level. In general, he issues a memo on his work that does not express any assurance on the financial statements.


Appendix: examples of the report

E1 • Favourable conclusion without comments

ATTESTATION OF THE PRESENTATION OF THE FINANCIAL STATEMENTS

In our capacity as certified/chartered accountant and in accordance with the terms of our engagement letter, we have undertaken a presentation engagement of the (state “annual”, “interim”) financial statements of ... (state the entity concerned) relative to ... (state the period or financial year concerned), which comprised the following data:

- Total balance sheet

- Turnover

- Net profit/loss

Our procedures were performed in accordance with the professional standard of the French “Ordre des experts-comptables” applicable to the presentation engagement which is neither an audit nor a review.

On the basis of our work, nothing has come to our attention that causes us to believe that the accompanying annual (or “interim”) financial statements taken as a whole are not consistent and plausible.

Date and chartered/certified accountant’s address and signature

13


E2 • Favourable conclusion together with one or more comment(s) affecting the consistency and plausibility of the financial statements taken as a whole (disagreements, uncertainties, limitations)

ATTESTATION OF THE PRESENTATION OF THE FINANCIAL STATEMENTS

In our capacity as certified/chartered accountant and in accordance with the terms of our engagement letter, we have undertaken a presentation engagement of the (state “annual”, “interim”) financial statements of ... (state the entity concerned) relative to ... (state the period or financial year concerned), which comprised the following data:


- Turnover

- Net profit/loss


We draw your attention to the following matter(s) which may affect the consistency and plausibility of the financial statements:

(Description with reasons and figures of disagreements, uncertainties or limitations covered by the comment(s))

On the basis of our work, except for the possible effect of the matter(s) described in the paragraph above, nothing has come to our attention that causes us to believe that the accompanying annual (or “interim”) financial statements taken as a whole are not consistent and plausible.



E3 • Refusal to attest (inconsistencies, disagreements, uncertainties, limitations)

REPORT WITH REFUSAL TO ATTEST

In our capacity as certified/chartered accountant and in accordance with the terms of our engagement letter, we have undertaken a presentation engagement of the... (state “annual”, “interim”) financial statements of ... (state the entity concerned) relative to ... (state the period or financial year concerned), which comprised the following data:


- Turnover

- Net profit/loss


We draw your attention to the following matter(s) which has (have) a significant effect on the consistency and plausibility of the financial statements:

(Description of the matter(s) noted and its (their) effect(s) on the financial statements)

On the basis of our work, and due to the significance of the matter(s) described in the paragraph above, we are unable to attest the consistency and plausibility of the accompanying annual (or “interim”) financial statements taken as a whole.


15


E4 • Possible report on work performed when the entity’s financial statements are subject to statutory audit

REPORT ON WORK PERFORMED BY THE CERTIFIED/CHARTERED ACCOUNTANT

In our capacity as certified/chartered accountant and in accordance with the terms of our engagement letter dated …, we have undertaken a presentation engagement of the... (state “annual”, “interim”) financial statements of ... (state the entity concerned) relative to ... (state the period or financial year concerned) which comprised the following data:


- Turnover

- Net profit/loss

We have performed the procedures in accordance with the professional standard of the French “Ordre des experts-comptables” applicable to the presentation engagement.


professional standard for (chartered/certified) · pdf file6 • the certified/chartered...

Documents