The Saudi Organization for Chartered and Professional Accountants, represented by the Auditing Standards Committee, has adopted the amendment of the International Auditing and Assurance Standards Board (IAASB) on the International Standard for Related Services 4400 (amended) "Commitments of Agreed-upon Procedures", taking into account the study carried out by the Committee of the updates issued by the IAASB on that standard, and after completing the procedures for adopting the standard in accordance with the “procedures for following developments in international standards, answering questions, and topics not addressed by international standards” approved by SOCPA's Board of Directors.
Accordingly, the Committee decided to adopt the International Standard for Related Services 4400 (amended) “Commitments of Agreed-upon Procedures” for implementation in Saudi Arabia, as issued by the IAASB.
Among the most important reasons for updating the standard:
Rewriting the standard in the same format as international standards in terms of form, presentation, and wording.
Expanding the scope of the standard, as it becomes explicitly inclusive of both financial and non-financial topics.
Bringing more clarity into the report on agreed procedures.
Promoting consistency in the implementation of agreed-upon process engagements, by covering the standard either in its requirements or in the implementation guidelines attached to it, by the following:
· Exercising professional judgment in the agreed-upon procedure engagements.
· Considering the conditions for accepting and maintaining engagements.
· Using experts by the chartered accountant.
· Disclosing of compliance with independence requirements, as appropriate.
Most important updates made to the International Standard for Related Services 4400 (Amended)
First: Scope and Responsibilities
The scope of the updated standard included engagements for agreed-upon procedures to be performed on both financial and non-financial topics.
Develop requirements and application materials to link the responsibilities of the auditor when implementing the agreed-upon procedures to the quality control system in the audit firm.
Clarify the auditor's responsibilities when aware of non-compliance - or suspicion of non-compliance - with laws and regulations.
Developing requirements and application materials to clarify the responsibilities of the chartered accountant towards the various parties in the agreed-upon procedures engagement, such as the assigning party and the target users to decide on the agreed-upon procedures, and the party responsible for the subject to which the procedures are applied.
The term “discovered facts” has been replaced by the term “findings,” which the standard defines as the actual results of agreed procedures that have been implemented. These findings can be objectively verified and do not include opinions or conclusions in any way nor do they include any recommendations. However, the standard does not preclude the use of the previous term "discovered facts", especially in cases where the chartered accountant fears that the term "findings" may be misunderstood. The standard indicated that this may be the case in countries or languages where the term "findings" may be misunderstood as including findings that are not abstract facts.
Adding application materials to clarify the extent of the accuracy with which the agreed procedures and findings are described, and indicating terms that may or may not be appropriate in the context of each particular engagement.
Highlighting that laws or regulations may impose certain procedures, and explaining how to deal with them.
Develop requirements and application materials regarding engagement documentation.
Second: Compliance to independence requirements as appropriate
The amended standard does not include a precondition requiring the independence of a chartered accountant when implementing the agreed-upon procedures engagement (as does the current related services standard).
However, the new requirements and application materials state that the chartered accountant may agree with the assigning party that it is appropriate to comply with requirements relating to independence for the purpose of carrying out the engagement of the agreed-upon procedures, even when the chartered accountant is not required (for example, under laws, regulations, code of ethics, or contract) to comply to such requirements.
The report on procedures agreed upon after the update includes a clause related to independence - the required phrase depends on whether or not the chartered accountant is required to comply with specific requirements related to independence for the purpose of implementing the agreed-upon procedures.
Third: Professional judgment
The updated standard includes a new requirement that a chartered accountant exercises professional judgment throughout the engagement period, including when accepting, implementing and reporting the engagement, taking into account the circumstances of the engagement.
The updated standard includes new supporting application materials that explain and provide examples of how to exercise professional judgment in the relevance of agreed-upon procedures.
Fourth: Accepting and continuing the engagement
The updated standard added new requirements regarding considerations for acceptability and continuing the engagement, which includes:
Understand the purpose of the engagement, and refusing it if the chartered accountant becomes aware of any facts or circumstances that indicate that the procedures are not adequate for the purpose of the engagement;
Not accepting or continuing the engagement unless certain conditions are met;
Inform the firm if any information was obtained that would have led to the firm refusing to engage if that information was available earlier, so that the necessary action can be taken.
Fifth: Using the work of an expert by the chartered accountant
The new requirements and application materials provide guidance on how an expert can assist a chartered accountant in implementing the agreed-upon procedure engagement. The requirements of the updated standard in this context include the following:
The chartered accountant must be able to participate in the expert’s work to the extent that is sufficient to take responsibility for the findings contained in the agreed-upon procedures report.
The chartered accountant may refer, either on his own initiative or in compliance with laws or regulations, in the report of the agreed upon procedures to the work carried out by the expert. In the event that this is done, the wording of the report shall not imply that the responsibility of the chartered accountant for implementing the procedures and reporting on the findings has been reduced due to the involvement of that expert.
Sixth: the agreed-upon procedures report
The updated standard included requirements to enhance transparency about:
Responsibility of the various parties in the engagement of the agreed procedures;
Whether or not the chartered accountant is required to comply with requirements related to independence, and a statement of the relevant independence requirements in the event of a claim to comply with one of them.
The report included a description of the purpose of the report and a description of the nature of the engagement.
Unlike the existing standard, the revised standard does not require the chartered accountant to include a statement stating that the report is limited to the parties that agreed to implement the procedures, and this matter is now left to the discretion of the chartered accountant. The new application materials provide guidance for a chartered accountant in determining whether to restrict the use or distribution of the report.
The updated standard allows the chartered accountant to present with his full report a summary of the findings. Requirements and application materials have been added to the preparation of the report, dealing with the circumstances in which a summary of the findings is presented in the agreed-upon procedures report.
Requirements and application materials have been added for preparing the report when the chartered accountant performs the agreed procedures engagement along with another engagement.