What does IES 8 mean for smaller Canadian accounting firms?
Bridget Noonan, CPA, CA on how to ensure compliance with International Education Standard 8
VANCOUVER – For many assurance practitioners, depending on your province of licence, minimum continuing professional development (CPD) hours and practical application of the International Education Standard 8 (IES 8) are not new. However, in other provinces, audit partners are hearing about IES 8 for the first time.
As members of the International Federation of Accountants (IFAC), provincial CPA regulatory bodies must demonstrate compliance with IFAC requirements, including IES 8: Professional Competence for Engagement Partners Responsible for Audits of Financial Statements (Revised). IES 8 requires that professional accountants, serving as audit engagement partners, develop and maintain professional competence through relevant CPD hours and practical application.
Although it is difficult to hear, as a professional, that our demonstrations of proficiency and competence in the area of audit is being questioned, we only need to turn to any of the provincial practice inspection results to see why this is the case.
Although demonstration of the required IES(8) competencies differs amongst the provincial bodies, all audit engagement partners will be monitored through some combination of the following:
- Completion of an annual self-assessment and declaration as part of membership or licensing renewals;
- Verification of a sample of CPD declarations, including assessment of the relevance of the CPD completed, in conjunction; and/or
- The Practice Inspection Program, which utilizes a risk-adjusted cycle to review competence areas and learning outcomes for all members performing the role of engagement partner responsible for audits of financial statements, as specified in IES 8 (Revised).
Should you continue to provide audit & assurance services?
If you have not already done so, step back and reconsider whether or not your CPA firm will continue with the provision of audit and/or other assurance services. This is a significant decision. It should be considered in its totality as it will impact many areas of the firm, such as student training and potentially succession planning.
Many chartered professional accountants have chosen to restrict their practices, as the provision of assurance services requires a significant investment of resources, as we highlighted in our 2018 Special Report: Getting out of Assurance … Maybe?
Some considerations if you choose to continue with audit & assurance
Multi-partner accounting firms should consider which partner(s) should maintain an audit licence. In provinces with minimum practice hours, the number of licences may be restricted by the volume of audit work the firm has available.
For those firms who have acknowledged that auditing is a specialized area of public practice, this decision may come easy. However, for other firms this will force the partners to reconsider fundamentals of the practice such as partnership agreements and revenue allocations.
As we highlighted in our May 2018 blog IES 8: Professional Competencies for Licensed Practitioners, we recommended that all audit firms develop a firm-wide plan for the content that should be covered each year as part of meeting the CPD requirements in your province of licence. The IES 8 competency areas and learning outcomes, which you will find in the final pronouncement of the IES standard, should guide this multi-year plan.
How Clearline Consulting can help? We are available to assist your firm in the identification, development and delivery of relevant CPD for your practice. This allows for a tailored approach to meeting the requirements tied directly to the type of audit clients the firm serves and the current staffing model your firm employees.
Clearline is offering online IES 8 Training Sessions directed at partners and managers. If you’re a smaller CPA firm, find out more by sending me an email. Or, if you have a larger team working on audit engagements, an in-house session directed at junior and senior staff that provides a more detailed look at the requirements, with case studies and example documentation, may be a better fit. Find out more by sending me an email.
Bridget Noonan, CPA, CA, is a partner at Clearline CPA and Clearline Consulting, which provides practitioners and their staff with the tools, training and advice they need to succeed and build thriving accounting firms. To receive our public practice newsletter, visit our website or provide your contact information here.