The Hindu Business Line : ICAI okays 'auditing, assurance standard'

The central council of ICAI has approved an `auditing and assurance standard' that establishes standards on the professional responsibilities of a member in practice (read accountant) while undertaking an engagement to compile financial statements or information.

Engagements to provide limited assistance to the client in the area of preparation of financial statements (for example selection of an appropriate accounting policy) are unlikely to be considered as engagements to compile financial information.

"A number of our members are asked to undertake compilation work for financial statements of their clients or other entities. We are now specifying the responsibilities for our members in such engagements through an auditing and assurance standard," an ICAI official told Business Line.

In all circumstances, when an accountant's (member in practice) name is associated with financial information compiled by him, the accountant would be required to issue a report.

The auditing and assurance standard of ICAI is mandatory on all the members of ICAI.

In the auditing and assurance standard, the institute is likely to specify the form and content of the report issued in connection with a compilation engagement so that the association of the name of the accountant (member in practice) with the financial statements is not misconstrued by the user of the statements as the same as having been audited by the person giving the report.

A compilation engagement is quite different from an audit work. The objective of this is for the accountant to use accounting expertise, as opposed to auditing expertise, to collect, classify and summarise financial information. The procedures employed in compilation are not designed and do not enable an accountant to express any assurance on the financial information.

The ICAI is in the process of making minor modifications to the standard before it is issued. Even as a member is expected to comply with certain ethical principles such as integrity, objectivity, confidentiality and professional conduct in such engagements, it is learnt that `independence' would not be a requirement for a compilation engagement.

Where an accountant is not independent, the ICAI's auditing and assurance standard is likely to stipulate that a statement to that effect should be made in the accountant's report.

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