COMPILATION MYTH
There is a myth that the IAP does not have to comply with the concept of “fair presentation” and therefore, third parties should not be allowed to argue reliance on the overall fairness of the information. This cannot be furthest from the truth. Remember The IAP in terms of the Companies Regulations has a statutory duty, on the basis of financial records provided by the company to prepare AFS in accordance with any relevant FRS. There are two different sets of FRS in South Africa that are recognised by the Companies Act: International Financial Reporting Standards (IFRS) and International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs). As regards IFRS, IAS 1 — Presentation of Financial Statements para 1.15 states as follows:
“Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.”
IFRS for SME’s para 32. States as follows:
“Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.”
There is no doubt that the applicable professional standard ISRS 4410 (Revised), Compilation Engagements. ISRS 4410 does not contemplate the skills and effort required for such an onerous task. However this where ISRS 4410 and the Companies Act part ways. In performing the statutory duties of the IAP the AFS must comply with IFRS or IFRS for SME’s and that means the AFS must “fairly present”.
“Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.”
IFRS for SME’s para 32. States as follows:
“Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.”
There is no doubt that the applicable professional standard ISRS 4410 (Revised), Compilation Engagements. ISRS 4410 does not contemplate the skills and effort required for such an onerous task. However this where ISRS 4410 and the Companies Act part ways. In performing the statutory duties of the IAP the AFS must comply with IFRS or IFRS for SME’s and that means the AFS must “fairly present”.
Comments