The implications in reviewing the financial statements
The financial statements that you must prepare annually for your travel agency must be accompanied by a review engagement report. For companies with year-end after December 14, 2017, the report is now called “Independent Professional Practice Review Mission Report” and has undergone significant changes.
The previous report usually included three paragraphs. The new report contains at least six paragraphs. What do these new paragraphs tell readers of financial statements? A significant addition to the report is that, from now on, readers are reminded that management is responsible for a fair presentation under ASPE and that it has the necessary internal controls in place to ensure that any significant anomalies that may result from fraud or error.
What does this mean for the auditor of your financial statements? He must document the accounting processes.
– What triggers the production of an invoice?
– Who accounts for administrative purchases and when?
– Do you review the documents produced by your accounting system?
– Do you budget?
– Have you developed new products / services?
– Has there been any movement of personnel?
All of the answers to these questions will allow the auditor to identify where there may be errors in your accounting and where he / she must attach importance to ensuring that your financial statements are free of material misstatement.
Another paragraph clarifies the responsibilities of the practicing professional. It informs the reader that examination procedures are more restricted than those of an audit. According to some users, the review may not be sufficient to obtain a high degree of assurance that the financial statements are free of material misstatement.
For professional accountants like me, this will require having a broader knowledge of my client’s business. For travel professionals like you, this will result in some extra effort to make your control methods and the sound management of your business more transparent.
Many travel agencies work with a small number of employees and often without any permanent staff at accounting. These new requirements may then seem like an additional burden because you absolutely have to integrate them and understand why they have to be applied to find their utility. Travel agencies, like any business, are sometimes victims of fraud. As soon as a fraudster detects a fault, he uses it until a control is put in place to minimize the risk.
In the next few weeks, I will elaborate more in new blog posts on the relevance of having internal controls in place as well as what you need to look at as an accounting report and the information you have to analyze.
Good luck in your accounting follow-ups!