CSRE 2400 – Documentation Considerations


Although we might not admit it to our peers, we all have a deep seeded fear that we are not ready for practice inspection. I will admit I have lost a few night sleep leading up to that day. But over the years I have come to realize that a little preparation, and no I don’t mean the day before frantically scanning my files, goes a really long way.

The first step is to fully understand the documentation requirements of CSRE 2400. What does it mean? How will it impact what you have been doing?

As you may or may not know, lack of documentation has been one of the leading findings from practice inspectors across the country.  This isn’t just the finding from the past year, it has been consistent historically. I believe this finding will become even more prevalent with the new standards, as documentation is critical in CSRE 2400.

The findings show that often it is simply the fact that there is no evidence that an inquiry was made or that an inconsistency was appropriately investigated.

Under the new CSRE 2400 standards, which came into effect for periods ending on or after December 14, 2017, the documentation requirements are more extensive and are specifically addressed.   CPA Canada issued a new set of PEG forms that address the new CSRE 2400 standards.

I have put together my top 10 areas where I think you will want to ensure that you have sufficient evidence documented. This is not an all inclusive list, so please take the time to read the standard, but it is where I feel we need to focus so we can all get through the dreaded practice inspection.

1. Materiality -  In the past, the calculation of materiality, although strongly encouraged, was not required.  Under CSRE 2400, you must determine and document overall materiality.

2. Related parties - Documentation on related parties should include the results of your inquiries on:

·         understand who the related parties are;

·         what transactions have occurred between the related parties during the period; and

·         whether the transactions were accounted for in accordance with the applicable accounting standards.

3. Estimates - The financial reporting framework dictates the accounting estimates to be made. On smaller engagements, estimates would include inventory impairment and allowances for doubtful accounts.  Documentation must include your inquiries of management, how these estimates have been made and whether they are reasonable.

4. Areas in the financial statements where material misstatements are likely to arise

With the change from plausibility to limited assurance, you are now required to perform procedures on:

·         all material balances, and

·         those where material misstatements are likely to arise. 

To properly design procedures to address these areas, you will need to obtain an understanding of the entity and its environment. Areas that need to be addressed and documented include those outlined in the following diagram (source: PEG 2018).

5.       Significant, unusual or complex transactions - Inquire about and document any significant, unusual or complex transactions that may have a material impact on the financial statements.  You should consider:

·         Significant changes in the entity’s business or operations

·         Significant changes to the terms of material contracts

·         Significant journal entries or other financial statement adjustments

·         Signification transactions around the reporting period end

·         Uncorrected misstatements from prior periods.

6.       Going concern - Most accounting frameworks (including Accounting Standards for Private Enterprises) require management to make an assessment of the entity’s ability to continue as a going concern.  It is your responsibility as practitioner to make inquiries about the basis of management’s assessment and whether any significant uncertainties exist.  Documentation should include:

·         management’s assessment of the medium and long-term prospects for the entity,

·         future financing needs, and

·         any events or conditions that appear to cast doubt on the entity’s ability to continue as a going concern.

If you identified an uncertainty in the going concern assumption, you will need to perform and document additional inquiries of management and then document your evaluation of whether management’s responses are appropriate to support the financial statements being prepared on a going concern basis. 

7.       Fraud and non-compliance with laws and regulations - Management is ultimately responsible for preventing or detecting fraud and complying with laws and regulations affecting the entity.  You will need to document your inquiries of whether management is aware of:

·         any actual, suspected or alleged fraud or illegal acts affecting the entity

·         any non-compliance with the provisions of laws and regulations that may impact the amounts or disclosures in the financial statements.

If you find any indication or suspect that fraud or non-compliance with laws and regulations has occurred, additional inquiries will need to be made.  You will also need to communicate your findings to the appropriate level of management and/or those charged with governance.  In some situations, there may also be a need to communicate to an authority outside the entity.

8.       Material non-monetary transactions - Documentation of your inquiries to management and others should address:

·         material non-monetary transactions and

·         transactions for no consideration in the financial reporting period.

9.       Material commitments, contractual obligations or contingencies - Document your inquiries about:

·         material commitments,

·         contractual obligations, and

·         contingencies

that have affected or may affect the entity’s financial statements, including disclosures. 

10.    Subsequent events - Inquire and document whether management has identified and addressed events occurring between the date of the financial statements and the date of the practitioner’s report.  If events exist, you will need to document whether they require an adjustment of or disclosure in, the financial statements.

I know that this time of year we are all very overwhelmed and just trying to get through the busy season.  However, keep in mind that if you document your work appropriately now it will save you significant amounts of time, energy and stress down the road.



For more detailed information on how to document the CSRE 2400 review engagements using the PEG Review Engagement Forms, FocusCPD offers short training videos walking users through how to complete key PEG review forms. For other continuing professional development in audits and reviews, visit www.focuscpd.com.

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