This summary of decisions of the Auditing and Assurance Standards Board (AASB) has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on projects and other matters, which might change after further deliberations by the AASB. Decisions to publish exposure draft and Handbook material are final only after a formal voting process.
Canadian Auditing Standards (CASs)
Audits of Less Complex Entities
The AASB provided input to the International Auditing and Assurance Standards Board (IAASB) members from Canada on issues related to feedback on the IAASB’s Discussion Paper, “Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs.” This input included possible actions the IAASB may take and a draft feedback statement.
The AASB will continue to discuss this project at future meetings.
Group Audits
The AASB provided input to the IAASB members from Canada on issues related to proposed revisions to International Standard on Auditing (ISA) 600, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors). Issues discussed included:
- key terms defined in the standard;
- requirements and application material related to materiality;
- appropriate responses to assessed risks of material misstatement;
- evaluating the sufficiency and appropriateness of audit evidence obtained; and
- documentation requirements.
The IAASB expects to approve an exposure draft in March 2020. The AASB will continue to discuss this project at future meetings.
Identifying and Assessing the Risks of Material Misstatement
The AASB approved Canadian Auditing Standard (CAS) 315, Identifying and Assessing the Risks of Material Misstatement, including the related conforming amendments to other standards.
There were no changes made from a Canadian standpoint (i.e., there was no addition, modification, or deletion of a Canadian amendment) in finalizing the standard. Therefore, no re-exposure was necessary.
CAS 315 will be effective for audits of financial statements for periods beginning on or after December 15, 2021.
Once the Auditing and Assurance Standards Oversight Council (AASOC) confirms that the AASB followed due process with proper regard for the public interest, CAS 315 will be included in the CPA Canada Handbook – Assurance update in May 2020.
Quality Management
The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise standards for quality management at the firm and engagement level, including engagement quality reviews. The Exposure Drafts included:
- proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
- proposed ISQM 2, Engagement Quality Reviews; and
- proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.
Issues discussed related to ISQM 1 included:
- how the standard should address quality risk considerations;
- whether responses to quality risks should be included in one section versus within each component; and
- the factors to be considered in determining an appropriate cyclical basis for selecting completed engagements for inspection.
Issues discussed related to ISQM 2 included:
- whether the objective is sufficiently outcome based;
- how the firm should identify engagements that should be subject to an engagement quality review; and
- the cooling-off period of the engagement quality reviewer.
Issues discussed related to ISA 220 (Revised) included:
- whether the definition of engagement team should include component auditors;
- whether the proposed standard should include application material on evolving audit delivery models; and
- clarifying which requirements must be performed by the engagement partner and those where other members of the engagement team can assist the engagement partner
The Board will continue to discuss these and other issues at future meetings.
Assurance and Related Services Standards (other than CASs)
Agreed-upon Procedures
The AASB provided input to the IAASB members from Canada on issues related to proposed International Standard on Related Services (ISRS) 4400 (Revised), Agreed-Upon Procedures Engagements, including:
- the effective date;
- definitions; and
- engagement acceptance and continuance requirements.
The IAASB expects to approve the final ISRS 4400 (Revised) at its December 2019 meeting. The AASB plans to approve the Canadian equivalent standard shortly thereafter.
Extended External Reporting
The AASB discussed its approach for responding to the IAASB’s document for comment, “Special Considerations in Performing Assurance Engagements on Extended External Reporting.” The IAASB expects to approve this document at its December 2019 meeting.
Public Sector Auditing Standards
The AASB discussed key issues stakeholders raised on the Exposure Draft, “Assurance and Related Services Guideline (AuG) 50, Conducting a Performance Audit in the Public Sector in Accordance with CSAE 3001,” including:
- incorporating materials from extant standards into the proposed Guideline;
- clarifying the concept of an engagement partner in the public sector context;
- the definition of legislative auditor;
- presenting the assurance conclusions; and
- making recommendations in a performance audit report.
The Board will continue to discuss these and other issues at future meetings.
Other
Annual Plan 2020-2021
The AASB discussed the significant risk areas it will focus on in developing the 2020-2021 Annual Plan. The Board also reviewed a first draft of the 2020-2021 Annual Plan and provided input on the key activities and targets. The Board expects to approve the final Annual Plan in March 2020.
Terms of Reference
The AASB approved its Due Process Manual. Once AASOC approves the Manual, it will be published on the Board’s website.
Conforming Amendments to Canadian Standards
The AASB received a presentation explaining the IAASB Exposure Draft, “Conforming Amendments to the IAASB International Standards as a Result of the Revised IESBA Code,” including the implications for Canadian standards. The Board expects to approve and issue an exposure draft of limited proposed revisions to Canadian standards by January 2020, with a response deadline of March 27, 2020.