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)
Auditor Reporting – Key Audit Matter Reporting and Other Considerations
The AASB unanimously approved amendments to CAS 700, Forming an Opinion and Reporting on Financial Statements. CAS 700 will require auditors to communicate key audit matters in the auditor’s report for audits of complete sets of general purpose financial statements of other listed entities for periods ending on or after December 15, 2022. This excludes listed entities required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure.
The AASB concluded that the revisions to the standard are significantly different from the proposals issued in the Exposure Draft, “Communicating Key Audit Matters in the Auditor’s Report." The Board decided not to re-expose the changes as they were based on the feedback received on the Exposure Draft.
Once the Auditing and Assurance Standards Oversight Council confirms that the AASB followed due process with proper regard for the public interest, the amendments will be included in the December 2019 Handbook update.
Auditor Reporting – Engagement Partner Name
The AASB discussed the status of matters that caused the deferral of paragraph 46 of CAS 700. This paragraph relates to disclosure of the engagement partner name in certain audit reports. The Board concluded that deferring paragraph 46 served its purpose and the issues that led to the deferral have been resolved. Paragraph C5B will be removed from the CPA Canada Handbook – Assurance in December 2020.
Audits of Less Complex Entities
The AASB discussed its draft response to the International Auditing and Assurance Standards Board’s (IAASB) Discussion Paper, “Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs.”
The Chair and Director will review the final letter prior to submission.
The AASB decided to form an Advisory Group to support staff and the Board on the Audits of Less Complex Entities project. The Advisory Group will help identify key issues related to audits of less complex entities in the Canadian environment and provide input to the AASB on proposals developed by the IAASB as this project evolves.
Extended External Reporting/Relevance of Audit
The AASB discussed its approach to responding to the IAASB’s Exposure Draft on non-authoritative guidance related to Emerging External Reporting, expected to be issued in January 2020.
The AASB decided to form an Advisory Group to support staff and the Board in reviewing and responding to materials issued by the IAASB. The Advisory Group will help identify key issues related to the evolution of audit in response to environmental changes in Canada.
Group Audits
The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise International Standard on Auditing (ISA) 600, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors). The Board discussed:
- using the “consolidation process” as a basis for determining whether an entity or business unit is a component;
- including a requirement for the group engagement partner to review the overall audit strategy;
- the importance of aggregation risk;
- component materiality; and
- various access issues at the component level related to people and information.
The AASB will continue to discuss this project at future meetings.
Identifying and Assessing the Risks of Material Misstatement
The AASB provided input to the IAASB members from Canada on issues related to proposed ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement. The Board discussed:
- changes to the proposed requirements for understanding components of internal control;
- the proposed effective date; and
- re-exposure considerations of the final revised ISA 315.
The IAASB expects to approve ISA 315 (Revised) in September 2019 and issue it in November 2019. The AASB plans to approve the Canadian equivalent standard shortly thereafter.
Quality Management
The AASB provided input to the IAASB members from Canada on issues related to the feedback received on the IAASB’s Exposure Drafts 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.
The AASB discussed the following key issues:
- whether the IAASB should issue a survey and conduct additional outreach on the possibility of developing a separate quality management standard for related service engagements;
- developing higher-level quality objectives to enhance scalability in proposed ISQM 1, adding risk considerations and clarifying required responses to assessed risks;
- removing the concept of entities with “significant public interest” in proposed ISQM 2; and
- including component auditors in the definition of engagement team in proposed ISA 220 and;
- clarifying the requirements in proposed ISA 220 that must be performed by the engagement partner and those where other members of the engagement team can assist the engagement partner.
Assurance and Related Services Standards (other than CASs)
Agreed-upon Procedures
The AASB discussed the implications of the independence rules in the provincial Codes of Professional Conduct on the project to develop Canadian Standard on Related Services (CSRS) 4400, Agreed-upon Procedures Engagements.
The AASB will continue to discuss this issue at future meetings.
Compilation Engagements
The AASB discussed key issues related to the project to revise Section 9200, Compilation Engagements, including:
- the subsequent discovery of facts;
- amendments to the glossary of terms and the preface; and
- the effective date.
The Board expects to approve the final standard at its October 2019 meeting.
Other
AASB Terms of Reference
The AASB discussed issues related to the development of a due process manual and reviewed an initial draft of the manual. The Board will continue to discuss issues and develop the manual at future meetings.