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)
Fraud
The AASB reviewed a summary of the outreach and the feedback on the Exposure Draft, “Proposed Amendments to CAS 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.” The Board discussed its response to the International Auditing and Assurance Standards Board (IAASB) on the proposed International Standards on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues discussed included:
- practical examples of demonstrating professional skepticism;
- documentation of professional judgment regarding the presumption of risk of material misstatement due to fraud in revenue recognition;
- proposed application material on obtaining an understanding of whistleblower programs;
- clarity of the requirements when fraud or suspected fraud is identified, including non-material fraud;
- transparency in the auditor’s report;
- whether a stand-back requirement is needed;
- scalability concerns; and
- the effective date.
The AASB will submit its response letter to the IAASB by the June 5, 2024, comment deadline
Other Canadian Standards
The AASB discussed issues related to the project to develop a proposed Canadian Standard on Related Services (CSRS) on Compilation Engagements on Future-oriented Financial Information and Pro forma that would replace Assurance and Related Services Guideline (AuG)16, Compilation of a Financial Forecast or Projection. Key issues discussed included:
- that compilations of all types of pro forma are within the scope of the proposed CSRS;
- that the effective date convention of the standard should be based on the report date;
- in the defined terms, that:
- pro forma adjustments present the effects of events or transactions on the base financial information, and added guidance to describe different pro forma adjustments that present the effects that are directly or indirectly attributable to the events or transactions;
- the starting point of base financial information is historical financial information; and
- a practitioner is “the individual conducting the engagement”;
- that pro forma is ordinarily presented in columnar format; however, in rare circumstances, management may select a different format (e.g., rows or disclosure in the notes); and
- that the period covered by the FOFI and pro forma is influenced by various factors (e.g., the intended use), and that for periods beyond one-year “the degree of uncertainty” increases.
The AASB expects to approve an exposure draft at its June 2024 meeting, with a comment period starting in the fall of 2024.