AASB

AASB Decision Summary – September 10-11, 2024

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 discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) proposed revisions to International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues discussed included:

auditor’s responsibilities relating to fraud in an audit of financial statements;
risk identification and assessment;
scalability and proportionality of requirements when fraud or suspected fraud is identified; and
transparency on fraud-related responsibilities and procedures in the auditor’s report.

Going Concern

The AASB discussed issues related to the IAASB’s proposed revisions to ISA 570, Going Concern. Key issues discussed included:

scalability;
the clarification of “significant judgments” in the auditor’s evaluation of management’s assessment of going concern;
the inclusion of the term “intent and ability” in the requirements for evaluating management’s plans for future actions;
documentation; and
key changes since June 2024, including transparency about going concern in the auditor’s report.

Integrated Project

The AASB discussed the draft project proposal developed by the IAASB for the audit evidence (ISA 500, Audit Evidence) and risk response project (ISA 330, to be known as the Integrated Project. Key issues discussed included:

the issues identified for the project;
proposed activities to address the project issues; and
overview of the project timeline.

Listed Entity/Public Interest Entity Track-2

The AASB discussed issues related to the IAASB’s proposed narrow-scope amendments project to revise the definitions of “listed entity” and “public interest entity”. Key issues discussed included:

options for the IAASB’s way forward to respond to comments received on its , including whether to:
- include only a definition and requirements for publicly traded entities; or
- include a definition of “public interest entity” and a conditional requirement for differential audit requirements to apply when law, regulation, or professional standards have further refined the definition or adopted the International Ethics Standards Board for Accountants’ mandatory categories; and
views on illustrative draft wording that demonstrates how these proposed options would be reflected in the International Standards on Quality Management and the International Standards on Auditing.

The AASB also discussed the CPA Canada Independence Standing Committee’s (ISC) Exposure Draft, “Proposed Revisions Relating to Definitions of Public Interest Entity and Listed Entity in Canadian Independence Standards.” Key issues discussed included:

the ISC’s Exposure Draft proposal to use the term “reporting issuer” in place of “publicly traded entity”, and not use “listed entity” in refining the “PIE” definition, including implications in the public sector;
whether c and
the ISC’s Exposure Draft proposal to remove the words “from the public” and “to the public” in its proposed categories B and C.

IAASB Technology Position

The AASB discussed issues related to the IAASB’s preliminary gap analysis for operationalizing its Technology Position. Key issues discussed included:

the proposed approach taken to the preliminary gap analysis; and
the connection between the guiding principles and the preliminary gap analysis.

Other Canadian Standards

Audits of Less Complex Entities (LCEs)

The AASB agreed to establish a new standing committee that would focus on scalability matters in:

existing CASs by responding to the challenges auditors and other interested and affected parties face in efficiently and effectively applying aspects of the CASs to audits of LCEs; and
new and revised CASs by helping to ensure that CASs are being developed and revised to be scalable, understandable, and proportional to audits of LCEs.

The AASB discussed:

the public interest considerations that establishing the committee would address;
the proposed Terms of Reference for this committee; and
administrative matters related to operations, oversight, and accountability.

The AASB is expected to issue a public call for membership on its website in fall 2024.

Sustainability Assurance

The AASB discussed the IAASB’s proposed revisions to International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Key issues discussed included:

a diagram describing the entity’s process to identify sustainability information to be reported;
communications between the auditor of the financial statements and the sustainability practitioner about sustainability matters;
testing management’s process for obtaining information from value chain components;
understanding the entity’s reporting policies at the risk assessment stage;
the practitioner’s description of any inherent limitations in the sustainability information reported; and
describing in the assurance report circumstances when the other information encompasses financial statements that were audited by the sustainability assurance practitioner or their firm.

The AASB also discussed the proposed and potential Canadian amendments to ISSA 5000 for adoption as Canadian Standard on Sustainability Assurance (CSSA) 5000 in Canada. Key issues discussed included:

new and revised wording on the proposed Canadian amendments concerning relevant ethical requirements, direct engagements, and Canadian Standard on Association 5000, Use of the Practitioner’s Communication or Name; and
revised direction for the potential Canadian amendment on Indigenous matters in CSSA 5000.

The AASB will continue to discuss both international and Canadian issues at the December 2024 meeting.