Call to Order
Kevin Nye, Chair of the Auditing and Assurance Oversight Committee (AASOC), called the meeting to order at 9:30 a.m. Eastern Standard Time (EST).
Approval of Minutes
For the minutes from June 27-28, 2022, an AASOC member asked for clarification on the reference to “removing the word ‘stakeholder’ for greater inclusivity, especially as it relates to the involvement of Indigenous Peoples in standard setting.” Karen DeGiobbi, Director, Audit and Assurance Standards, explained that the AASB is moving away from the word “stakeholder” to acknowledge concerns with that word as it relates to Indigenous communities and, instead, using the phrase “interested and affected parties”. She explained that this phrase is intended to include the more groups that are interested and affected by the standards the AASB sets. Stephenie Fox, Senior Vice-President, Standards, explained that the word “stakeholder” is not an accurate depiction of the relationship as Indigenous representatives would see it.
The AASOC considered the minutes for June 27-28, 2022, correct as written and were approved on a motion by Gary Hannaford and seconded by Magatte Ndiaye.
Sustainability Update
Lisa French, Vice-President, Sustainability Standards, presented a two-part update on the Sustainability Standards team’s activities. The first part focused on the International Sustainability Standards Board’s (ISSB) Exposure Drafts and the second part focused on efforts to build the Canadian Sustainability Standards Board (CSSB).
ISSB update
Ms. French covered the ISSB’s two Exposure drafts:
The comment period for both Exposure Drafts closed on July 29, 2022.
The ISSB received 735 submissions to the Exposure Draft for IFRS S1 (with 75 Canadian responses) and 700 submissions to the Exposure Draft for IFRS S2 (with 70 Canadian response). The Canadian responses made up 10 per cent of the global feedback.
Responses from industry associations, investors, and preparers made up two-thirds of Canadian respondents. The remaining one-third came from not-for-profit, governments, supporting entities, professional bodies, and academia.
The Sustainability Standards team prepared AASOC’s response letters to the Exposure Drafts for IFRS S1 and IFRS S2.
The team received strong support from an expert panel that provided technical and oversight functions and participated in 24 engagement events. The events attracted 172 attendees, with high participation from report preparers (36 per cent) and investors (25 per cent). The engagement helped to inform the team’s response to the two Exposure Drafts.
In the response letters, the Sustainability Standards team proposed:
- IFRS S1 – Specific amendments to clarify the materiality concept and changes to open-ended text that appeared to work against the notion of a single baseline.
- IFRS S2 – A reframing of future-oriented disclosure requirements from financial statement implications to a more general outlook discussion.
For IFRS S2, the Sustainability Standards team signaled its support for disclosing Scope 3 greenhouse-gas emissions, subject to some tweaks and additional guidance. The team also supported the notion of scenario analyses to encourage preparers and investors to consider long-term climate resilience.
For IFRS S1 and IFRS S2, the Sustainability Standards team urged the ISSB to consider Indigenous rights and specific aspects of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The team also noted key costs and benefits based on Canadian perspectives.
The ISSB is still analyzing all feedback, with plans to publish the final standards as early as possible in 2023.
In late 2022, the ISSB plans to launch a public consultation on its future agenda priorities.
Ms. French explained that once the CSSB is in place, the Sustainability Standards team will use its network for special committees or task forces to support future market engagement.
In terms of standard operating procedures, based on lessons learned from the responses to IFRS S1 and IFRS S2, the approach to planning, consulting, communication, and project management will be formalized.
CSSB update
The Sustainability Standards team will be recruiting two principals and two analysts.
Mr. Nye thanked Ms. French for her informative update and asked for another at the next AASOC meeting.
AASB Update
Ms. DeGiobbi provided the AASB Chair’s update, in Bob Bosshard’s absence.
Since the last AASOC meeting in June 2022, the AASB had two meetings with a mix of international and Canadian topics. Starting with the international projects, the International Audit and Assurance Standards Board’s (IAASB) Public Interest Entity project is responding to recent changes in the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards). This project has two tracks. The first is a fast track, limited-scope revision of the auditor's reporting requirements when differential independence standards are applied for certain entities. For this track, the IAASB approved its exposure draft in June 2022, and the AASB followed with approving its exposure draft in July 2022. At its September 2022 meeting, the AASB discussed its preliminary views on the exposure draft and planned to meet again at the end of September to finalize its response before the October 4, 2022, deadline.
Ms. DeGiobbi highlighted a second international project, the IAASB’s Sustainability Assurance project. In September 2022, the IAASB approved a project plan for a new overarching standard on sustainability assurance (ISSA 5000, (Revised) General Requirements for Sustainability Assurance Engagements). This standard will build upon the IAASB's existing ISAE 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, which is used for these engagements as well as its full suite of auditing standards. The IAASB will be moving quickly, expecting to approve an exposure draft in the second half of 2023. Ms. DeGiobbi highlighted that Associate Director Johanna Field has been asked to be part of the IAASB’s drafting team.
On the Canadian projects, Ms. DeGiobbi stated that in July 2022, the AASB made good progress on developing its engagement process. Following which, the Board is beginning to field test certain aspects of the proposed process on three standard-setting projects that are currently at the outreach stage. This field testing will help the Board gather valuable insight on how the process can be operationalized. The results will be considered alongside the outcome of a broader market research project and the Independent Review Committee on Standard Setting in Canada’s recommendations on engagement that will be available in the coming months.
Over the past year, the AASB has been working on the Key Audit Matters (KAM) research project, which was done in two parts. The first part was desktop research on experience with communicating KAM in the auditor’s report for the 2020 calendar year-end period. The second part involved interviews to gather first-hand KAM reporting experience. The research was completed in early summer 2022, and the researcher’s report is in its final design stages. The Board expects to publish its summary of key findings in October 2022.
Finally, at its July 2022 and September 2022 meetings, the AASB discussed the status and potential changes to its current year annual plan activities. Since the start of the year, several additional activities and opportunities arose for the Board outside of its planned activities. Staff capacity was also impacted when one staff member left in June 2022. (They have been replaced in September 2022.)
The AASB discussed its Annual Plan and identified areas where changes to the initial plan were needed. The Board was mindful of the public interest and focused on trying to minimize the impact on its standard-setting activities.
Ms. DeGiobbi concluded that the Performance Review Committee would be updated at its next meeting on the AASB’s current year performance and on projects that will not progress as planned. There will be an ongoing discussion on resourcing and appropriate staff levels to support the Board’s growing workload.
Adjournment
Having no further business, the meeting was adjourned at 5:30 p.m. (EST).