Auditing and Assurance Standards Board
September 12-13, 2016
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)
Auditing Accounting Estimates
The AASB discussed issues related to the IAASB’s project to revise ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, including:
- scalability of the standard to both low and high risk estimates;
- definitions of key terms;
- classes of risk and risk assessment process;
- work effort in response to the assessed risks; and
- implications to other ISAs.
The IAASB is expected to approve an exposure draft of revisions to ISA 540 at its December 2016 meeting. The AASB plans to approve its exposure draft in January 2017.
The AASB discussed issues related to the adoption of ISAs on auditor reporting, as well as views raised by AASOC members at its July 2016 meeting, including:
- the scoping, and effective dates for the implementation of key audit matters reporting;
- whether early application should be allowed and, if so, the implications;
- how to support successful implementation of the standards;
- timelines for issuance of the standards and related materials to support their implementation; and
- key messages to highlight in a message from the Chair.
The AASB will continue to discuss these and other issues at its October 2016 meeting. The AASB Chair intends to issue a message to update stakeholders with more details on the progress of this project in late 2016.
Identifying and Assessing the Risks of Material Misstatement
The AASB discussed issues related to the IAASB’s project to amend ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, including:
- the components of internal control relevant to the audit;
- assessment of the risk of material misstatement; and
- whether risks should be assessed on a “spectrum of risk”.
The AASB strongly supports this project and intends to setup an advisory group to assist staff and the AASB identify Canadian issues.
The AASB considered issues related to the following IAASB projects:
- enhancing audit quality;
- group audits;
- professional skepticism; and
- quality control.
The AASB also reviewed the IAASB’s 2017/2018 Work Plan and its proposed response to the IAASB’s work plan survey.
Assurance and Related Services Standards (other than CASs)
The AASB discussed issues related to the IAASB’s project on revisions to ISRS 4400, Engagements to Perform Agreed-upon Procedures Regarding Financial Information. The AASB reviewed the IAASB Working Group’s draft discussion paper, “Exploring the Demand for Agreed-Upon Procedures Engagements and Other Services.” The AASB discussed the approach to be followed in Canada for this project, including possible outreach activities. The AASB will continue to monitor this project as it evolves before deciding whether an advisory group may be required.
The AASB approved CSOA 5000, Use of the Practitioner’s Communication or Name, and related consequential amendments. The AASB concluded that changes made in finalizing the standard do not result in substantial changes in practice. Therefore re-exposure is not required. The standard will be effective for a practitioner’s consent provided on or after June 1, 2017 and is expected to be included in a January 2017 Handbook update.
In July 2015, Section 7500, Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents, was replaced with Section 7170, Auditor’s Consent to the Use of the Auditor’s Report Included in a Business Acquisition Report. As a result of a consequential amendment in finalizing CSOA 5000, Section 7500, will be reinstated to the Handbook. The scope of Section 7500 will be amended to remove consents to the use of the auditor’s report included in a business acquisition report as such consents are addressed in Section 7170. The AASB will consider a new project to revise Section 7500 at a future meeting.
The AASB discussed issues related to its compilation engagements project, including:
- the scope and definition of a compilation engagement;
- engagement acceptance and continuance;
- documentation requirements;
- whether CSQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance Engagements, should be applicable to compilation engagements; and
- whether communication with management and those charged with governance is needed.
The AASB also agreed that the project is at an appropriate stage for its task force to obtain input from Canadian stakeholders. The input will focus on tentative conclusions the task force reached on how to address public interest issues identified to date. The task force is planning outreach beginning in November 2016.
Special Reports – Assurance on Compliance with Agreements, Statutes and Regulations
The AASB reviewed revisions resulting from comments received on exposure of its proposed standard CSAE 3530, Reports on Compliance with Agreements, Statutes and Regulations, and discussed issues including:
- a revised title for the new standard;
- the scope of the standard, including material on engagements that have aspects of reporting on financial information as well as reporting on compliance;
- terminology used to describe the entity’s responsibility regarding compliance; and
- the wording of the practitioner’s conclusion.
The AASB will continue to discuss these and other issues, including a proposed standard on direct compliance engagements, at its next meeting.