Auditing and Assurance Standards Board
June 11-12, 2018
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 Board provided input to the CPA Canada nominee on the International Auditing and Assurance Standards Board (IAASB) on issues related to the IAASB’s project to revise International Standard on Auditing (ISA) 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, including the proposed effective date and re-exposure considerations of the final revised ISA.
The Board also discussed potential risks to implementation of the revised standard by Canadian practitioners, and how these risks will be addressed through guidance.
The IAASB expects to approve ISA 540 (Revised) in June 2018 and issue it in October 2018. The AASB plans to approve the Canadian equivalent standard shortly thereafter.
The Board discussed issues related to implementing the new auditor reporting standards, including:
- developing non-authoritative guidance that would help practitioners evaluate whether information is Other Information for the purposes of Canadian Auditing Standard (CAS) 720, The Auditor's Responsibilities Relating to Other Information, and implications if information does not fall within the scope of CAS 720; and
- the entities to which key audit matter reporting requirements should apply, and when such requirements should be effective.
The Board will continue to discuss these and other issues at future meetings.
Identifying and Assessing the Risks of Material Misstatement
The Board provided input to the CPA Canada nominee on the IAASB on 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 whether:
- the exposure draft should include a requirement for the auditor to consider whether all significant classes of transactions, account balances and disclosures, and their relevant assertions, have been identified (referred to as the “stand-back” requirement);
- proposed conforming amendments are appropriate and complete; and
- the proposed exposure period and planned effective date of the final standard are appropriate.
The IAASB expects to approve an exposure draft of revised ISA 315 in June 2018. The Board anticipates approving a Canadian exposure draft shortly thereafter. The Board also discussed items to include in the highlights summary that will accompany the exposure draft in Canada, the possible implementation risks associated with the revision of this standard, and the communication and outreach plan related to the exposure draft.
The Board provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to revise International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and ISA 220, Quality Control for an Audit of Financial Statements, including:
- the firm’s risk assessment process and how it is applied to the components of the firm’s system of quality management;
- the monitoring and remediation process, including how practitioners from smaller firms could implement the requirements;
- the proposed ordering of components in the standard;
- definitions of engagement partner and engagement team;
- leadership responsibilities, including need for the engagement partner to be actively involved in the engagement; and
- engagement performance, including direction, supervision and review.
The IAASB is expected to approve an exposure draft of ISQC 1 in September 2018 and ISA 220 in December 2018. The Board would approve Canadian exposure drafts shortly thereafter. The Board will continue to discuss these and other issues at future meetings.
Assurance and Related Services Standards (Other Than CASs)
The Board discussed issues related to its project to revise Section 9200, Compilation Engagements, including:
- the scope of the proposed standard;
- engagement acceptance and continuance; and
- the proposed effective date of the standard.
The AASB unanimously approved an exposure draft of proposed Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements, that would replace Section 9200. The exposure draft is expected to be issued in early September 2018 and will have a response date of late November 2018.
Reporting on Controls at a Service Organization
The Board discussed issues related to its project to revise Canadian Standard on Assurance Engagements (CSAE 3416), Reporting on Controls at a Service Organization, including:
- challenges affecting the overall approach to the project; and
- use of the terms “audit” versus “reasonable assurance” in the service auditor’s report.
The Board received presentations and discussed the following initiatives:
- challenges faced by practitioners in audits of small and medium-sized entities;
- providing assurance over key performance indicators reporting; and
- monitoring assurance issues related to cryptocurrency transactions and balances recorded in financial statements.
The Board also received a presentation by Carol Paradine, Chief Executive Officer, and Jeremy Justin, Vice-President, Stakeholder Engagement, of the Canadian Public Accountability Board (CPAB). This presentation highlighted areas noted in the CPAB 2017 Annual Inspections Report and areas where CPAB and the AASB may be able to strengthen audit quality.