Auditing and Assurance Standards Oversight Council
Terms of Reference

Relationships

  1. The Auditing and Assurance Standards Oversight Council (AASOC) is an independent body that oversees the activities of the Auditing and Assurance Standards Board (AASB). AASOC also oversees activities related to independence standards set by the Chartered Professional Accountant (CPA) profession to safeguard the public interest.
      
  2. The AASB is a body with the authority and responsibility for issuing pronouncements for the private and public sectors in Canada. The AASB’s Terms of Reference require the AASB to establish its priorities and agenda after discussion with and consideration of the views of AASOC.
     
  3. Chartered Professional Accountants of Canada’s (CPA Canada) Independence Task Force, under CPA Canada’s Public Trust Committee, establishes independence standards for incorporation into the profession’s rules of professional conduct after due process.
      
  4. CPA Canada supports AASOC in the performance of its activities. In doing so,  CPA Canada respects the independence of AASOC, which is not subject to direction or influence by CPA Canada or other representatives of the accounting profession.
       
    Funding for reasonable and necessary expenses for the activities of AASOC and the standard-setting activity is provided from the budget of CPA Canada. The Vice-President, Standards of CPA Canada has liaison responsibilities to administer the relationship between CPA Canada and AASOC.
      
  5. For purposes of these Terms of Reference, a practitioner is a person who is a member or employee of a public accounting practice or has been a member or employee of a public accounting practice within the past three years.

Mission

  1. The mission of AASOC is to serve the public interest by overseeing and providing input to the development of auditing, assurance and independence standards in Canada.
     
    In this context, it is in the public interest that stakeholders in an entity have confidence in both the quality of such standards as well as the credibility of the process by which those standards are set.

Authority

  1. In undertaking its mission, AASOC has the authority to:
    a.oversee the activities of the AASB and the Independence Task Force;
    b.provide input to the activities of the AASB and the Independence Task Force;
    c.approve the Terms of Reference of the AASB, including any amendments thereto, subject to the approval of the Board of Directors of CPA Canada;
    d.appoint members to AASOC and the AASB, including the Chairs and Vice-Chairs;
    e.amend the Terms of Reference of AASOC, subject to the approval of the Board of Directors of CPA Canada;
    f.report publicly on AASOC’s activities at least annually; and
    g.take such other reasonable actions as are necessary to fulfill AASOC’s responsibilities.

Responsibilities

  1. AASOC shall have the following responsibilities with respect to assurance and auditing standards:
    a.to be satisfied that the standard-setting process is appropriate and responsive to the public interest;
    b.to recognize that the authority to set auditing and assurance standards rests with the AASB;
    c.to approve the Terms of Reference of the AASB, including any amendments thereto;
    d.to oversee the activities of the AASB, by developing and implementing a framework in order to evaluate the credibility of the AASB’s standard-setting process; and
    e.to provide input to the activities of the AASB and:
    i.take an active role in assisting the AASB to determine its priorities and strategies in its work program with due regard for domestic needs and international developments by overseeing AASB’s strategic planning process;
    ii.endeavour to ensure that the AASB considers user needs in determining priorities and strategies;
    iii.monitor and evaluate the performance of the AASB, the fulfillment of its responsibilities, accomplishment of its work program, and the use and adequacy of available volunteer and staff resources; and
    iv.inform the AASB of the diversity of views represented on AASOC, as well as the views of other individuals or groups with an interest in auditing and assurance standards.
       
  2. AASOC shall have the following responsibilities with respect to independence standards:
    a.to be satisfied that the composition of the Independence Task Force adequately represents the required competencies, knowledge, experience and commitment to the public interest;
    b.to be satisfied that the Independence Task Force has followed the process agreed to by AASOC;
    c.to be satisfied that the final standards have been adequately incorporated in the profession’s rules of professional conduct; and
    d.to be satisfied that the process continues to be sufficiently credible so that the independence standards are, and are perceived to be, protective of the public interest.
      
  3. On a regular basis, AASOC will monitor developments by regulatory agencies in Canada that affect auditing, assurance and independence standards. Such monitoring will be done through regular reports by representatives of regulatory agencies, such as the Canadian Securities Administrators, the Office of the Superintendent of Financial Institutions and the Canadian Public Accountability Board, who are AASOC members or observers.
       
  4. On a regular basis, AASOC will monitor developments outside Canada affecting auditing and assurance standards to identify those that might significantly impact Canadian entities operating both in and outside of Canada or might require changes to Canadian auditing and assurance standards. If such a development is identified, AASOC will request that the AASB, or other appropriate Canadian body, takes on the role of analyzing and assessing the impact to Canadian entities and Canadian standards and, if necessary, formulating and advocating an appropriate Canadian position.
       
  5. AASOC shall make available to the public minutes of the deliberations of AASOC, except those held in camera.
     
  6. AASOC shall establish a Nominating Committee and any other committees as required to carry out its responsibilities.
     
  7. AASOC shall review the AASOC’s membership, Terms of Reference and the Oversight Framework and Operating Plan every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents.
       
  8. The Chair and Vice-Chair of AASOC shall meet at least annually, if practicable, with the Chairs and Vice-Chairs of the Accounting Standards Oversight Council and the Canadian Public Accountability Board. The purpose of such meeting would include discussing common issues, challenges and agendas, and ensuring there is appropriate liaison and communication among the operating bodies (the Accounting Standards Board, the AASB and practice inspection/enforcement).
     
  9. AASOC shall follow CPA Canada’s bilingualism policy.

Communication with CPA Canada

  1. AASOC shall review annually the proposed budget of AASOC prior to its submission to the Board of Directors of CPA Canada, as part of CPA Canada’s annual budget approval process, and shall review actual results and variances.
     
  2. AASOC shall provide such other reports as may reasonably be requested by the Board of Directors of CPA Canada.

Members and Voting Rights

  1. AASOC shall, except for temporary vacancies, comprise not fewer than thirteen and not more than seventeen volunteer voting members, as follows:
    a.a Chair with a three-year term of office, which is renewable for one term;
    b.four members as referred to in clause 24; and
    c.eight to twelve other members, each with a normal term of three years (subject to clause 22), which term is renewable for one additional term with the recommendation of the Nominating Committee.

    At the discretion of the Chair, a Vice-Chair with a three-year term of office, which is renewable for one term, may be appointed from the foregoing members.
       
  2. The voting rights of any member may be waived by that member or, in the case of members appointed under clause 24, by the member or by the appointing organization. A member who would otherwise be a voting member shall be considered to be a ‘voting member’ for the purposes of these terms of reference notwithstanding that his or her voting rights have been waived.
     
  3. At all times, the majority of voting members of AASOC shall not be practitioners. The Chairs and Vice Chair of AASOC and the Nominating Committee shall not be practitioners.
     
  4. The terms of AASOC voting members shall, where practicable, be arranged with staggered expiry dates to effect an orderly rotation of membership.
     
  5. AASOC shall also include the following non-voting members: 
    a.the Chair of the AASB;
    b.the Vice-President, Standards, of CPA Canada;
    c.the Auditing and Assurance Standards Director of CPA Canada; and
    d.the member(s) of the International Auditing and Assurance Standards Board (IAASB), if resident in Canada, subject to receipt of consent from the individual(s).
       
  6. Each of the following organizations shall be specifically invited to appoint a voting member to AASOC so that each organization will normally have one representative on AASOC:
    a.the Canadian Securities Administrators;
    b.the Office of the Superintendent of Financial Institutions;
    c.the Canadian Public Accountability Board; and
    d.the Public Interest Oversight Board (PIOB), if resident in Canada.
      
    Each member shall remain a member of AASOC until such time as his or her respective organization appoints a different member to AASOC.
     
  7. With respect to clause 24(d) if there is more than one member of PIOB who is resident in Canada, the Nominating Committee shall recommend one of those persons to represent PIOB on AASOC.
     
  8. If any of the organizations identified above ceases to exist or, in the opinion of the Nominating Committee, ceases to be the appropriate representative of the particular constituency whose interests in the activities of the AASB it represents, the Nominating Committee shall recommend to AASOC a different organization to represent the constituency in question.

AASOC Member Selection Process

  1. The AASOC member selection process is based on merit, the primary criteria being the individual qualities and abilities of the nominee and the nominee’s ability to represent the public interest. Members shall be selected so that AASOC reflects a broad cross-section of many backgrounds and points of view. A diverse membership enables AASOC to have a broad perspective on the issues and potential issues facing the AASB.
     
  2. Members shall be selected from groups such as public accounting practice, legislative audit offices, investors, business, finance, government, academe, financial analysts, regulators, the legal profession and others.
     
  3. The Nominating Committee shall comprise:
    a.the Chair and/or Vice-Chair of AASOC; and
    b.three other members of AASOC selected by AASOC from time to time.
     
  4. The Chair of the AASB and the Vice-President, Standards, of CPA Canada are non-voting members of the Nominating Committee.
     
  5. All members of AASOC and the Chair and Vice-Chair appointments shall be nominated by the Nominating Committee of AASOC. These nominations shall be presented for approval by AASOC.

Operating Procedures

  1. A quorum for meeting of AASOC shall be a majority of the voting members.
     
  2. Members of AASOC shall vote according to their own opinions and not as representatives voting according to the views of any organization with which they are associated.
     
  3. A simple majority of those present and voting is required for a motion to be carried.
     
  4. Meetings of AASOC shall be held normally every four months or more frequently, if necessary, to achieve its objectives. Meetings shall be open to public observation at the discretion of the Chair.
     
  5. With the exception of members appointed pursuant to clause 24, for any voting member of AASOC who either:
    a.fails to attend more than two regular meetings of AASOC in succession; or
    b.fails to attend, in any twelve-month period, at least 50% of all meetings of AASOC
     
    the Nominating Committee can recommend that, in the absence of extenuating circumstances, the individual cease to be a member of AASOC as of the end of the meeting at which he or she was in default. A member shall be deemed to be absent from a meeting of AASOC unless he or she is in attendance for substantially all of it.
     
  6. The AASOC year end for purposes of the Terms of Reference shall be March 31.