Auditing and Assurance Standards Oversight Council
Terms of Reference

(Revised and approved by the Auditing and Assurance Standards Oversight Council on November 10, 2017)

Mission

  1. The mission of the Auditing and Assurance Oversight Council (AASOC) is to serve the public interest by overseeing and providing input to the development of auditing, other assurance, related services and independence standards in Canada, including the activities of the Auditing and Assurance Standards Board (AASB) and the Independence Task Force.
     
  2. The mission of the AASB is to serve the public interest by setting standards and guidance and assisting in their implementation to enable the provision of high-quality, value-added and relevant auditing, other assurance and related services in Canada.
      
    Through its globally respected standard setting capability and an engaged stakeholder community, the AASB’s standards and guidance respond to the needs of Canadian stakeholders, and contribute to enhanced quality and consistency of practice, which results in a high degree of public confidence in auditing, and other assurance and related services.
      
  3. Chartered Professional Accountants of Canada’s (CPA Canada) Independence Task Force, under CPA Canada’s Public Trust Committee (PTC), establishes independence standards for incorporation into the profession’s rules of professional conduct after due process.
       
    The Independence Task Force’s responsibilities are to:
    (a) review recent amendments adopted by the IESBA in relation to breaches of its code of ethics;
    (b) review the Enhancing Audit Quality project’s recommendations regarding making changes to Canadian independence standards; and
    (c) study any other auditor independence matters required by the Public Trust Committee.
       
  4. As a body that has a broad perspective on the complex issues facing standard setters from the point of view of users, preparers, and the public, AASOC supports the AASB in its mission as an independent standard-setting body. AASOC also supports the Independence Task Force in its responsibilities related to independence standards. AASOC recognizes that the authority to set technical agendas and the resulting standards rests with the AASB.

Responsibilities

  1. AASOC has the following authority and responsibilities:
    (a) To oversee the activities of the AASB by:
        (i) approving the Terms of Reference for the AASB and any amendments to them;
      (ii) monitoring and evaluating 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
      (iii) determining whether the AASB has developed and approved a statement of operating procedures that is appropriate and responsive to the public interest.
    (b) To appoint members to AASOC in accordance with paragraphs 15 to 22, including the Chair and, where applicable, the Vice-Chair of AASOC.
    (c) To appoint members to the AASB, including the Chair and the Vice-Chair.
    (d) To provide input to the AASB primarily in terms of the strategic direction and priorities of the AASB, by providing its views on the preliminary agenda planning decisions of the AASB, as presented to AASOC by the AASB. AASOC actively assists the AASB to determine its priorities and strategies in its work programs with due regard for domestic needs and international developments. AASOC determines whether the AASB has considered the needs of all categories of stakeholders appropriately in determining its priorities and strategies.
    (e) To 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. This input includes views as to the priorities of the AASB and the technical matters before it.
    (f) To protect the independence of the AASB and to be satisfied that the AASB has maintained its independence in carrying out its mission.
    (g) To be satisfied that the standard-setting activities of the AASB are appropriate and responsive to the public interest and conducted in accordance with acceptable due process procedures. In this regard, AASOC undertakes an annual review of the performance of the AASB relative to the long-term strategic plan and annual operating plan of the board.
    (h) To report to the public on the discharge of its responsibilities and disseminate to the public information about its activities and those of the AASB. In this regard, AASOC reports annually to the public on its own activities and ensures that the AASB reports annually to the public on its respective activities.
    (I) To determine whether AASOC and the AASB have the financial and human resources necessary to support their work.
    (j) To advise the AASB in any matters as requested by the AASB Chair.
    (k) To oversee and provide input into the activities of the Independence Task Force. 
    (l) To be satisfied that the composition of the Independence Task Force adequately represents the required competencies, knowledge, experience, and commitment to the public interest.
    (m) To be satisfied that the Independence Task Force has followed the process agreed to by AASOC.
    (n) To be satisfied that the final independence standards have been adequately incorporated in the profession’s rules of professional conduct.
    (o) To be satisfied that the process of the Independence Task Force continues to be sufficiently credible so that the independence standards are, and are perceived to be, protective of the public interest.

       

  2. On a regular basis, AASOC monitors developments by regulatory agencies in Canada that affect auditing, assurance, and independence standards.
      
  3. On a regular basis, AASOC monitors developments outside Canada affecting auditing and assurance standards to identify those that might significantly affect 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 requests that the AASB, or other appropriate Canadian body, take on the role of analyzing and assessing the effect on Canadian entities and Canadian standards and, if necessary, formulates and advocates an appropriate Canadian position.

Membership

  1. AASOC, except for temporary vacancies, comprises not fewer than thirteen and not more than seventeen volunteer members, as follows:
    At the discretion of the Nominating and Governance Committee, a Vice-Chair with a three-year term of office, which is renewable for one term, may be appointed from the foregoing members.
    (a) a Chair with a three-year term of office, which is renewable for one term; and
    (b) twelve to sixteen other members.
     
    At the discretion of the Nominating and Governance Committee, a Vice-Chair with a three-year term of office, which is renewable for one term, may be appointed from the foregoing members.
      
  2. Each of the members, except for those appointed pursuant to clause 18 below, is appointed for a term of three years or such shorter term as AASOC may determine. Members are eligible for reappointment.
      
  3. The term of each AASOC member is determined by AASOC on a basis that ensures an orderly changeover of membership over time while maintaining the experience and balance of backgrounds necessary to meeting AASOC’s objectives.
       
  4. At all times, the majority of members of AASOC will not be practitioners. The Chairs and Vice-Chair of AASOC and the Nominating and Governance Committee will not be practitioners.
       
  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.
     
  6. The following have a right to attend and participate in AASOC meetings and receive any meeting materials, except that they may be excluded from participating in and receiving meeting materials related to in camera portions of the meetings at the discretion of the Chair:
    (a) the Chairs of the AASB and the Independence Task Force;
    (b) the Vice-President, Standards of CPA Canada;
    (c) the Director, Auditing and Assurance Standards; and
    (d) the member(s) of the International Auditing and Assurance Standards Board (IAASB), if resident in Canada.
      
  7. With the exception of members appointed pursuant to clause 18, any member of AASOC who fails to attend, in any twelve-month period, at least 50 per cent of all meetings of AASOC in the absence of circumstances that, in the opinion of the Nominating and Governance Committee, are extenuating, will cease to be a member of AASOC. A member is deemed to be absent from a meeting of AASOC unless he or she is in attendance for substantially all of it.
       
  8. Members of AASOC vote according to their own beliefs, experience and judgment based on the information they have and the discussions they have taken part in, and not according to the views of any firm, organization or constituency with which they are associated.

Appointments Process

  1. Members of AASOC are selected on the basis of individual merit. Members are selected also on a basis that ensures that AASOC reflects a broad cross-section of backgrounds and points of view so that it is able to discharge its responsibilities relative to both the AASB and the Independence Task Force. A diverse membership enables AASOC to have a broad perspective on the issues and potential issues facing the AASB and the Independence Task Force.
     
  2. AASOC has established a Nominating and Governance Committee to recommend nominees to fill vacancies in the membership and in the positions of Chair and/or Vice Chair of AASOC and the AASB. The members of the Nominating and Governance Committee comprise four to five members of AASOC who are appointed from time to time by the Chair and/or the Vice-Chair of AASOC and the Chair of the Nominating and Governance Committee. The Chair of the AASB, the Chair of the Independence Task Force and the Vice-President, Standards of CPA Canada have a right to attend and participate in meetings of the Nominating and Governance Committee and receive meeting materials.
       
  3. The following organizations are specifically invited to appoint a 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; and
    (c) The Canadian Public Accountability Board.
      
    Further, the Nominating and Governance Committee may invite members of the Public Interest Oversight Board (PIOB), if resident in Canada, to be members of AASOC.
       
    These various representatives are included in the twelve to sixteen members referred to in paragraph 8(b) above. Each member will remain a member of AASOC until such time as his or her respective organization appoints a different member to AASOC.
       
  4. The voting rights of members appointed under clause 18 may be waived by that member, by the member or by the appointing organization.
     
  5. If any of the organizations identified in paragraph 18 ceases to exist or ceases, in the opinion of the Nominating and Governance Committee, to be the appropriate representative of the particular constituency whose interests in the activities of the AASB it represents, the Nominating and Governance Committee will recommend to AASOC a different organization to represent the constituency in question.
     
  6. The Nominating and Governance Committee presents its recommendations to AASOC for approval.

Operations

  1. AASOC reviews its Terms of Reference at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents.    
      
  2. AASOC develops and adopts an oversight framework and operating plan setting out the principal operating procedures it follows in fulfilling its responsibilities. AASOC applies this, except in unusual circumstances and following agreement by AASOC on any departure from the procedures by AASOC. AASOC reviews its Oversight Framework and Operating Plan at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents.
     
  3. The Chair and Vice-Chair of AASOC will 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 meetings would include discussing common issues, challenges and agendas, and ensuring there is appropriate liaison and communication among the operating bodies.
     
  4. AASOC will create such committees of its members, in addition to the Nominating and Governance Committee, as it deems necessary in carrying out its responsibilities. The Chair of AASOC has the right, but not the obligation, to attend, participate in and receive meeting materials for all committees of AASOC.
     
  5. Meetings of AASOC are open to public observation, other than in camera discussions of human resources and other confidential matters.
     
  6. AASOC undertakes a review of its operations and effectiveness at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents. This review will be conducted jointly with the Accounting Standards Oversight Council.

Relationships with CPA Canada

  1. The results of AASOC’s periodic reviews of its Terms of Reference are provided to the Board of Directors of CPA Canada.
     
  2. 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.
     
  3. Funding for reasonable and necessary expenses of AASOC and the standard-setting activities is provided from the budget of CPA Canada, based on a proposed budget submitted as part of CPA Canada’s annual budget approval process.
     
  4. AASOC provides such other reports as may reasonably be requested by the Board of Directors of CPA Canada.
     
  5. The Vice-President, Standards of CPA Canada has liaison responsibilities to administer the relationship between AASOC and CPA Canada.