Financial Statement Disclosures

Current Status Next Steps

Final Handbook material approved.

Second quarter of 2017 – Final Handbook material to be issued.

OBJECTIVE AND SCOPE OF THIS PROJECT

Financial statement disclosures have become more detailed and complex as a result of evolving financial reporting standards.

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The International Auditing and Assurance Standards Board (IAASB) has commenced a project to develop guidance on the audit of financial statement disclosures.

The objective of the IAASB project is to gain robust understanding of the views and perspectives on issues relevant to auditing disclosures in a financial statement audit. The IAASB’s objectives further include:

  • determining whether revisions (in the form of new or revised requirements, or additional application material) to the International Standards on Auditing (ISAs) with respect to auditing disclosures are required;
  • considering how such revisions should be presented (for example, within the relevant ISAs or in a separate ISA); and
  • determining whether another type of non-authoritative guidance should be developed and, if so, developing the content. 

The Auditing and Assurance Standards Board (AASB) is committed to adopting the ISAs. Revisions that the IAASB makes to the ISAs will be reflected in the equivalent Canadian Auditing Standards (CASs). Should the IAASB develop a new ISA, the AASB will adopt the standard in an equivalent CAS. Amendments, if any, that the AASB makes to the ISA wording would be in accordance with the AASB’s criteria for such amendments, as set out in Appendix 1 of the Preface to the CPA Canada Handbook – Assurance.

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PROJECT NEWS & DECISION SUMMARIES

AASB Decision Summary – January 23-24, 2017
The AASB discussed the timeline for approving and issuing the auditor reporting standards in Canada.  The AASB anticipates releasing draft material to provincial institutes, for use in developing courses and training, in February 2017. The AASB continues to expect to approve the auditor reporting standards in the spring of 2017.

The AASB continues to monitor the progress of the U.S. Public Company Accounting Oversight Board’s auditor reporting proposals.

AASB Decision Summary – November 28-29, 2016
The AASB discussed draft basis for conclusion documents related to the adoption of auditor reporting standards in Canada.

The AASB also discussed risks associated with effective implementation of these standards and key messages to communicate with stakeholders.

Alert – International Standards on Auditing Not Adopted as Canadian Auditing Standards as at December 15, 2016
December 5, 2016.  Auditors performing audits of financial statements in accordance with CASs for periods ending on or after December 15, 2016 should not represent compliance with ISAs unless they have also complied with these ISAs issued by the IAASB.

Message from the Chair – Moving Forward on New Auditor Reporting and Other Standards
November 14, 2016. Our Chair, Darrell Jensen, provides an update on the progress towards adopting new international standards.

AASB Decision Summary – October 17-18, 2016
The AASB discussed issues related to the adoption of auditor reporting standards in Canada. The AASB considered the appropriate timing for approval of the standards in relation to the expected timing for the finalization of the U.S. Public Company Accounting Oversight Board’s auditor reporting proposals.  The AASB also discussed different options for the application of the new standards for entities listed with exchanges other than the Toronto Stock Exchange. 

The AASB reviewed a draft message from the Chair to update stakeholders on the progress of the project. This message is expected to be released in late 2016.

The AASB also discussed a proposed joint project with the Australian Auditing and Assurance Standards Board to conduct a review of the Australian experience in implementing new auditor reporting standards in the first year, with a particular focus on smaller listed entities.

AASB Decision Summary – September 12-13, 2016
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.

AASB Decision Summary – June 27, 2016
The AASB discussed different approaches for reflecting the new auditor reporting standards in the Handbook, including during the transition period prior to their effective date.  The AASB deliberated whether to allow earlier application of the standards in Canada and possible application dates. The AASB plans to issue a Message from the Chair to update stakeholders on the key decisions reached and expects to approve the final standards at its next meeting in September 2016.

AASB Decision Summary – June 13-14, 2016
The AASB discussed issues related to the adoption of ISAs regarding auditor reporting including:

  • the impact of the U.S. PCAOB’s auditor reporting reproposal;
  • the scope of requirements dealing with reporting of key audit matters;
  • what effective date should be established for the new standards including whether there should be a staged implementation of reporting on key audit matters; and
  • whether to permit early application of the CASs.

The AASB agreed to issue at an appropriate time a Message from the Chair designed to update stakeholders on the project.

The AASB will continue discussion of the project issues at its June 2016 conference call.

AASB Decision Summary – May 5, 2016
The AASB discussed issues regarding the adoption of ISAs relating to auditor reporting, financial statement disclosures, and ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information. The AASB will continue its discussions at its June 2016 meeting.

AASB Decision Summary – March 7- 8, 2016
The AASB discussed comments received from Canadian stakeholders on the AASB’s Invitation to Comment, “Implementation Considerations for New Auditor Reporting Standards.”  The AASB also discussed the way forward in Canada in response to input from stakeholders as well as the status of the U.S. Public Company Accounting Oversight Board’s planned issuance of the auditor reporting proposals.

The AASB decided on key areas requiring further exploration that will be discussed at the next meeting.

Bulletin – Addressing Disclosures in the Audit of Financial Statements
February 26, 2016. Addressing disclosures is an integral part of the audit. This Bulletin provides an overview of several revisions to CASs to more effectively address disclosures in the audit of financial statements.

AASB Decision Summary – November 30–December 1, 2015 
The AASB discussed issues and provided input relating to a proposed staff publication that refers to and summarizes the changes to CASs relating to the audit of financial statement disclosures that were approved by the AASB at its September 2015 meeting. The AASB decided that the staff publication should provide background to the changes and link to the IAASB Staff Publication, "Addressing Disclosures in the Audit of Financial Statements.” After the AASB’s fatal flaw review, the publication will be issued early in 2016.

AASB Decision Summary – October 14, 2015
The AASB discussed the effective date of the revisions to various CASs addressing disclosures in the audit of financial statements that were approved at its September 2015 meeting. The AASB tentatively agreed that the effective date should be consistent with the effective date of the new auditor reporting standards and revised CAS 720, The Auditor’s Responsibilities Relating to Other Information, which will be set once those standards are approved. The AASB has proposed that the effective date for those standards would be for audits of financial statements for periods ending on or after December 15, 2017.

The AASB will consider whether to issue a staff publication that refers to and summarizes the changes relating to the audit of financial statement disclosures at its November 2015 meeting.

AASB Decision Summary – September 16-18, 2015 
The AASB unanimously approved revisions to various CASs addressing disclosures in the audit of financial statements. The AASB concluded that changes made in finalizing the CASs were not significantly different from the proposals in the Exposure Draft and, therefore, no re-exposure is necessary. The AASB will discuss the effective date of the revised CASs at its October 2015 meeting.

Final Revisions – Addressing Disclosures in the Audit of Financial Statements
July 21, 2015 – The IAASB has issued revisions to focus auditors more explicitly on disclosures throughout the audit process and drive consistency in auditor behaviour in applying the requirements of certain ISAs. The revisions are effective for audits of financial statements for periods ending on or after December 15, 2016.

AASB Decision Summary – March 9-10, 2015
The AASB provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project on the audit of financial statement disclosures, including:

  • the proposed decision to postpone significant changes to ISA 320, Materiality in Planning and Performing an Audit, until the International Accounting Standards Board has progressed its work on materiality;
  • what constitutes accounting records and the nature, timing and extent of work auditors should be expected to perform on information derived from sources other than those records; and
  • proposed revisions dealing with the evaluation of uncorrected misstatements in qualitative disclosures.

The IAASB is expected to approve final revisions to various ISAs dealing with the audit of disclosures at its March 2015 meeting. The AASB will discuss adoption of these revisions as revisions to the CASs at its June 2015 meeting.

AASB Decision Summary – November 24-25, 2014
The AASB provided input to the CPA Canada nominee and another Canadian member on the IAASB on issues related to the IAASB’s project on the audit of financial statement disclosures, including:

  • the direction the IAASB should take on this project in light of the IASB’s projects on materiality and disclosures;
  • whether there is a need for more requirements and application material on applying the concept of materiality to disclosures; and
  • whether there is a need to elevate application material in certain standards to requirements.

AASB Response – Addressing Disclosures in the Audit of Financial Statements
October 27, 2014 – The AASB has submitted a comment letter responding to the IAASB’s Exposure Draft.

AASB Decision Summary – September 8-9, 2014
The AASB discussed comments received on the AASB’s Exposure Draft, “Addressing Disclosures in the Audit of Financial Statements.” The AASB also discussed a draft response letter to the IAASB’s Exposure Draft with the same title. A final draft of the response will be reviewed by the AASB Chair and Vice Chair prior to submission.

AASB Exposure Draft – Addressing Disclosures in the Audit of Financial Statements
June 9, 2014 The AASB has issued an Exposure Draft that proposes to adopt changes to certain ISAs issued by the IAASB dealing with disclosures in the audit of financial statements.  Stakeholders are encouraged to submit their comments, on the form provided, by August 15, 2014.

IAASB Exposure Draft – Addressing Disclosures in the Audit of Financial Statements
May 16, 2014. The IAASB has issued an Exposure Draft that proposes changes to certain ISAs dealing with disclosures in the audit of financial statements. Canadian stakeholders are encouraged to provide their comments to the IAASB by September 11, 2014.

AASB Decision Summary – April 22, 2014
The IAASB approved an exposure draft, “Addressing Disclosures in the Audit of Financial Statements,” in March 2014. The IAASB’s exposure draft will propose revisions to various International Standards on Auditing (ISAs) to provide additional guidance in the audit of financial statement disclosures. The IAASB’s exposure draft is expected to be issued in early May 2014.

The AASB unanimously approved an exposure draft that proposes no Canadian amendments to the IAASB exposure draft. The AASB’s exposure draft is expected to be issued by early June 2014.

AASB Decision Summary – March 10-11, 2014
The AASB provided input to the CPA Canada nominee and another Canadian member on the IAASB on issues related to the IAASB’s project on the audit of financial statement disclosures, including whether:

  • proposed changes to various ISAs provide appropriate guidance to auditors when auditing financial statement disclosures;
  • the supplementary guidance prepared on a preliminary basis as an IAASB staff publication should accompany the IAASB’s exposure draft; and
  • more comprehensive guidance is needed outside of the ISAs, and, if so, what form that guidance may take.

The IAASB is expected to issue an exposure draft in April 2014. The AASB will issue its exposure draft shortly thereafter.

AASB Decision Summary – December 2-3, 2013
The AASB discussed issues related to the IAASB’s project on the audit of financial statement disclosures, including whether the IAASB should consider revisions to application material in International Standards on Auditing, or issue an International Auditing Practice Note to provide guidance to auditors.

AASB Decision Summary – September 9-10, 2013
The AASB discussed issues related to the IAASB’s project on the audit of financial statement disclosures. The AASB agreed that clarification of existing requirements and addition of application material is needed to address this topic. There is no need for a separate ISA or the addition of requirements in existing ISAs.

The IAASB will continue its discussion of this topic, with a goal of issuing an exposure draft in mid-2014.

AASB Decision Summary – April 8-9, 2013
The AASB discussed issues related to the IAASB’s project on audit of financial statement disclosures, including whether more robust guidance is needed on how to plan and perform auditing procedures related to notes to financial statements and, if so, what the nature and extent of additional guidance should be.

The IAASB will continue its review of how the ISAs deal with the audit of disclosures, and is expected to identify additional potential changes that will be discussed at its June and September 2013 meetings.

AASB Decision Summary – December 3-4, 2012

The AASB discussed issues related to the IAASB’s project to develop guidance on the audit of financial statement disclosures. The IAASB is considering the best way to approach this new project which may involve:

  • changes to requirements or guidance in ISAs; or
  • issuance of non-authoritative guidance, such as an International Auditing Practice Note.

The AASB decided to commence a project on this topic, since there is a possibility that the project will result in changes to ISAs that would be adopted as CASs.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.