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)
Audit Evidence
The AASB discussed the International Auditing and Assurance Standards Board’s (IAASB) information gathering and targeted outreach activities related to audit evidence, as well as the stakeholder consultation plan for Canada. Issues discussed included matters that the Board believes are causing the most difficulties with audit evidence in practice and how these matters can be best addressed.
Audits of Less Complex Entities
The AASB provided input to the IAASB members from Canada on possible responses to feedback on the IAASB’s Discussion Paper, “Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs.” Matters discussed included:
- two proposed IAASB workstreams to address audits of less complex entities (LCEs);
- the IAASB’s proposed approach to dealing with specific areas within International Standards on Auditing (ISA) that are challenging to implement; and
- whether there are other matters deserving further consideration by the IAASB.
The IAASB plans to discuss the way forward in relation to audits of LCEs at its June 2020 meeting.
Group Audits
The AASB provided input to the IAASB members from Canada on issues related to proposed revisions to ISA 600, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors). Issues discussed included:
- key terms defined in the standard;
- proposed scope of the standard;
- requirements and application material related to materiality; and
- the length of the exposure draft comment period and the planned outreach activities.
The IAASB expects to approve an exposure draft of proposed ISA 600 (Revised) at its March 2020 meeting. The AASB expects to approve its exposure draft of proposed CAS 600, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors) in April 2020.
Quality Management
The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise standards for quality management at the firm and engagement level, including engagement quality reviews.
Issues discussed related to proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements included:
- whether a service provider should be considered as a resource and, therefore, subject to the same requirements as internal firm resources;
- renaming quality risk considerations introduced in December 2019, including conditions and circumstances, actions and inactions, and events;
- whether the standard should include examples of how larger firms may apply the requirements, and to examples for smaller firms, in order for firms to compare and contrast;
- whether specified responses should be included within each component or together in a separate section of the standard; and
- whether the reference to transparency reports should be in the requirements of the standard or the application material.
Issues discussed related to proposed ISQM 2, Engagement Quality Reviews, included:
- the cooling-off period for the engagement quality reviewer; and
- how the firm identifies engagements that should be subject to an engagement quality review.
Issues discussed related to proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements, included:
- the definition of “engagement team”;
- links to proposed ISA 600 (Revised) and proposed ISQM 1; and
- how the standard addresses scalability.
The IAASB expects to approve final proposed ISQM 1, ISQM 2, and ISA 220 (Revised) at its June 2020 meeting. The AASB expects to approve the Canadian equivalent standards at its September 2020 meeting.
Assurance and Related Services Standards (other than CASs)
Agreed-upon Procedures
The AASB unanimously approved Canadian Standard on Related Services (CSRS) 4400, Agreed-upon Procedures Engagements, including the related conforming amendments to other standards. CSRS 4400 will replace Section 9100, Reports on the Results of Applying Specified Auditing Procedures to Financial Information other than Financial Statements, and Section 9110, Agreed-Upon Procedures Regarding Internal Control over Financial Reporting.
The AASB unanimously agreed that re-exposing Canadian amendments is not necessary because the amendments relate to applying the quality control standards in Canada to agreed-upon procedure engagements. The nature and reasons for such amendments are established in the Preface of the CPA Canada Handbook – Assurance, and do not affect a practitioner’s compliance with CSRS 4400. Accordingly, the Board concluded that re-exposure would not result in any new information and is not necessary.
CSRS 4400 will be effective for agreed-upon procedures engagements for which the terms of engagement are agreed to on or after January 1, 2022.
Once the Auditing and Assurance Standards Oversight Council (AASOC) confirms that the AASB followed due process with proper regard for the public interest, it is expected CSRS 4400 will be issued in the CPA Canada Handbook – Assurance in July 2020.
Future-oriented Financial Information
The AASB unanimously approved a notice that will be placed in Assurance and Related Services Guideline (AuG) 6, Examination of a Financial Forecast or Projection Included in a Prospectus or Other Public Offering Document, and AuG-16, Compilation of a Financial Forecast or Projection. This notice was necessary because of the Accounting Standards Board’s (AcSB) decision to remove Section 4250, Future-oriented Financial Information, from the CPA Canada Handbook – Accounting and retain the content as non-authoritative guidance for future-oriented financial information in the CPA Canada Standards and Guidance Collection.
The AASB unanimously agreed not to expose the notice for public comment because it was developed in response to the AcSB’s decision and there are no other choices for the AASB.
Once AASOC confirms that the AASB followed due process with proper regard for the public interest, it is expected the notice in AuG-6 and AuG-16 will be issued in the CPA Canada Handbook – Assurance in June 2020.
Post-Implementation Review
The AASB reviewed the results of the post-implementation review of CSRS 4460, Reports on Supplementary Matters Arising from an Audit or a Review Engagement. The Board agreed to issue a communication on the review’s key findings.
Public Sector Auditing Standards
The AASB approved AuG-50, Conducting a Performance Audit in the Public Sector in Accordance with Canadian Standard on Assurance Engagements (CSAE) 3001, Direct Engagements.
The AASB unanimously agreed that re-exposing AuG-50 is not necessary because all changes were made in response to comments raised on exposure and there was extensive outreach with key stakeholders on the changes proposed in the Exposure Draft.
Once AASOC confirms that the AASB followed due process with proper regard for the public interest, it is expected AuG-50 will be issued and effective in the CPA Canada Handbook – Assurance in July 2020.
Other
AASB Annual Plan
The AASB approved its 2020-2021 Annual Plan. Once AASOC confirms that the Board followed due process with proper regard for the public interest, the 2020-2021 Annual Plan is expected to be published April 1, 2020.
The AASB also reviewed a report summarizing its performance of the 2019-2020 Annual Plan.
AASB Strategic Plan
The AASB reviewed a first draft of its Draft Strategic Plan for 2022-2025. The Board expects to approve the Draft Strategic Plan in April 2020. It is expected to be issued for stakeholder feedback shortly thereafter.