Decision Summary – December 4-5, 2017

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 AASB 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 ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. Key issues discussed included:

  • using the spectrum of risk to demonstrate scalability and possible other approaches for scalability;
  • adding wording to enhance the application of professional skepticism;
  • the appropriateness of possibly elevating certain application material to requirements; and
  • the disposition of significant issues in the revised draft of ISA 540 resulting from the responses received to the Exposure Draft.

Auditor Reporting

The Board discussed issues related to the CASs on auditor reporting, including:

  • key audit matter reporting for TSX-listed entities;
  • activities underway to investigate the implications of disclosing the engagement partner’s name in the auditor’s report; and
  • the status of activities related to developing a combined U.S. and Canadian auditor’s report, and the potential for acceptance by the U.S. Securities and Exchange Commission.

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:

  • changes to key definitions such as “qualitative inherent risk factors” and “significant class of transactions, account balance or disclosure”;
  • requirements related to understanding each component of internal controls; and
  • requirements to identify and assess the risks of material misstatement, including inherent and control risks.

 Quality Control

The Board provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to revise 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.

Key issues discussed relating to ISQC 1 included:

  • the scalability of the standard;
  • the overall length of the standard, including whether certain application material could be removed;
  • responsibilities for independence; and
  • the robustness of the proposed changes and whether they address key public interest issues identified in the IAASB’s Invitation to Comment, “Enhancing Audit Quality in the Public Interest – A Focus on Professional Skepticism, Quality Control and Group Audits.”

Key issues discussed relating to ISA 220 included:

  • the proposed objective of the standard;
  • requirements related to engagement acceptance and continuance;
  • requirements related to use of resources; and
  • requirements regarding the sufficient and appropriate involvement of the engagement partner.

Assurance and Related Services Standards (other than CASs)

Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents

The Board discussed the Securities Regulations Advisory Group’s proposed changes to expand the scope of Section 7170, Auditor's Consent to the Use of the Auditor's Report Included in a Business Acquisition Report, to include material from Section 7500, Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents. The Board reviewed a preliminary draft of the standard, including:

  • the scope of the standard;
  • proposed changes to the auditor’s work effort on performing interim review procedures to identify intervening period events;
  • which terms should be defined to enhance the clarity of the standard; and
  • potential illustrative reports.

Compilation Engagements

The Board discussed issues identified in developing a revised standard to replace Section 9200, Compilation Engagements, including:

  • the scope of the standard and what might be excluded;
  • appropriateness of any communication or disclaimer for services outside the compilation engagement standard; and
  • proposed wording for the scope paragraph.

The Board also reviewed feedback collected from the online survey regarding the proposed scope of the standard. Approximately 800 responses were received.

Special Reports – Assurance on Compliance with Agreements, Statutes and Regulations

The Board unanimously approved new standards CSAE 3530, Attestation Engagements to Report on Compliance, and CSAE 3531, Direct Engagements to Report on Compliance. The Board discussed related consequential amendments to other standards, and decided to defer a decision until further information is available regarding the use of Assurance and Related Services Guideline (AuG) 18, Criteria for Reports Issued Under Subsection 295(5) of "an Act Respecting Trust Companies and Savings Companies" in Québec.

The Board concluded that changes made in finalizing the standards were not significantly different from the proposals in the Re-exposure Draft and unanimously decided that re-exposure is not needed. The new standards will be effective for compliance reports dated on or after April 1, 2019, and are expected to be included in a Handbook update in March 2018.

AASB Planning

AASB Operating Plan 2018-2019

The Board reviewed the key elements to be included in the 2018-2019 operating plan. The Board provided input on select projects, discussed priorities and proposed timing of key elements. The Board is expected to approve the plan in the first quarter of 2018.

Monitoring Group Consultation Paper

The Board discussed the Monitoring Group’s Consultation Paper, “Strengthening the Governance and Oversight of the International Audit-Related Standard-Setting Boards in the Public Interest.” A draft response will be reviewed at the Board’s January 2018 meeting.