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 and Risk Response
The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) project to revise International Standard on Auditing (ISA) 330, The Auditor’s Responses to Assessed Risks; ISA 500, Audit Evidence; and ISA 520, Analytical Procedures. Key issues discussed included:
- different options for revising paragraph 18 of ISA 330;
- aligning requirements in ISA 330 and ISA 500 regarding evaluating relevance and reliability of information;
- proposed changes to analytical procedures in ISA 520;
- proposed requirement for selecting items for testing; and
- placement of a “stand-back” requirement in ISA 700, Forming an Opinion and Reporting on Financial Statements.
At its March 2026 meeting, the AASB will continue to discuss these and other issues, as it follows the IAASB’s progress on this project. The IAASB is expected to approve the exposure drafts of the three standards in June 2026.
Experts Narrow-scope Amendments
The AASB discussed issues related to final approval of narrow-scope amendments to:
- CAS 620, Using the Work of an Auditor’s Expert;
- CSAE 3000, Attestation Engagements Other than Audits or Reviews of Historical Financial Information;
- CSAE 3001, Direct Engagements;
- CSRE 2400, Engagements to Review Historical Financial Statements; and
- CSRS 4400, Agreed-upon Procedures Engagements.
Key issues discussed included:
- final changes made by the IAASB before approving the narrow-scope amendments to its standards;
- final due process items, including:
- considering the need for Canadian amendments;
- determining whether re-exposure is required;
- reviewing the draft Basis for Conclusions;
- providing input on the implementation risk analysis; and
- reviewing the summary of due process steps completed.
The AASB concluded that re-exposure was not required as:
- there are no Canadian amendments in CAS 620, CSAE 3000, and CSRS 4400; and
- the reasons noted in the AASB’s Exposure Draft for proposing narrow-scope amendments to CSAE 3001 and CSRE 2400 remain relevant to the final revisions.
Following discussion, the AASB unanimously approved the final narrow-scope amendments. The narrow-scope amendments are effective for audits and reviews of financial statements for periods beginning on or after December 15, 2026, and for engagements performed under CSAE 3000, CSAE 3001, and CSRS 4400 beginning on or after December 15, 2026.
The AASB expects the narrow-scope amendments will be published in the February 2026 Handbook update.
ISA 540 – Post-implementation Review
The AASB discussed issues related to the IAASB’s post-implementation review of ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures. Key issues discussed included:
- key findings from the IAASB’s initial information-gathering activities;
- the content of the proposed IAASB’s public consultation survey; and
- the AASB’s outreach activities to inform its response to the IAASB’s survey.
Moving forward, the AASB will be raising awareness of the IAASB’s post-implementation review and public consultation survey and conducting Canadian outreach activities to inform our response to the survey.
Listed Entity and Public Interest Entity
The AASB discussed the Canadian way forward in relation to the IAASB’s narrow-scope amendments to International Standards on Quality Management and ISAs related to listed entity and public interest entity. In its final narrow-scope amendments, the IAASB replaced the term “listed entity” with “publicly traded entity”. Key issues discussed included:
- whether to move ahead with a project given the IAASB has finalized its narrow-scope amendments or continue to defer until the definition of public interest entity is finalized in Canada for the relevant ethical requirements; and
- what term would be most appropriate to use in Canada, given the IAASB used “publicly traded entity”, and Canadian law, regulation, and the Canadian Independence Standards use the term “reporting issuer”.
At the March 2026 meeting the AASB will continue to discuss these and other issues, including which entities might be included or excluded under the term “reporting issuer” versus “listed entity”.
Select ISA 500-series Standards
The AASB discussed issues from the IAASB’s information-gathering and research activities in anticipation of a project to revise targeted standards in the ISA 500 Series. Key issues discussed included:
- the scope of standard-setting activities:
- support for revising considerations in respect of the existence and condition of inventory in ISA 501, Audit Evidence – Specific Consideration for Selected Items, and external confirmations in ISA 505, External Confirmations;
- determination that no standard setting is warranted for the other topics in ISA 501 – litigation and claims, and segment information;
- agreed that no revisions to ISA 530, Audit Sampling, are necessary, but encouraged the IAASB to develop non-authoritative materials as a way to address specific audit sampling challenges identified; and
- the IAASB’s draft project proposal, including:
- the completeness of the proposed actions to address the key issues identified in the project; and
- the project’s timeline, priorities, resources, output, and impact.
At its March 2026 meeting, the AASB will discuss the IAASB’s updated project proposal, which is anticipated for approval at the IAASB’s March meeting.
Technology – Focus on Quality Management
The AASB discussed issues related to the IAASB’s Technology Quality Management Workstream. Key issues discussed included:
- key takeaways from the joint IAASB/AASB Canadian Technology Roundtable hosted on October 30, 2025;
- feedback received from the IAASB’s global roundtables; and
- next steps for the IAASB’s Technology Quality Management Workstream.
At its March 2026 meeting, the IAASB is expected to discuss a proposed non-authoritative-material action plan, including identification of appropriate themes and topics to address and the nature, scope, and expected timing of deliverables.
Other Canadian Standards
Sustainability Assurance
The AASB discussed the proposed Canadian Standard on Sustainability Assurance (CSSA) 5000, General Requirements for Sustainability Assurance Engagements, and the amendment related to Indigenous matters in CSSA 5000. Key issues discussed included:
- the volume of comments received on the Re-Exposure Draft of the amendment related to Indigenous matters, suggesting there are unresolved implementation challenges and a need for additional subject-matter expertise to support the project moving forward;
- agreement that, based on feedback received on the Indigenous amendment:
- the Board, with support from its Sustainability Assurance Committee, will require additional time, beyond what was anticipated at re-exposure, to carefully analyze and respond to all feedback;
- further field testing on the revised Indigenous amendment is necessary to ensure that implementation challenges are resolved; and
- interested parties need to be updated on the status and next steps for the Indigenous amendment, including the anticipated timeline for completion.
- whether to finalize CSSA 5000 while continuing to work on the Indigenous amendment, in order to maintain congruence with the international standard and reduce market confusion.
The AASB will continue discussing the Indigenous amendment at its January 2026 meeting.
Other
Canadian Public Accountability Board (CPAB)
The AASB received a presentation from CPAB. The presentation included an update on interim findings from CPAB’s 2025 Inspections, thought-leadership publications issued during the year, and its future focus areas.
Emerging Issues Monitoring Process
The AASB discussed the results from its monitoring of emerging issues, including technology, and key topics identified for discussion.
The AASB prioritized all the key emerging issues based on their potential impact on the Board’s activities and their urgency. Some of the key topics identified included:
- technology, including artificial intelligence (AI), – Use of technology by audit entities and auditors, and its impact on the audit;
- sustainability reporting and regulation – Evolution of sustainability reporting and its regulation that impacts the demand for sustainability assurance engagements; and
- challenges with interpretation and application of standards – CAS 315, Identifying and Assessing the Risks of Material Misstatement, CAS 402, Audit Considerations Relating to an Entity Using a Service Organization,
- Canadian Standard on Quality Management (CSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, and Canadian Standard on Related Services (CSRS) 4200, Compilation Engagements;
IAASB Strategy and Work Plan for 2028-2031
The AASB discussed the IAASB and International Ethics Standards Board for Accountants’ (IESBA) future strategy and proposed joint stakeholder survey. Key issues discussed included:
- the content of the proposed IAASB/IESBA public consultation survey; and
- the AASB’s activities to inform its response to the IAASB’s survey.
Moving forward, the AASB will be raising awareness of the IAASB’s public consultation survey and discussing its response to the joint stakeholder survey at its March 2026 meeting.
International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE)
The AASB received an update on the IAASB’s upcoming project to maintain the ISA for LCE. The update included:
- the IAASB’s proposed approach statement; and
- the IAASB’s project proposal.
The AASB has not adopted the ISA for LCE for use in Canada. However, the AASB monitors the IAASB’s work as it progresses.
Practice Inspection Working Group
The AASB received a presentation from the Chair of the Practice Inspection Working Group, which is made up of representatives from the provincial Chartered Professional Accountants bodies. The presentation included an update on key findings from recent inspection findings and challenges identified in application of the AASB’s standards.