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)
The AASB discussed the International Auditing and Assurance Standards Board’s (IAASB) proposals for the way forward in relation to audit evidence, including a proposal to revise International Standard on Auditing (ISA) 500, Audit Evidence.
The IAASB plans to discuss this topic at its June 2020 meeting.
Audits of Less Complex Entities
The AASB provided input to the IAASB members from Canada on the IAASB Audits of Less Complex Entities (LCE) Working Group’s proposal to start developing a separate standard on this topic. Matters discussed included the overarching principles proposed for the IAASB to use when developing a separate set of standards.
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:
- revising the definition of “quality risk” to include the concept of “reasonable possibility”;
- replacing all references to “factors” with “conditions, events, circumstances, inactions or actions”;
- clarifying the risk assessment process through practical examples in the application material; and
- encouraging the adoption of the suite of quality management standards as a package.
Issues discussed related to proposed ISQM 2, Engagement Quality Reviews included:
- aligning the IAASB provisions related to the objectivity of the engagement quality reviewer and proposed revisions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards (IESBA Code) addressing objectivity of appropriate reviewers.
Issues discussed related to ISA 220 (Revised), Quality Management for an Audit of Financial Statements included:
- revising the engagement resources section in ISA 220 (Revised) to account for circumstances where engagement team resources may not be assigned by the firm, but rather obtained directly; and
- providing a general illustrative example of a situation when resources may not be assigned by the firm, other than that of a group audit engagement.
The AASB also discussed a one-year deferral of the standards’ effective date to December 15, 2022. This would account for COVID-19’s impact on firm activities.
The IAASB expects to approve final proposed ISQM 1, ISQM 2, and ISA 220 (Revised) at its September 2020 meeting. The AASB expects to approve the Canadian equivalent standards at its January 2021 meeting.
Assurance and Related Services Standards (other than CASs)
Extended External Reporting
The AASB continued discussing its draft response letter to the IAASB Public Consultation Paper, “Proposed Non-Authoritative Guidance Extended External Reporting (EER) Assurance.” The Board will review other sections of the draft response in July 2020 before submitting a final letter to the IAASB in mid-July 2020.
The AASB received an update on the IAASB Technology Working Group activities. The Board provided feedback on draft wording the Group proposed to include at the top of all non-authoritative guidance it publishes, including an example of when automated tools and techniques may be more effective than manual procedures.