Decision Summary November 28-29, 2016

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 IAASB on issues related to the IAASB’s project to revise ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, including:

  • the objective;
  • responding to the assessed risks of material misstatement;
  • work effort for each class of risk;
  • disclosure and stand back requirements; and
  • documentation of the rationale for the auditor’s judgment.

The AASB also discussed the Canadian approach for obtaining feedback once the exposure draft is issued in mid-2017.

Auditor Reporting

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.    

Data Analytics

The AASB discussed whether it should provide a formal response to the IAASB’s Request for Input, “The Growing Use of Technology in the Audit, with a Focus on Data Analytics.” Based on feedback collected from Canadian stakeholders, the AASB decided that it will submit a response. Staff will continue to gather input from Canadian stakeholders and prepare a draft response for review at the January 2017 meeting.

Enhancing Audit Quality

The AASB provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project proposal addressing quality control and group audits. The AASB expressed concerns with the lack of detail in the project proposal related to group audits. However, the AASB supports these projects and intends to set up two advisory groups to assist staff and provide input on Canadian issues.

Identifying and Assessing the Risks of Material Misstatement

The AASB provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to amend ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, including:

  • identifying significant accounts and inherent risks;
  • classes of risks and terminology to describe them;
  • use of qualitative factors in identification and assessment of inherent risks;
  • exploration of including a “spectrum of risk”; and
  • understanding how internal controls impact the risk assessment.

Other IAASB Projects

The AASB considered issues related to the following IAASB discussions:

  • professional skepticism; and
  • the IAASB’s 2017-2018 Work Plan.

Assurance and Related Services Standards (other than CASs)

Reporting on Controls at a Service Organization

The AASB unanimously approved a project proposal to revise CSAE 3416, Reporting on Controls at a Service Organization, in light of the American Institute of Certified Public Accountants’ new attestation standard AT-C Section 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting. The AASB discussed:

  • issuing an interim communication outlining key differences between CSAE 3416, AT-C Section 320 and ISAE 3402, Assurance Reports on Controls at a Service Organization; and
  • the need for input from practitioners with expertise in these standards on this project.

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

The AASB discussed issues relating to the development of CSAE 3530, Reports on Compliance with Agreements, Statutes and Regulations, including:

  • the scope;
  • definitions for key terms;
  • how practitioners apply materiality in a compliance engagement and the nature of guidance;
  • whether risk assessment should be addressed; and
  • the wording of the practitioner’s conclusion.

The AASB will continue to discuss these issues at a future meeting. 

AASB Planning

Stakeholder Outreach

The AASB discussed the request by the Canadian Securities Administrators (CSA) for input to its project committee that is developing a concept paper on enhancing audit committee disclosures. The AASB provided input to the AASB Chair and Director on perspectives to share with the CSA’s project committee in December 2016.