Canadian Auditing Standards (CASs)
Audit of Accounting Estimates
The AASB approved CAS 540, Auditing Accounting Estimates and Related Disclosures, including the related conforming amendments to other standards. The Board concluded that no significant changes were made in finalizing the standards from a Canadian standpoint (i.e., the changes did not require an addition, modification, or deletion of a Canadian amendment); therefore, no re-exposure was necessary. CAS 540 will be effective for audits of financial statements for periods beginning on or after December 15, 2019. It is expected to be included in the CPA Canada Handbook – Assurance update in early 2019.
The AASB approved amendments to CAS 700, Forming an Opinion and Reporting on Financial Statements. It requires auditors to communicate key audit matters in the auditor’s report for audits of complete sets of general purpose financial statements of Toronto Stock Exchange (TSX)–listed entities, other than entities that are required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure. The Board concluded that the amendments are significantly different from the current standard. However, the changes are consistent with proposals in the 2015 Invitation to Comment, “Implementation Considerations for New Auditor Reporting Standards.” Those proposals were broadly supported by stakeholders; therefore, no re-exposure was necessary. The amendments will be effective for audits of financial statements for periods ending on or after December 15, 2020 and are expected to be included in the December 2018 Handbook update.
The AASB also discussed the potential expansion of the communication of key audit matters for investment funds and other listed entities. The Board plans to discuss an exposure draft dealing with proposals for such communications at its December 2018 meeting.
Identifying and Assessing the Risk of Material Misstatement
The AASB reviewed comments received from Canadian stakeholders on the its Exposure Draft of proposed revisions to CAS 315, Identifying and Assessing the Risks of Material Misstatement. Issues respondents raised that the Board discussed included:
- the enhancement and clarification of requirements related to the auditor’s identification of controls relevant to the audit; and
- the separate assessment of inherent and control risk at the assertion level.
The Board discussed its draft response letter to the International Auditing and Assurance Standards Board’s (IAASB’s) Exposure Draft with the same title. It will review a final draft of the response before submission in early November 2018.
The AASB also unanimously approved the Canadian Exposure Draft Supplement to its Exposure Draft of proposed revisions to CAS 315. The Exposure Draft Supplement proposes conforming amendments to CAS 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Canadian Auditing Standards, and CAS 540. The Exposure Draft Supplement is expected to be issued in January 2019, with a response deadline of May 1, 2019.
The AASB discussed Canadian issues related to the IAASB’s project to revise International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, including the proposed scope of the Canadian equivalent standard.
The Board will continue to discuss this and other issues at the December 2018 meeting.
Assurance and Related Services Standards (Other than CASs)
The AASB discussed Canadian issues related to its project to consider adopting International Standard on Related Services (ISRS) 4400 (Revised), Engagements to Perform Agreed-upon Procedures Regarding Financial Information, including the content for a Canadian exposure draft. The Board is expected to approve a Canadian exposure draft by written ballot in November 2018.
Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents
The AASB reviewed and discussed comments received on the Exposure Draft of Section 7170, Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents. Issues respondents raised, and the Board discussed included:
- terms of engagement;
- work effort relating to other information;
- format of the auditor’s consent; and
- the effective date of the final standard.
The Board will continue to discuss these and other issues at a future meeting.
Public Sector Auditing Standards
The AASB discussed issues related to the development of guidance for performance audits in the public sector, including:
- whether to seek additional input from other stakeholders to identify areas to be addressed in this guidance;
- the amount of detail to be included in the guidance to set out how key requirements of Canadian Standard on Assurance Engagements (CSAE) 3001, Direct Engagements, can be applied to public sector engagements; and
- whether the form of this guidance should be a Guideline or a standard.
The Board will continue to discuss these, and other issues related to performance audits at a future meeting.
Reporting on Controls at a Service Organization
The AASB unanimously approved an exposure draft of CSAE 3416, Reporting on Controls at a Service Organization Relevant to User Entities’ Internal Controls over Financial Reporting. The exposure draft is expected to be issued in December 2018 and will have a 60-day comment period.
The AASB received an update on staff’s development and documentation of the process for understanding and responding to implementation issues. The Board did not identify any gaps in the current process.
The AASB provided input on a pilot risk-assessment approach for the 2019-2020 Annual Plan. A draft of the Annual Plan will be presented at the December 2018 meeting.