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 Standards on Quality Management
Quality Management
The AASB approved its Exposure Draft, “Quality Management – Conforming Amendments to Other Canadian Standards,” by email ballot vote. One member voted against approving the Exposure Draft.
The Exposure Draft will be issued in late June 2021, with comments due by September 30, 2021.
Canadian Auditing Standards (CASs)
Audits of Less Complex Entities
The AASB provided input to the International Auditing and Assurance Standards Board (IAASB) members from Canada on the IAASB’s project to develop a separate standard for audits of the financial statements of less complex entities (LCEs). Key issues discussed included:
- the extent of judgment inherent in the characteristics of complexity and how many of these characteristics an entity needs to exhibit before it is no longer appropriate to use the separate standard for audits of LCEs;
- understanding the related implications, including the work effort and reporting, of transitioning between International Standards on Auditing (ISAs) and the separate standard for audits of LCEs; and
- the proposed approach to maintain the separate standard for audits of LCEs, including the potential for narrow-scope amendments, when necessary.
The AASB expects to approve a Canadian discussion paper for audits of the financial statements of LCEs at its July 2021 meeting.
Fraud
The AASB provided input to the IAASB members from Canada on issues related to information the IAASB gathered on ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues discussed included possible actions to:
- address the presumed risks of fraud in revenue recognition;
- enhance the introductory paragraphs of the standard to clarify the auditor’s responsibilities in relation to fraud; and
- retain the definition of fraud but incorporate additional guidance to address how other concepts, such as bribery and corruption, may impact the auditor’s responsibilities related to fraud.
Based on the information it gathered, the IAASB anticipates approving a project proposal to revise ISA 240 at a future meeting.
Group Audits
The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise ISA 600, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors). Key issues discussed included:
- clarifying the application of the risk-based approach in a group audit engagement;
- documenting the group auditor’s determination that component auditors have the competence, capabilities, and sufficient time to perform the engagement; and
- removing the requirement related to using audit evidence from an audit performed for another purpose and including a general paragraph on this topic in the introduction of the standard.
Assurance and Related Services Standards (other than CASs)
Extended External Reporting
The AASB discussed the way forward in Canada for applying the IAASB’s “Non-Authoritative Guidance on Applying ISAE 3000 (Revised) to Extended External Reporting (EER) Assurance Engagements.”
The AASB decided to issue the IAASB non-authoritative guidance as AASB guidance. The non-authoritative guidance will be accompanied by a supporting document outlining the limited differences in applying Canadian Standard on Assurance Engagements 3000, Attestation Engagements Other than Audits or Reviews of Historical Financial Information, compared to International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information.
The supporting document, linking to the non-authoritative guidance, is expected to be issued in August 2021.
Other
2021-2022 Annual Plan
The AASB approved its 2021-2022 Annual Plan and expects to publish it on July 5, 2021.
AASB Strategic Plan
The AASB approved its 2022-2025 Strategic Plan and expects to publish it on July 5, 2021.
International Developments
The AASB received a presentation from the Director of Policy and Leadership at the Institute of Chartered Accountants of Scotland. The presentation highlighting key areas of focus in the Consultation Paper, “Restoring trust in audit and corporate governance – Consultation on the government’s proposals.”