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AASB Decision Summary – June 10-11, 2024

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)

Going Concern

The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) proposed revisions to International Standard on Auditing (ISA) 570, Going Concern. Key issues discussed included:

  • themes from the significant issues raised by respondents to the IAASB’s Exposure Draft;
  • the timeline to be used for the going concern assessment;
  • the explicit statement about going concern in the auditor’s report; and
  • the filter to determine a close call and the appropriate placement for the disclosure in the auditor’s report. 

Listed Entity/Public Interest Entity Track 2

The AASB reviewed the remaining feedback on the Canadian Exposure Draft related to the IAASB’s “Proposed Narrow Scope Amendments to International Standards on Quality Management; International Standards on Auditing; and International Standard on Review Engagements 2400 (Revised), Engagements to Review Historical Financial Statements as a Result of the Revisions to the Definitions of Listed Entity and Public Interest Entity in the IESBA Code.”

Respondents to the Canadian Exposure Draft unanimously supported the AASB’s proposal not to adopt the IAASB’s proposed changes at this time.

The AASB will continue to monitor the IAASB’s project. The AASB will also consider the implications of proposed changes to Canadian Independence Standards in the Independence Standing Committee’s Exposure Draft, “Proposed Revisions Relating to Definitions of Public Interest Entity and Listed Entity in Canadian Independence Standards.”

IAASB’s Technology Position

The AASB discussed issues related to the IAASB’s Technology Position. Key issues discussed included:

  • the themes identified from the feedback received in the March 2024 IAASB discussion on the Technology Position as well as results of outreach between March and June 2024, and
  • the three components of the draft technology position, including:
    • the technology position statement;
    • the approach to operationalizing the position statement; and
    • monitoring and adaptation.

Other Canadian Standards

Audits of Less Complex Entities

The AASB discussed its next steps in exploring a Canadian solution to addressing challenges that auditors face in applying the CASs to audits of less complex entities. The discussion included considering opportunities and challenges with existing models of non-authoritative guidance.
The AASB also discussed establishing a new committee that would support the Board in its work in this area. The Board will review a Terms of Reference for the proposed committee at a future meeting and, if approved, will issue a public call for nominations.

Compilations of Future-oriented Financial Information (FOFI) and Pro Forma

The AASB unanimously approved an exposure draft for proposed Canadian Standard on Related Services (CSRS) 4250, Compilation Engagements on Future-oriented Financial Information and Pro Forma. The proposed standard would replace Assurance and Related Services Guideline 16, Compilation of a Financial Forecast or Projection. Key issues discussed included:

  • proposed limited consequential amendments to CSRS 4200, Compilation Engagements;
  • questions that will accompany proposed CSRS 4250; and
  • other considerations, including comment period, the outreach plan, and compliance with the Board’s due process.

The AASB expects to issue an exposure draft in mid-September 2024, with a 90-day comment period.

Sustainability Assurance

The AASB discussed the IAASB’s proposed revisions to the International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Key issues discussed included:

  • a “tiering of authority” for applying relevant ethical requirements;
  • how to identify and assess risks of material misstatement in both limited assurance and reasonable assurance engagements;
  • the proposed presumption that criteria that are embodied in law or regulation, or framework criteria that are issued by authorized or recognized bodies that follow a transparent due process, are suitable in absence of indications to the contrary;
  • the risk of management override of controls in both reasonable and limited assurance engagements;
  • the communication between the sustainability assurance practitioner and the financial statement auditor when a material misstatement exists in other information (e.g., the financial statements) or when the practitioner identifies non-compliance with laws and regulations; and
  • the description of the summary of work performed in the limited assurance engagement assurance report.

The IAASB anticipates approving proposed ISSA 5000 at its September 2024 meeting. The AASB will continue to discuss international and Canadian issues as it works toward a planned approval of Canadian Standard on Sustainability Assurance 5000 by the end of 2024.