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
Fraud
The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) proposed revisions to International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues discussed included:
- the definition of fraud and applicability of examples used;
- the application of a fraud lens on risk identification and assessment;
- the work effort requirement when fraud or suspected fraud is identified; and
- transparency of disclosure of significant fraud risks as key audit matters.
Listed Entity/Public Interest Entity Track-1
The AASB discussed issues related to the IAASB’s narrow-scope amendments project to revise the definitions of “listed entity” and “public interest entity,” including proposed revisions to ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and ISA 260 (Revised), Communication with Those Charged with Governance. Key issues discussed included:
- the proposed final revisions to ISA 700 (Revised), including revisions to application material supporting the conditional requirement for the auditor to disclose the independence requirements applied; and
- the proposed final revisions to ISA 260 (Revised), including the new requirement for the auditor to communicate with those charged with governance, the independence requirements applied, regardless of whether they were differential independence standards.
The IAASB expects to approve final revisions at its June 2023 meeting.
The AASB also discussed whether any Canadian amendments should be made when adopting the revisions in the equivalent Canadian Auditing Standards (CASs). After discussing the feedback received on its Exposure Draft and the final revisions proposed by the IAASB, the AASB intends to adopt the IAASB’s revisions without Canadian amendments.
The AASB plans to approve final revisions to the CASs in September 2023.
Other Canadian Standards
Audits of Less Complex Entities (LCEs)
The AASB discussed issues related to the IAASB’s project to develop an ISA for Audits of Financial Statements of Less Complex Entities (ISA for LCE). Key issues discussed included:
- the proposed approach to developing non-authoritative guidance to support the proposed ISA for LCE, including the nature and content of such guidance and whether the proposed ISA for LCE should reference such guidance;
- the proposed approach to addressing the ISA 800 series of standards;
- how common it is for LCEs to use a service organization and whether the proposed ISA for LCE should address the auditor’s use of a report on the description, design, or operating effectiveness of controls at a service organization;
- the content of Part 6, including where changes to requirements or additional essential explanatory material (EEM) may be needed to address:
- the use of analytical procedures as risk assessment procedures;
- the description of components of the entity’s system of internal control;
- the use of commercial accounting packages; and
- the requirement related to the presumption of fraud risk in revenue recognition;
- the content of Part 7, including where changes to requirements or additional EEM may be needed to address:
- incorporating an element of unpredictability in audit procedures;
- audit sampling; and
- journal entry testing.
Sustainability Assurance
The AASB discussed issues related to the IAASB’s project to develop International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Key issues discussed included:
- the full proposed ISSA 5000, including illustrative assurance reports and the proposed conforming and consequential amendments arising from ISSA 5000;
- how the IAASB Task Force addressed substantive matters related to proposed ISSA 5000, including:
- the concepts of sustainability matters, sustainability information, and disclosures and their interoperability within the standard;
- the concepts of “double materiality”, more than one materiality for the same assurance engagement, and differentiating the concept of materiality applied by the entity (e.g., materiality process), and the practitioner’s consideration or determination of materiality (engagement materiality);
- the convention for the effective date of proposed ISSA 5000; and
- the relevant matters for the Explanatory Memorandum to accompany the exposure draft of the proposed ISSA 5000.
- the Canadian issues pertaining to the exposure draft of the proposed Canadian Standard on Sustainability Assurance, such as:
- the exposure period;
- any possible Canadian amendments;
- any questions to include in the Canadian Exposure Draft; and
- the planned outreach with interested and affected parties.
The IAASB expects to approve an exposure draft at its June 2023 meeting. The AASB expects to approve its Canadian exposure draft in August 2023 with publication expected throughout September 2023.
Other
AASB Strategic Plan
The AASB had a preliminary strategic planning discussion in anticipation of its next strategic planning cycle. Key issues discussed included:
- the continued relevance of its current 2022-2025 Strategic Plan; and
- the current and upcoming environmental developments that are likely to influence its next strategic plan.
AASB Standards Forward Timeline
The AASB received an update on a forward timeline of its standards and discussed how its project timelines interact/overlap to better support the Board’s efforts to:
- achieve meaningful engagement on its documents for comment; and
- support the effective implementation of its standards.
CPA Canada’s Guidance Status Report
The AASB received an update from CPA Canada’s Director, Audit and Assurance in its Research Guidance and Support (RGS) group. Key issues discussed included RGS’s focus areas and projects for implementation guidance for the upcoming year.
Independent Review Committee on Standard Setting (IRCSS) Update
The AASB received a presentation on the IRCSS’s recommendations issued in its Final Report.
In-camera discussion
The AASB held an in-camera discussion on the Board’s 2022-2023 self-assessment results.