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
Technology – Focus on Quality Management
The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) Technology Quality Management Workstream. Key issues discussed included:
- objective, scope, and strategic importance of the quality management workstream; and
- how the IAASB can assist firms and practitioners in applying the quality management principles set out in its standards to emerging technologies used in the performance of audit and assurance engagements.
Canadian Auditing Standards (CASs)
Audit Evidence and Risk Response
The AASB discussed issues related to the IAASB’s project to revise International Standard on Auditing (ISA) 330, The Auditor’s Responses to Assessed Risks; ISA 500, Audit Evidence; and ISA 520, Analytical Procedures. Key issues discussed included:
- definitions for “tests of details,” “substantive analytical procedures,” and “analytical procedures”;
- designing and performing a “substantive analytical procedure”;
- using audit evidence from previous audits;
- positioning of the stand-back requirement from ISA 330; and
- application material related to automated tools and techniques.
Experts Narrow-scope Amendments
The AASB reviewed a summary of outreach to date with interested and affected parties in Canada on its Exposure Draft, “Use of Experts Proposed Narrow-scope Amendments Related to the IAASB’s Using the Work of an External Expert Project.”
The AASB also discussed its response to the IAASB’s Exposure Draft. Key issues discussed included developing an overarching comment for inclusion in the Board’s response on the IAASB’s approach to revising IAASB standards because of changes in the International Ethics Standards Board for Accountants (IESBA) Code.
The AASB will submit its response letter to the IAASB by the July 24, 2025, comment deadline.
Fraud
The AASB discussed issues related to the final approval of CAS 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues discussed included:
- final changes made by the IAASB before the approval of ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements (Revised);
- final due process items, including:
- considering the need for Canadian amendments;
- determining whether re-exposure is required;
- confirming robust and appropriate overall engagement has been achieved;
- reviewing the draft Basis for Conclusions;
- providing input on the implementation risk analysis; and
- reviewing the summary of due process steps completed.
The AASB concluded that re-exposure was not required as there are no new Canadian amendments in CAS 240, other than retaining an existing amendment in the extant standard.
Following discussion, the AASB unanimously approved the final CAS standard. The CAS is effective for audits of financial statements for periods beginning on or after December 15, 2026.
The standard is expected to be published in a September 2025 Handbook update.
Targeted Standards in the ISA 500 Series
The AASB discussed preliminary issues the IAASB identified in relation to ISA 501, Audit Evidence–Specific Considerations for Selected Items (covers the discrete topics of existence and condition of inventory, litigation and claims, and segment information); ISA 505, External Confirmations; and ISA 530, Audit Sampling. This is a new project for the IAASB that is currently at the information gathering stage. Key issues discussed included:
- the development of the IAASB’s project proposal;
- the common drivers for revisions to ISA 501, ISA 505, and ISA 530, being:
- addressing the increased use of technology; and
- clarifying or enhancing the auditor’s work effort;
- the completeness and relevance of issues identified during the information gathering stage;
- the key risks that need to be addressed in ISA 530 because of the increased use of technology-facilitated sampling tools; and
- the root causes of the challenges auditors face in sampling.
Other Canadian Standards (OCSs)
Compilations of Future-oriented Financial Information (FOFI) and Pro Forma
The AASB discussed key issues arising from outreach on the Exposure Draft of a new Canadian Standard on Related Services (CSRS) 4250, “Compilation Engagements on Future-oriented Financial Information and Pro Forma.” Key issues discussed included the following:
- Scoping – Clarifying in the application material that the scope exclusion for accounting, business advisory, and consulting services (para. 2(c)), applies when any resulting financial information would only be used by management for internal purposes.
- Basis of accounting – Adding the basis of accounting described in para. 28(ii) to para. 7 for completeness. To better align with the engagement acceptance outcomes, the Board agreed to make this additional basis of accounting conditional on neither of the conditions for acceptance in para. 28(a) or (b) being met.
- Work effort – Agreeing that management’s acknowledgement of responsibility for the final compiled financial information in para. 38 is complete, as it inherently includes all the information used to compile it. The Board further agreed that practitioners are not precluded from obtaining a detailed written acknowledgement if they choose, and such practices can be incorporated within a firm’s quality management policies and procedures.
At its next meeting, the AASB will consider the remaining issues, including the compilation engagement report, effective date, and any implementation challenges identified. The Board anticipates approval of the standard by Spring 2026.
Review of Interim Financial Information
The AASB discussed the IAASB’s project to revise the International Standard on Review Engagements (ISRE) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. ISRE 2410 has not been adopted in Canada. Instead, a domestically developed standard, Section 7060, Auditor Review of Interim Financial Statements, is used. Key issues discussed included:
- an overview of the IAASB’s ISRE 2410 project proposal; and
- the Canadian approach to monitoring the project, including the involvement of the Board’s Securities Regulations Advisory Group.