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
Going Concern
The AASB received an update on the feedback the International Auditing and Assurance Standards Board (IAASB) received on its Exposure Draft of International Standard on Auditing (ISA) 570 (Revised 202X), Going Concern.
Listed Entity/Public Interest Entity Track-2
The AASB reviewed feedback received to date and discussed its response to the IAASB’s Exposure Draft, “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.” Key issues discussed included:
- category (iv) of the Public Interest Entity (PIE) definition;
- extending requirements related to:
- engagement quality reviews to all PIEs; and
- communicating the auditor’s compliance with ethical requirements to all entities.
The AASB’s response letter will be submitted by the IAASB’s comment deadline of April 8, 2024. Following which, the AASB will continue its discussions on Canadian-specific issues.
IAASB Integrated Project – Risk Response
The AASB discussed issues related to the IAASB’s information gathering for an integrated project on risk response. Key issues discussed included:
- how to use audit evidence about the operating effectiveness of controls obtained in previous periods;
- what challenges are present in carrying out the requirement to perform substantive procedures for material classes of transactions, account balances and disclosures, irrespective of risk;
- situations where testing operating effectiveness of controls should be required;
- the root cause of issues related to nature, timing, and extent of testing controls; and
- whether a revision to ISA 520, Analytical Procedures, is necessary.
IAASB Technology Position
The AASB discussed issues related to the IAASB’s Technology Position. Key issues discussed included:
- what is the IAASB’s current posture as it develops ISAs regarding automated tools and techniques;
- what questions the Technology Position should answer to inform the IAASB’s standard-setting and other related activities; and
- whether more information is needed to understand what the IAASB’s Technology Position should be.
Other Canadian Standards
Audits of Less Complex Entities
The AASB considered whether to adopt the ISA for Less Complex Entities (ISA for LCEs), which the IAASB approved at its September 2023 meeting.
While the AASB’s policy is to adopt the IAASB’s ISAs and its International Standards on Quality Management (ISQMs), decisions to adopt other international standards the IAASB issues, like the ISA for LCE, are made on a case-by-case basis. Such decisions are based on whether they meet the needs of interested and affected parties in Canada and serve the Canadian public interest.
After careful consideration, the AASB decided not to adopt the ISA for LCE. The Board believes the ISA for LCE would not adequately meet the needs of interested and affected parties in Canada nor serve the Canadian public interest. The Board based its decision primarily on the observation that the specific aspects of the ISAs identified by Canadian practitioners as challenging to apply in the audits of LCEs have not been sufficiently tailored. This may negatively impact the potential for a widespread uptake of the ISA for LCE in Canada. Furthermore, concerns arise from the public interest implications of having two sets of auditing standards.
Following this decision, the AASB will continue to discuss possible alternative options for addressing the unique challenges faced by small and medium-sized entities and practitioners engaged in audits of LCEs.
Compilations of Future-oriented Financial Information (FOFI)
The AASB discussed issues related to the project to develop a proposed Canadian Standard on Related Services (CSRS) on compilation engagements on FOFI that will replace Assurance and Related Services Guideline (AuG) 16, Compilation of a Financial Forecast or Projection. This meeting focused on addressing the incorporation of pro forma financial information in the proposed CSRS. Key matters discussed included:
- identifying the types of pro forma for inclusion within the proposed CSRS;
- defining pro forma and related terminology;
- distinguishing between pro forma, forecasts, and projections; and
- specifying incremental requirements, and application and other explanatory material, for engagement acceptance, work effort, and reporting.
The AASB expects to approve an exposure draft in the summer of 2024, with an exposure period commencing in the fall of 2024.
Sustainability Assurance
The AASB discussed the IAASB’s proposed revisions to International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Key issues discussed included proposed changes to the requirements and application material on:
- the quality management standards that are “at least as demanding” as ISQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
- the understanding of “the entity’s process to identify the sustainability information to be reported”;
- the practitioner’s consideration of materiality for qualitative disclosures;
- using the work of another practitioner;
- performing substantive procedures for disclosures irrespective of risk; and
- the risk identification and assessment in a limited assurance engagement.
The AASB also reviewed feedback on the proposed and potential Canadian amendments in the Exposure Draft of Canadian Standard on Sustainability Assurance (CSSA) 5000, General Requirements for Sustainability Assurance Engagements.
The AASB will continue to discuss international and Canadian issues as it works toward a planned approval of CSSA 5000 by the end of the year.
Other
AASB Annual Plan
The AASB discussed emerging issues relevant to its standards and standard-setting activities as the basis for confirming whether any additional activities should be included in the 2024-2025 Annual Plan. Key issues discussed included:
- the top three themes arising from monitoring are like the themes identified in September and December 2023:
- sustainability,
- emerging industries, and
- changing business practices/ technology; and
- agreement that all items reported have been appropriately contemplated in the 2024-2025 Annual Plan.
The AASB reviewed and approved its:
- 2023-2024 Annual Performance Assessment (to be published in May 2024).
- 2024-2025 Annual Plan (to be published in April 2024).
AASB Strategic Plan
The AASB discussed and approved public consultation for its draft 2026-2029 Strategic Plan.
AASB Terms of Reference
The AASB reviewed final proposed revisions to its Terms of Reference, Statement of Operating Procedures, and Standard-setting Due Process Manual.
Following a discussion, the AASB unanimously approved the three documents. They will be posted to the Board’s website after the Auditing and Assurance Standards Oversight Council approves the Terms of Reference, and Standard-setting Due Process Manual.
In-camera
The AASB held an in-camera session.