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
The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) project to revise International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Key issues included:
- the auditor’s responsibilities when fraud or suspected fraud is identified;
- communicating identified fraud risks and the auditor’s response in the auditor’s report; and
- proposals to address the issue of identified significant deficiencies in internal control that are relevant to the prevention and detection of fraud in the financial statements.
The AASB discussed issues related to the IAASB’s project to revise ISA 570 (Revised), Going Concern. Key issues included:
- the auditor’s evaluation of management’s going concern assessment;
- the going concern disclosures in the auditor’s report; and
- the repositioning and redrafting of certain paragraphs to enhance clarity of the ISA.
Joint Policy Statement
The AASB discussed issues related to its project to revise the “Joint Policy Statement (JPS) Concerning Communications Between Actuaries Involved in the Preparation of Financial Statements and Auditors”. Key issues included:
- the changes made to the JPS since exposure;
- the matters raised from the outreach engagement process; and
- any re-exposure considerations.
The AASB unanimously agreed that re-exposure is not necessary for the following reasons:
- Most changes from the Exposure Draft are made to clarify the responding professional’s involvement with the work provided to the inquiring professional and to restrict the distribution of the written response. To assist the respective professionals with implementing the changes to the written response, an illustrative example of the written response is developed for each respective professional. The other changes from the Exposure Draft are mostly clarifications and do not change the substance of the JPS.
- The JPS impacts mostly large firm auditors, public sector auditors, and actuaries. These constituents are represented on the JPS Joint Task Force and were involved in drafting the changes to the JPS to ensure that the changes are well-understood and agreed to by the auditing and actuarial professions.
- The AASB thinks the public interest benefits of making the revised JPS available as soon as practicable outweigh any benefits from further consultations on the JPS for the following reasons:
- The JPS will help auditors and actuaries address changes arising from International Financial Reporting Standard (IFRS) 17, Insurance Contracts, which is effective for annual reporting periods beginning on or after January 1, 2023.
- The revised JPS addresses public interest issues such as unclear scope and inappropriate use of the other professional’s work. It also provides clarity and enhances discussions between the two professions.
The AASB unanimously approved the revised JPS.
The Canadian Actuarial Standards Board is expected to approve the JPS at its meeting in December 2022.
The AASB expects the final JPS to be available on its website in February 2023 and issued in the Handbook in March 2023, once the Auditing and Assurance Standards Oversight Council (AASOC) confirms the Board followed due process with proper regard for the public interest.
Listed Entity/Public Interest Entity
The AASB discussed issues related to the IAASB’s narrow-scope amendments project to revise the definitions of “listed entity” and “public interest entity”, and other revisions to align with recent changes to the International Ethics Standards Board for Accountants International Code of Ethics for Accountants (including International Independence Standards) (IESBA Code). Key issues included:
- the IAASB’s proposed objective and guidelines for establishing differential requirements for certain entities in the International Standards on Quality Management (ISQMs) and ISAs;
- the factors and examples in evaluating the extent of public interest of an entity;
- a case-by-case analysis of extant differential requirements for listed entities in the ISQMs and ISAs;
- the IAASB adopted the IESBA definition of “public interest entities” (PIE) and “publicly traded entity” into the ISQMs, ISAs, and the Glossary of Terms; and
- the introductory and application material in the ISQMs and ISAs.
The AASB also discussed possible implications in Canada of the proposed revisions, considering the Codes of Professional Conduct that practitioners are required to comply with in Canada are not the same as the IESBA Code. The Board will discuss these implications further at future meetings.
Other Canadian Standards
Audits of Less Complex Entities
The AASB discussed issues related to the IAASB’s project to develop a separate standard for audits of less complex entities (LCEs). Key issues included:
- the proposed revisions to Part 6 of the draft International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) dealing with risk identification and assessment;
- the proposed Part 10 of ISA for LCE and proposed revisions to the Authority of ISA for LCE dealing with group audits;
- how the AASB will respond to the IAASB’s exposure draft of Part 10; and
- the possible activities the Board may undertake in its 2023-2024 Annual Plan as it works towards a solution for LCEs.
The AASB will continue to discuss future activities as it develops its 2023-2024 Annual Plan.
The AASB discussed issues related to the IAASB’s project. Key issues included:
- how the practitioner should group sustainability information for purposes of materiality, risk assessment, and evaluating misstatements;
- the practitioner’s conclusion in the sustainability assurance report (e.g., a single conclusion for all sustainability information being assured, or multiple conclusions for different topics or indicators disclosed in the sustainability information); and
- the differences in the approach between limited and reasonable sustainability assurance engagements for risk assessment.
The AASB also discussed the Canadian next steps for sustainability assurance. The Board made a directional decision to adopt the IAASB’s proposed overarching standard as an Other Canadian Standard concurrently with the IAASB. In accordance with the AASB’s Due Process Manual, a project proposal will be presented at the AASB’s January 2023 meeting.
Canadian Public Accountability Board
The AASB received a presentation from the Canadian Public Accountability Board (CPAB) representatives. They discussed findings from the “CPAB Audit Quality Insights Report: 2022 Interim Inspections Results (October 2022)” and provided an update on CPAB projects relevant to the AASB and its activities.
The AASB discussed the proposed consultation paper on the IAASB’s Strategy and Work Plan for 2024-2027. The Board also discussed the proposed outreach process for building awareness and engagement on the proposed consultation paper with interested and affected parties in Canada.