Keep up to date! Assurance over Key Performance Indicators

January 14, 2019 News


CPA Canada and staff of the AASB are seeking auditors, audit committee members and preparers of financial information to participate in a research initiative on this topic.

Reporting and providing assurance over key performance indicators

There are a number of developments resulting from efforts by the Auditing and Assurance Standards Board (AASB) and others to enhance the trust and credibility of information reported outside of the financial statements.

What is driving the increased focus and discussion in this area?

In the last few years, there has been an increase in company disclosures of and reliance by users on:

  • non-GAAP financial measures;
  • other financial measures; and
  • non-financial measures or operational measures.

These are known collectively as Key Performance Indicators (KPIs).

Users are now asking for better quality KPIs developed with rigour and explained with transparent disclosure. In some cases, users are also asking for KPIs to be verified by independent assurance providers. 

But this type of assurance is currently not part of a standard audit of the financial statements. If a user, management or the audit committee ask for this type of assurance, that requires a completely separate assurance engagement – which is not common today and drives home the gap between what users want, and what auditors currently do.

What’s the AASB doing about this?

We believe that auditors have a role to play in enhancing the trust and credibility of information outside of the financial statements, including KPIs.

In 2017, we began research to understand the views of investors and to assess the potential impact on the assurance standards for this type of information.

Working with CPA Canada

One of our current activities is a research project conducted jointly with CPA Canada – which will complement the work of others in this area.

We have issued an open call for participants to work with the AASB on exploring ways to enhance trust and credibility in information disclosed outside of the traditional financial statements. 

More specifically, we are looking to recruit multi-stakeholder teams (consisting of a representative from an audit committee, preparer of financial information and auditor) to work with the investor/user community to:

  • enhance the quality of their financial reporting; and
  • explore the value of assurance on information outside the financial statements.

Read more about our work with CPA Canada on Exploring ways to enhance credibility in information beyond financial statements.

Our hope is that this research initiative will help us learn how we can support assurance efforts through additional guidance or standards, and further inform stakeholders on:

  • the learnings from practical experience of applying recently issued pronouncements of standard setters, regulators and others; and
  • the role that auditors can play in obtaining independent assurance on other information.

What else is happening in Canada?

CPA Canada

CPA Canada published two publications providing guidance to audit committees and management on their role in the presentation of KPIs in an issuer’s Management Discussion and Analysis and earnings press releases. 

The first publication, Key Performance Indicators: Tool for audit committees, focuses on the role of audit committees, providing guidance on how they can help develop a robust process to deliver effective oversight of KPIs. 

The second publication, Management Considerations for Effective KPI Disclosure, is focused on management.  It provides a description of management’s role in relation to KPIs and six principles to assist management in appropriately selecting and effectively disclosing KPIs.

Accounting Standards Board (AcSB)

Our sister Board, the AcSB, just issued the revised Framework for Reporting Performance Measures: Voluntary guidance to enhance the relevance of financial reporting on December 12, 2018.

The Framework was created to help entities – from public to private companies, to not-for-profits and pension plans – improve the quality of financial and non-financial performance measures they choose to report outside of the financial statements.

Canadian Securities Administrators (CSA)

In September 2018, the CSA published a proposed rule (Rule 52-112) over the disclosure of non-GAAP and other financial measures by Canadian issuers.  This proposed rule will apply to disclosures in all documents, including written communications on websites and social media.

The proposed rule:

  • applies to the disclosure of financial measures (including ratios) that are non-GAAP financial measures, segment measures, capital management measures, and supplementary financial measures (as defined in the proposed rule);
  • includes an updated definition of non-GAAP financial measures; and
  • introduces the concept of segment measures, capital management measures, and supplementary measures, together with associated disclosure requirements.

The final rule will follow after the CSA evaluates responses to its proposals.

What’s next?

It is clear this topic is one of increasing importance and interest to a variety of stakeholders.  It is an area that we as a Board believe is critical to enhancing the relevance and value of audit.

However, we recognize that our work needs to be conducted in collaboration with other elements of the financial reporting process. That will be our goal as we move forward with this initiative.


Eric Turner
Director, Auditing and Assurance Standards Board

Taryn Abate
Director, CPA Canada’s Research Guidance and Support Group, Audit and Assurance