AASB

AASB Defers Disclosure of Engagement Partner Name for Audits of Certain MJDS Filers

February 15, 2019 News

Canadian reporting issuers that are MJDS filers

In Canada, the financial statements of reporting issuers are generally required to have Canadian generally accepted auditing standards (GAAS) audits.

But certain reporting issuers qualify to report to the U.S. Securities and Exchange Commission (SEC) under the Multijurisdictional Disclosure System (MJDS). Canadian MJDS filers can comply with SEC reporting requirements by filing documents prepared largely in accordance with Canadian laws, and by having Canadian GAAS audits.

Some MJDS filers are also SEC issuers as defined under Canadian securities regulations (SEC issuers). They are permitted to have their financial statements audited in accordance with U.S. Public Company Accounting Oversight Board (PCAOB) auditing standards rather than Canadian GAAS.

However, certain MJDS filers have audits that comply with both Canadian GAAS and PCAOB auditing standards, or Canadian GAAS only. This is either because they are not SEC Issuers or because they are subject to additional requirements.

Comparing Canadian and PCAOB standards

Paragraph 46 of CAS 700, Forming an Opinion and Reporting on Financial Statements requires that the name of the engagement partner be included in the auditor’s report on financial statements of listed entities with only very limited exceptions.

The PCAOB does not require disclosure of the engagement partner name in the auditor’s report.

The PCAOB proposed to require inclusion of the engagement partner name in the auditor’s report in an exposure draft of its auditor reporting standard. However, it introduced a different system in response to consent and liability concerns raised on exposure. The Form AP system requires the auditor to submit information, including the name of the engagement partner, on a form that is available to the public, rather than disclosure of the name in the auditor’s report.

The issue for Canadian MJDS filers

Because the Canadian GAAS auditor’s report includes the name of the engagement partner, concerns were raised about such report being filed with the SEC. The potential consent and liability issues identified during the PCAOB exposure might apply for Canadian auditors of MJDS filers.

The AASB’s Decision

The AASB considered this issue, including the potential impact on affected entities. We concluded that stakeholders need more time to obtain appropriate information about the issue and consider different options.

We deferred application of paragraph 46 for one year for audits of financial statements conducted in accordance with Canadian GAAS when the name of the engagement partner is submitted on Form AP for filing with the PCAOB. As a result, paragraph 46 does not apply to audits of financial statements of affected filers for periods ending before December 15, 2019. We will monitor and support the activities of stakeholders to resolve the issue during the deferral period.

The following change was finalized on February 1, 2019 and will be included in the CPA Canada Handbook – Assurance in March 2019.

Change to Paragraph 5

The AASB notes that readers of the auditor’s report of an entity affected by the deferral of application of paragraph 46 who wish to determine the name of the engagement partner for the engagement can do so by accessing Form AP at the PCAOB’s website.

Contact

Eric Turner
Director, Auditing and Assurance Standards Board
+1 416 204 3240
eturner@aasbcanada.ca