(Revised and approved by the Auditing and Assurance Standards Oversight Council on March 29, 2022)
- The mission of the Auditing and Assurance Oversight Council (AASOC) is to serve the public interest by overseeing and providing input to the development of auditing, other assurance related services, and independence standards in Canada, including the activities of the Auditing and Assurance Standards Board (AASB or the Board) and the Independence Standing Committee (ISC).
- The mission of the AASB is to serve the public interest by setting standards and guidance and assisting in their implementation to enable the provision of high-quality, value-added, and relevant auditing, other assurance, and related services in Canada.
Through its globally respected standard setting capability and an engaged stakeholder community, the AASB’s standards and guidance respond to the needs of Canadian stakeholders, and contribute to enhanced quality and consistency of practice, which results in a high degree of public confidence in auditing, and other assurance and related services.
- The ISC, a standing committee of CPA Canada’s Public Trust Committee (PTC), makes recommendations concerning Independence Standards and related matters.
The ISC’s mandate is to assist the PTC in serving the public interest by recommending high-quality independence standards for proposed adoption by the CPA profession’s provincial bodies in their own provincial codes of ethics for use by all Canadian Chartered Professional Accountants.
- As a body that has a broad perspective on the complex issues facing standard setters from the point of view of users, preparers, and the public, AASOC considers the needs of Canadian stakeholders, the independence of the AASB and the ISC, and developments in the international environment. In this context, AASOC supports the AASB in its mission as an independent standard-setting body and the ISC in its responsibilities related to independence standards. AASOC recognizes that the authority to set technical agendas and the resulting audit and assurance standards rests with the AASB. Likewise, the setting of independence standards is based on authorities within the CPA profession’s provincial bodies and the PTC.
- AASOC has the following authority and responsibilities:
- To appoint members to AASOC in accordance with clauses 8 to 17, including the Chair and, where applicable, the Vice-Chair of AASOC.
- To report annually to the public on the discharge of its responsibilities, including information about its activities and its oversight of the AASB and ISC. AASOC reviews a draft of its annual report with the Chairs and senior staff members with responsibility for the AASB and ISC. With respect to the AASB, AASOC ensures that the AASB reports annually to the public on its respective activities.
- To determine whether AASOC has the financial and human resources necessary to support its work.
- To oversee the activities of the AASB by:
- approving the Terms of Reference for the AASB and any amendments to them;
- monitoring and evaluating the performance of the AASB, the fulfillment of its responsibilities, accomplishment of its work program, and the use and adequacy of available volunteer and staff resources; and
- determining whether the AASB has developed and approved a statement of operating procedures that is appropriate and responsive to the public interest.
- To appoint members to the AASB, including appointing the Chair and the Vice-Chair.
- To have the right to provide an observer for each meeting of the AASB.
- To provide input to the AASB primarily in terms of its strategic direction and priorities, by providing views on the preliminary agenda planning decisions of the AASB as presented to AASOC. AASOC actively assists the AASB to determine its priorities and strategies in its work programs with due regard for domestic needs and international developments. AASOC determines whether the AASB has considered the needs of all categories of stakeholders appropriately in determining its priorities and strategies.
- To inform the AASB of the diversity of views represented on AASOC, as well as the views of other individuals or groups with an interest in auditing and assurance standards. This input includes views as to the priorities of the AASB and the technical matters before it.
- To protect the independence of the AASB and to be satisfied that the AASB has maintained its independence in carrying out its mission.
- To be satisfied that the standard-setting activities of the AASB are appropriate and responsive to the public interest and conducted in accordance with acceptable due process procedures. In this regard, AASOC undertakes an annual review of the performance of the AASB relative to the long-term strategic plan and annual operating plan of the board.
- To determine whether the AASB has the financial and human resources necessary to support its work.
- To advise the AASB in any matters as requested by the AASB Chair.
- Jointly with the PTC, to appoint the Chair of the ISC.
- Jointly with the PTC, to appoint the public member(s) of the ISC.
- To review and provide input on the appointment of other members who are not provincial staff from a perspective of composition in terms of aggregate skill sets, backgrounds, etc.
- To review and provide input to the PTC on the Terms of Reference for the ISC, at a minimum of every three years.
- To review the “Framework for Developing Canadian Independence Standards,” as maintained by the ISC at a minimum of every three years.
- To have the opportunity to provide an observer for each meeting of the ISC.
- To receive reports at AASOC meetings on recent ISC activities to be provided by the ISC Chair and the Director, Regulatory Affairs and Independence Standards, or the Vice-President, Regulatory Affairs.
- To review an annual written summary of ISC activities, including the results of its “environmental scan” of significant proposals or new standards in the U.S., U.K., and EU.
- To collaborate with the ISC Chair and senior staff members in the drafting and final review of the annual public report to be published by AASOC regarding its activities related to its oversight of the ISC.
- On a regular basis, AASOC monitors developments by regulatory agencies in Canada that affect auditing, assurance, and independence standards.
- On a regular basis, AASOC monitors developments outside Canada affecting auditing and assurance standards to identify those that might significantly affect Canadian entities operating both in and outside of Canada, or those that might require changes to Canadian auditing and assurance standards. If such a development is identified, AASOC requests that the AASB, or another appropriate Canadian body, take on the role of analyzing and assessing the effect on Canadian entities and Canadian standards and, if necessary, formulates and advocates for an appropriate Canadian position.
- AASOC, except for temporary vacancies, comprises not fewer than 13 and not more than 17 volunteer members, as follows:
- a Chair with a three-year term of office, which is renewable for one term;
- 12 to 16 other members; and
- at the discretion of the Nominating and Governance Committee (NGC), a Vice-Chair of AASOC may be appointed by AASOC from current members with a three-year term of office, which is renewable for one term.
- Each of the members, except for those appointed pursuant to clause 17 below, is appointed for a term of three years or such term as AASOC may determine. Normally members serve for two terms, but the term can be extended beyond that limit with approval of the Council.
- The term of each AASOC member is determined by AASOC on a basis that ensures an orderly changeover of membership over time, while maintaining the experience and balance of backgrounds necessary to meet AASOC’s objectives.
- At all times, the majority of members of AASOC will not be practitioners. The Chair and Vice-Chair (where applicable) of AASOC and the Chairs of the standing committees will not be practitioners. For purposes of these Terms of Reference, a practitioner is a person who is a member or employee of a public accounting practice or has been a member or employee of a public accounting practice within the past three years.
- The following have a right to attend and participate in AASOC meetings and receive any meeting materials, except that they may be excluded from participating in and receiving meeting materials related to in camera portions of the meetings at the discretion of the Chair:
- the Chairs of the AASB and the ISC;
- the Senior Vice-President, Financial Reporting and Assurance Standards (FRAS), the Vice-President, FRAS, and the Vice-President, Regulatory Affairs;
- the Director, AASB and the Director, Regulatory Affairs and Independence Standards;
- the member(s) of the International Auditing and Assurance Standards Board (IAASB), and the International Ethics Standards Board for Accountants (IESBA), if resident in Canada; and
- members of the Public Interest Oversight Board (PIOB), if resident in Canada.
- With the exception of members appointed pursuant to clause 17, any member of AASOC who fails to attend, in any twelve-month period, at least two-thirds of all meetings of AASOC in the absence of circumstances that, in the opinion of the NGC, are extenuating, will cease to be a member of AASOC. A member is deemed to be absent from a meeting of AASOC unless he or she is in attendance for substantially all of it.
- Members of AASOC vote with the goal of serving the public interest, according to their own beliefs, experience, and judgment based on the information they have and the discussions they have taken part in, and not according to the views of any firm, organization or constituency with which they are associated.
- Members of AASOC are selected on the basis of individual merit. Members are also selected on a basis that ensures that AASOC reflects a broad cross-section of backgrounds and points of view so that it is able to discharge its responsibilities relative to both the AASB and the ISC. A diverse membership enables AASOC to have a broad perspective on the issues and potential issues facing the AASB and the ISC.
- AASOC has established the NGC to recommend nominees for approval by AASOC to fill vacancies in the membership, and in the positions of Chair and/or Vice-Chair (where applicable) of AASOC and the AASB, and jointly with the PTC, the Chair and public members of the ISC.
- The following organizations are specifically invited to appoint a member to AASOC so that each organization will normally have one representative on AASOC:
These various representatives are included in the 12 to 16 members referred to in clause 8(b) above. Each member will remain a member of AASOC until such time as their respective organization appoints a different member to AASOC.
- The Canadian Securities Administrators;
- The Office of the Superintendent of Financial Institutions; and
- The Canadian Public Accountability Board (CPAB).
- The voting rights of members appointed under clause 17 may be waived by that member, or by the appointing organization.
If any organization identified in clause 17 ceases to exist or ceases, in the opinion of the NGC, to be the appropriate representative of the particular constituency whose interest in the activities of the AASB or ISC it represents, the NGC will recommend to AASOC a different organization to represent the constituency in question.
- The purpose of the NGC is to make recommendations on various nominations and assist and advise on governance matters for AASOC.
The NGC comprises four to seven members of AASOC.
This Committee’s full mandate is set out in its Terms of Reference.
- The purpose of the Performance Review Committee (PRC) is to assess the performance of the AASB and report thereon to AASOC.
The PRC comprises four to seven members of AASOC.
This Committee’s full mandate is set out in its Terms of Reference.
- AASOC will create such committees of its members, in addition to the NGC and the PRC, as it deems necessary in carrying out its responsibilities. The Chair of AASOC has the right, but not the obligation, to attend, participate in, and receive meeting materials for all committees of AASOC.
- AASOC reviews its Terms of Reference at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents.
- AASOC develops and adopts a statement setting out the principal operating procedures it follows in fulfilling its responsibilities. AASOC applies this, except in unusual circumstances and following agreement by AASOC on any departure from the procedures by AASOC. AASOC reviews its principal operating procedures at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents.
- The Chair and Vice-Chair of AASOC will meet at least annually, if practicable, with the Chairs and Vice-Chairs of the Accounting Standards Oversight Council (AcSOC) and CPAB. The purpose of such meetings would include discussing common issues, challenges and agendas, and ensuring there is appropriate liaison and communication among the operating bodies.
- Meetings of AASOC are open to public observation, other than in camera discussions of human resources and other confidential matters.
- AASOC undertakes a review of its operations and effectiveness at least once every three years to ensure that they continue to meet the needs of AASOC and the public interest it represents. This review will be conducted jointly with AcSOC.
Relationships with CPA Canada
- CPA Canada supports AASOC in the performance of its activities. In doing so, CPA Canada respects the independence of AASOC, which is not subject to direction or influence by CPA Canada.
- Funding for reasonable and necessary expenses of AASOC and the standard-setting activities is provided from the budget of CPA Canada, based on a proposed budget submitted as part of CPA Canada’s annual budget approval process.
- AASOC provides such reports as may reasonably be requested by the Board of Directors of CPA Canada.
- The Senior Vice-President, FRAS has liaison responsibilities to administer the relationship between AASOC and CPA Canada.