At its virtual meeting held on June 28-29, 2021, the Auditing and Assurance Standards Oversight Council (AASOC) received presentations on, and discussed the following:
- Chair’s Opening Remarks
- Approval of Minutes
- Auditing and Assurance Standards Board (AASB) Update
- AASOC’s Publication on the Public Interest
- Independent Review Committee on Standard Setting Update
- AASB 2022-2025 Strategic Plan
- AASB 2021-2022 Annual Plan
- Alternative Performance Measures Update
- Presentation on Extended External Reporting
- Canadian Public Accountability Board’s (CPAB) Audit Quality Insights Report
Chair’s Opening Remarks
AASOC Chair Kevin Nye welcomed members and observers.
Approval of Minutes
AASOC approved the minutes of the meeting held on May 18, 2021.
Auditing and Assurance Standards Board (AASB) Update
AASB Chair Ken Charbonneau briefed AASOC on some of the Board’s activities since its last update to the Council.
AASB Director Eric Turner explained that a large part of the AASB’s June 2021 meeting focused on international materials dealing with the audits of less complex entities (LCE), fraud, and group audits. These topics are very important from the Canadian Board’s perspective. Mr. Turner stated that the Board discussed the International Auditing and Assurance Standards Board's (IAASB) draft LCE standard. He noted that the IAASB will discuss specific matters related to the development of the draft LCE standard presented in the IAASB’s Issues Paper and be asked to approve the exposure draft at its June meeting. AASOC members commented on the IAASB’s proposed review of the LCE standard every three years and whether there is confidence that the standards are stable. Mr. Turner said the IAASB is trying to achieve a balance, maintaining some element of stability. He added that this was important for the firms that are dealing with many changes and need to update their methodologies as changes are made.
The AASB reviewed the latest draft of the Group Audits standard and the responses to comments received on the Exposure Draft on the Special Considerations – Audits of the Group Financial Statements (Including the Work of Component Auditors). The IAASB is working toward the final standard later this year. Mr. Turner explained that this is a very complex standard based on how audits are dealt with globally and domestically. The IAASB’s Task Force has been dealing with many technical details. It is focused on responding to regulatory feedback about documentation by group auditors.
The AASB also received a presentation on the U.K. audit reforms from a representative from the Institute of Chartered Accountants of Scotland.
On the topic of fraud, an AASOC member commented that there is quite a bit of concern from international regulatory groups regarding the potential direction of change to the fraud standards, adding that the changes are not sufficient in addressing investors and regulators’ concerns. Mr. Turner responded that the IAASB has not yet taken a position on any of the requirements on the fraud standard. At its June meeting, the IAASB will review comments received on certain specific issues and will determine the road forward. At its IAASB’s September meeting, the IAASB will discuss a project proposal providing a clearer direction.
AASOC’s Publication on the Public Interest
Stephenie Fox, Senior Vice-President, Standards, Financial Reporting and Assurance Standards Canada, gave an overview of the public interest and presented AASOC’s Public Interest Paper, “What the Public Interest Means to AASOC” that was published in August 2016. She provided context and clarification on what is public interest and whether the AASOC document continues to be fit for purpose.
Ms. Fox explained that there is a Monitoring Group Report with recommendations that include a public interest framework intended to be used as standards are developed. She added that the Independent Review Committee on Standard Setting in Canada (IRCSS) will be reviewing the public interest framework as it moves forward.
AASOC members discussed key differences between the Council’s Public Interest Paper and the Monitoring Group’s Public Interest Framework, focusing on who are the Council’s public, and how we assess whether an action, decision or policy is in the public interest. The Council agreed to establish a working group that would consider the Public Interest Paper and determine what if any changes are required to ensure it is fit for purpose. Council members were asked to express their interest in participating in the working group to Mr. Nye. Mr. Charbonneau encouraged the Council to involve the AASB in the process for determining whether changes to the AASOC Public Interest Paper are needed.
Independent Review Committee on Standard Setting Update
Ms. Fox updated AASOC on the IRCSS. The IRCSS had their first meeting to understand standard setting in Canada and the current system.
She explained that the IRCSS will be preparing a work plan that may include public interest considerations and how to take it forward. AASOC members questioned the timeliness of the review related to the definition of public interest and standard setting.
The AASB Chair added that the public interest needs to be considered as standards are developed and that Canadian-specific public interest considerations are separately identified in each agenda paper submitted to the Board for discussion.
AASB 2022-2025 Strategic Plan
Mr. Charbonneau informed AASOC about the recent AASB activities and the feedback on the 2022-2025 Strategic Plan. In May, the Board received input from the Council, the Performance Review Committee, the Canadian Securities Administrators Chief Accountants Committee, and the Quebec CPA Order. The Board discussed this input at its meeting on June 7-8, 2021. No significant issues were raised, and comments were editorial in nature. The next steps will be to post the Strategic Plan on the website by July 5. Staff are developing a feedback statement for stakeholders, communicating the process followed, and how feedback on the Strategic Plan was addressed. Staff aim to publish this feedback statement in early to mid-July.
AASB 2021-2022 Annual Plan
Mr. Charbonneau updated AASOC on the AASB’s activities related its 2021-2022 Annual Plan. He explained that at its meeting on June 7-8, 2021, the Board reviewed and approved the final 2021-2022 Annual Plan for release on July 5, 2021. Some editorial changes were made to the Annual Plan to make it consistent with the 2022-2025 Strategic Plan.
An AASOC member commented on performance planning and meeting objectives. The incoming AASB Chair, Bob Bosshard, responded that starting in September, objectives will be monitored on a regular basis to ensure that they are accomplished according to the plan and that achievements culminate with the annual report. This will involve working with staff to ensure that the internal agenda is moving forward and to communicate progress to stakeholders on achieving topic-specific agendas and timelines.
The AASOC Chair congratulated Mr. Charbonneau and his team for their hard work on developing these documents.
Alternative Performance Measures Update
Tom Trainor, AcSOC member and the Managing Director of Hanover Private Client Corporation, made a presentation to the Council about alternative performance measures (APM). Mr. Trainor explained what they are, how widely they are used, and who oversees them. He also covered the development of the APM standard-setting process, pilot projects, and work toward a solution going forward.
The AASOC Chair thanked Mr. Trainor for his presentation and for providing context for this subject matter.
Presentation on Extended External Reporting
Mr. Charbonneau opened the discussion by emphasizing the three specific goals in the AASB’s 2022-2025 Strategic Plan that include elements directly related to the topic of Extended External Reporting (EER). These goals are:
- monitoring and understanding emerging issues in this area;
- setting high-quality standards and guidance; and
- supporting the effective implementation and application of standards and guidance.
He added that five specific objectives are associated with these goals that directly relate to providing assurance or information other than financial statements. The AASB’s 2022-2023 Annual Plan includes specific activities to achieve these objectives. Karen DeGiobbi, an AASB principal, provided an overview of the activities in the 2022-2023 Annual Plan addressing each of these objectives.
She presented the background of the EER, recent developments in Guidance on Sustainability and other EER assurance Engagements in Canada, the Canadian Practitioner Experience Spectrum, options considered, and next steps.
Canadian Public Accountability Board’s (CPAB) Audit Quality Insights Report
CPAB CEO Carol Paradine introduced its Audit Quality Insights Report: 2020 Annual Audit Quality Assessments. The main area covered in the report was the inspection findings and trends, and recommendations for improvement. A common theme was quality monitoring processes and systems to test quality management systems within audit firms.
This was Mr. Charbonneau’s last AASOC meeting. AASOC Chair Mr. Nye thanked him for his work and contribution over the past three years as the AASB Chair, adding that Mr. Charbonneau has done a superb job in navigating these times. Mr. Bosshard will be the new AASB Chair.
The Auditing and Assurance Standards Oversight Council (AASOC) is an independent, volunteer body established by the Canadian Institute of Chartered Accountants (now Chartered Professional Accountants of Canada) in 2002. It serves the public interest by overseeing and providing input on the activities of the Auditing and Assurance Standards Board (AASB), which sets standards for assurance and related service engagements. Reporting to the public and consisting of prominent leaders from business and regulators, AASOC’s responsibilities include appointing AASB members, providing input on strategic priorities and evaluating the performance of the AASB.