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AASOC Meeting Minutes - June 27-28, 2022

The Auditing and Assurance Standards Oversight Council (AASOC) discussed the activities of the Auditing and Assurance Standards Board (AASB) and related matters. The meeting spanned two days. The first day was open to the public. The second day was reserved for in-camera discussions and not open to the public.

The following notes relate to the first day, June 27. 

  • Chair’s Opening Remarks
  • Approval of Minutes
  • AASB’s Chair Report and Update
  • AASB Due Process
  • Performance Review Committee Update
  • Indigenous Representation in Standard Setting Activities
  • Sustainability Update
  • Closing Remarks

Chair’s Opening Remarks

AASOC Chair Kevin Nye opened the meeting by welcoming members and the external observers to the meeting. He provided an overview of the agenda topics to be covered.

Approval of Minutes

AASOC approved the draft minutes from the AASOC meeting on March 28-29, 2022, on a motion by Michael Tambosso, and Ian Bandeen.

AASB Chair’s Report and Update

AASB Chair Bob Bosshard provided an update on the Board’s activities since the last AASOC meeting in March 2022. To improve the understandability and streamline the preparation of agenda papers, Mr. Bosshard presented a shorter document for this quarterly update than was prepared for previous meetings. More detailed background information was provided as optional reading and, going forward, will only be provided at the first Council meeting of the year.

AASOC suggested other ways to enhance the reporting, including clearly distinguishing required versus optional reading (e.g., two separate packages with clearly labelled documents). Mr. Nye also suggested indicating the last date that a topic was presented to Council, for reference purposes.

Mr. Bosshard stated that the International Auditing and Assurance Standards Board (IAASB) is working on a key project related to assurance over sustainability information. Key issues the AASB discussed included:

  • the various approaches to developing an overarching standard on environmental, social, and governance (ESG)/sustainability assurance as an immediate standard-setting action; and
  • how to design or frame such an overarching standard and its relationship with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information.

It is expected that the IAASB will move forward with a project proposal that will likely result in creating standards specific to sustainability assurance in a new 5000 series.

Responding to AASOC members’ comments, Karen DeGiobbi, Director, Audit and Assurance Standards, clarified that the AASB has a commitment to adopt International Standards on Auditing as Canadian Auditing Standards (CASs), and other IAASB standards are adopted on a case-by-case basis, based on a project proposal.

Mr. Bosshard provided an update on the Audits of Less Complex Entities (LCEs) project that was on the IAASB’s June 2022 agenda. He indicated that the comment period to the Exposure Draft ended in January 2022, and the IAASB is analyzing the responses. He noted that while there is global support for the LCEs’ principle, there are also significant reservations on whether this will address stakeholders’ needs. The IAASB’s current focus is on scoping what is a “less complex entity.” As a result, the AASB discussed this scoping matter in June, as well as next steps in Canada, including potential additional research on Canadian issues.

Mr. Bosshard said that at its June 2022 meeting, the AASB approved the Exposure Draft, “Joint Policy Statement Concerning Communications between Actuaries Involved in the Preparation of Financial Statements and Auditors,” with comments due September 19, 2022.

Regarding Quality Management, he stated that the AASB discussed a letter received from one of its stakeholders regarding Canadian Standard on Quality Management (CSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.” The stakeholder asked the Board to consider deferring the effective date, citing several reasons. While the Board acknowledged and understood the implementation challenges raised, after a thorough discussion, the Board concluded that it would not be in the public interest to defer the effective date of CSQM 1. The Board and staff will continue to engage with and support those responsible for the development of standards’ implementation guidance, tools, and training to explore what more be done to support the implementation of CSQM 1. Also, staff will work with CPA Canada to develop material to help smaller practitioners transition from Canadian Standard on Quality Control 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance Engagements (the existing quality control standard in Canada), to CSQM1.

AASB Due Process

Ms. DeGiobbi explained that the purpose of the agenda paper on CAS 600, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors), is to provide AASOC with a basis to conclude on whether the AASB followed due process. The Board approved this an international standard in March 2022, subject to the Public Interest Oversight Board confirming that the IAASB followed due process (which was obtained in April 2022).

Responding to a question on the authority of the Basis for Conclusions, Ms. DeGiobbi confirmed that the Basis for Conclusions forms part of the non-authoritative guidance in the CPA Canada Handbook – Assurance.

On the motion by Mr. Nye and seconded by Don Newell, voting AASOC members present at the meeting confirmed that the AASB had followed due process with proper regard for the public interest in developing and approving CAS 600 and the related conforming amendments.

Performance Review Committee Update

Mr. Bosshard provided AASOC with the AASB’s performance assessment of its planned activities set out in the 2021-2022 Annual Plan. He noted that one assessment remained “red” relating to the activity for developing a stakeholder-engagement process. While the Board continued to undertake several activities to engage with its stakeholders throughout the year, the development of a strategic stakeholder-engagement framework was not completed. The delay was due to staff resource constraints and the prioritization of other AASB activities. This activity will be carried forward to the 2022-2023 Annual Plan for completion. The other key activities were assessed as completed (green), indicating that objectives, as set out at the beginning of the year relating to the strategic objectives, were fully met. In the initial 2021-2022 Annual Plan, several projects were not included but were completed by the Board. The AASB’s “By the Numbers 2021-2022” document summarized the Board’s key communications and outreach results and was included with the performance documents.

Mr. Nye asked to Ms. DeGiobbi elaborate on the approach and scope of the AASB’s stakeholder-engagement framework. She mentioned that in July 2022, the Board will discuss the first phases of the proposed engagement process (e.g., how to identify and prioritize key projects, and who are the interested or affected parties). She also explained that the Board is looking at removing the word “stakeholder” for greater inclusivity, especially as it relates to the involving Indigenous peoples in standard setting.

Mr. Nye congratulated Mr. Bosshard, the Board, and staff for their excellent work and for a great year.

Indigenous Representation in Standard-setting Activities

Mr. Nye introduced Scott Munro who gave a presentation on the perspectives of Indigenous peoples and the importance of Indigenous representation in standard-setting activities. Mr. Munro noted that he is from the Kaska Dena Nation, originally from Whitehorse, Yukon. He is Deputy Chief Executive Officer of the First Nations Financial Management Board (FMB). In this role, he is responsible for developing and improving standards and for certifying the financial performance and financial management systems of First Nations across Canada. He is also the PSAB Vice-Chair.

He spoke about:

In the context of ESG, he stressed the need for strong Indigenous inclusion.

Mr. Munro stated that in its IRCSS response letter, the FMB supported:

  • the idea of a new Canadian Sustainability Standards Board with a mandate that considers Indigenous rights to self-determination as a universal theme of sustainability standards;
  • dual materiality as part of Canadian sustainability standards and disclosure must keep Indigenous right holders in mind; and
  • the move from consultation to consent, collaboration, and inclusion, in terms of guiding the interaction with Indigenous governments and Indigenous peoples.

Mr. Munro addressed AASOC members’ questions regarding the concept of informed consent in standard setting, stating that the focus should be on inclusivity, consultation, and Indigenous representation on the standard-setting boards.

AASOC members asked Mr. Munro’s advice on the Council’s and the Board’s public calls for Indigenous members related to self-declaration, identification of candidates, and selection. He highlighted the importance of ensuring that the process is inclusive and accessible (e.g., using different ways to promote and advertise opportunities). He advised reaching out to Indigenous-lead organizations such as AFOA Canada, the Canadian Council for Aboriginal Business, and the Atlantic Policy Congress of First Nation Chiefs Secretariat. He added that the search process should challenge the status quo when looking for diversity.

The AASOC Chair thanked Mr. Munro for the insightful presentation.

Sustainability Update

Omolola Fashesin, Principal, Sustainability, provided an update on global developments in sustainability disclosure standards, noting three related consultations by:

  • International Sustainability Standards Board (ISSB);
  • Securities and Exchange Commission; and
  • European Financial Reporting Advisory Group.

Since the launch of these consultations, the IFRS® Foundation has convened a working group to understand where the three consultations differ, why they differ, and how those differences could impact stakeholders. The working group met in mid-May and plans to meet again in July 2022.

Ms. Fashesin mentioned that the IFRS Foundation issued a call for candidates for membership of the Sustainability Standards Advisory Forum (SSAF). The SSAF will be established in 2022 and, with the members’ advice, will help the ISSB to develop IFRS® Sustainability Disclosure Standards. Canada is seeking a strong Canadian candidate for that role.

Ms. Fashesin explained that the ISSB has published two Exposure Drafts:

The deadline for both Exposure Drafts is July 29, 2022.

She described the response strategy to address the two Exposure Drafts, including:

  • translating IFRS S1 and IFRS S2;
  • creating an issue log; and
  • forming an Expert Panel.

The strategy also includes targeted roundtables to collect feedback from focus groups, including the preparer community and other stakeholders such as academia, audit firms, and Indigenous groups.

Closing Remarks

Mr. Nye thanked everyone for attending and contributing to the meeting.