AASOC Meeting Minutes – Dec. 20, 2018



Auditing and Assurance Standards Oversight Council



December 20, 2018



Office of the Superintendent of Financial Institutions



Bruce Winter




Ian Bandeen
Carol Bellringer
Kathryn Bewley
Donna Bovolaneas
Sheila Filion
John Gordon
Janet Grove
Cameron McInnis
Kevin Nye
Carol Paradine (Non-voting)
Neil Sinclair
Karen Stothers (Non-voting)
Bruce West




John Walker




Jeremy Justin, CPAB
Genevieve Mottard, Chair, Public Trust Committee (part of the meeting)
Ron Salole, Canadian Representative on the IAASB
Michael Tambosso, Independence Task Force Chair
Jean-François Trépanier, Member, AASB (part of the meeting)




Noor Abu-Shaaban, Principal, Standards
Ken Charbonneau, Chair, AASB
Stephenie Fox, Vice President, Standards
Eric Turner, Director, AASB




Birender Gill


Chair’s Opening Remarks

Bruce Winter welcomed everyone to the meeting and thanked Karen Stothers for hosting the meeting at OSFI. Mr. Winter announced that John Walker will not attending for today’s meeting. He also introduced Noor Abu-Shaaban, a Principal in the Standards group who will take over the secretary function for both AASOC and the Accounting Standards Oversight Council (AcSOC).

Office of the Superintendent of Financial Institutions (OSFI) Presentation

Bruce Winter updated the Council on the new member orientation session that was held the previous night. The session was well attended. In lieu of a presentation the prior evening, Karen Stothers, Senior Director of the Accounting Policy Division, provided an overview of the OSFI. This presentation was well received by the Council. Mr. Winter noted that Ms. Stothers will provide a similar presentation on the Public Interest Oversight Board (PIOB) at the Council’s next meeting to complete the new member orientation.

Approval of AASOC Minutes

Bruce Winter asked for comments on the October 1, 2018, meeting minutes. No comments were made, and the minutes were approved.

The Chair asked the members for comments on the October 29, 2018, meeting minutes. Subject to minor changes, the meeting minutes were approved.

Cryptocurrency Presentation

Bruce Winter introduced Jean-François Trépanier, a member of the Auditing and Assurance Standards Board (AASB), who will present on cryptocurrency, a popular topic in today’s business environment. This session will highlight the related business and audit issues.

Mr. Trépanier stated that cryptocurrency is “at the cornerstone of three pillars: game theory, computer science, and cryptography”. It has generally been defined as “a peer-to-peer electronic cash system.” Cryptocurrency has gained momentum because there has been a recent push to make the currency system more decentralized and shared.

He said that cryptocurrency has significant audit implications. These include:

  • significant use of experts (game theory, cryptography, and other specialized IT skills);
  • ·need for understanding the entity’s internal controls; and
  • implications on the selection and application of accounting policies.

He noted that cryptocurrencies can be held in many forms (e.g., on a computer, mobile phone, removable hardware, paper wallet, custodian, etc.). This makes it difficult to perform audit procedures to assess existence, accuracy, and ownership.

He remarked that CPA Canada recently published two guides: Introduction to Accounting for Cryptocurrencies under IFRS (May 20180 and Audit Considerations Related to Cryptocurrency Assets and Transactions (July 2018). After a question-and-answer period, Mr. Winter thanked Mr. Trépanier for his presentation and for sharing his insights.

AASB Due Process

Canadian Auditing Standards (CAS) 540 Auditing Accounting Estimates and Related Disclosures

Eric Turner directed the Council to the meeting materials on CAS 540, Auditing Accounting Estimates and Related Disclosures. The International Auditing and Assurance Standards Board (IAASB) undertook this project due to the complexity of auditing accounting estimates. Mr. Turner informed the Council that the final standard changed significantly from the Exposure Draft as a result of comments received from respondents, including the AASB. He stated that the Board has evaluated the final standard and noted that no amendments were required from a Canadian perspective. The Board approved the final standard in October 2018 and Mr. Turner confirmed that due process was followed.

One member asked how the AASB addressed comments received from Canadian stakeholders upon exposure. Mr. Turner responded that the Board considered all comments and other input. CAS 540 does not contain any amendments to International Standards on Auditing wording.

Some members asked about the AASB’s re-exposure process in the case when the IAASB considered re-exposure. Mr. Turner stated that the Board would re-expose a standard only if a Canadian amendment is necessary or if the IAASB re-exposed a standard.

Another member asked if there were any groups in Canada that would think the AASB did not fulfill the public interest with respect to this standard. Mr. Turner stated no group has brought anything to the Board’s attention during the consultation process.

The Council concluded that the AASB followed due process with proper regard for the public interest in developing and approving CAS 540.

Terms of Reference

Ken Charbonneau highlighted key items in the meeting materials related to the AASB’s revisions of its Terms of Reference and Statement of Operating Procedures. He reminded the Council that it reviewed the initial drafts of these documents at the October 2018 meeting and provided comments for the Board to consider. The Board discussed the Council’s comments at the December 2018 Board meeting and made final revisions.

The Council concluded that the AASB followed due process with proper regard for the public interest in developing its Terms of Reference and Statement of Operating Procedure.

Performance Review Committee

Bruce West, Chair of the Performance Review Committee, provided an update on the Committee’s activities. Currently, it is working on:

  • Terms of Reference. The Committee has finalized its Terms of Reference, which it will present to the Council for approval at the February 2019 meeting.
  • 2019-2020 Annual Plan. The Committee reviewed key inputs into the AASB’s 2019-2020 Annual Plan; specifically, its risk assessment and an environmental analysis.

Mr. West told the Council the Committee will perform a midterm progress review of the AASB’s Strategic Plan and will provide input as the Board finalizes its annual plan.

Nominating and Governance Committee

The Council received a report from the Nominating and Governance Committee regarding nominations for AASOC Chair selection, AASOC member selection and AASB member selection.

AASOC Appointments

After deliberations, the Council approved the appointment of Kevin Nye as AASOC Chair for a three-year term, effective April 1, 2019. It also approved the appointments of Ellen Desmond, Michael Tambosso, and Gary Hanford as Council members for three-year terms, effective April 1, 2019.

AASB Appointments

After deliberations, the Council approved the re-appointments of Jean-François Trépanier and Julie Corden as AASB members for another three-year term, effective April 1, 2019. It also approved the appointments of Joel Humphrey, Audrey Mercier, and Wayne Morgan as new Board members for three-year terms, effective April 1, 2019.

Public Trust Committee

Bruce Winter invited Genevieve Mottard, President and CEO of the Quebec CPA Order and currently the Chair of the Public Trust Committee, to update the Council on establishing the Independence Standing Committee.

Ms. Mottard said that this session’s goal is to seek input from AASOC on the Committee’s draft Terms of Reference, its proposed composition, and the Council’s oversight role.

She highlighted that the goal is to have the ISC effective as of April 1, 2019. The Council of Chief Executives has approved the budget for a staff resource and Ms. Mottard will be hiring one employee in the next few months. She opened the floor for the Council’s comments and questions.

One member questioned whether one individual is enough to support the Committee. Ms. Mottard explained that the staff resource is a research-and-coordination role, like the Principals who support the Accounting Standards Board (AcSB) and the AASB. She said that one person was more than enough to meet the Committee’s needs. Ms. Mottard added that the Committee has a budget if consultants are needed.

Another member expressed concern with regards to the Committee’s composition. Based on the proposed composition, most of the candidates are from the profession: firms and professional bodies. The member asked whether independence may be a concern. Ms. Mottard reminded the Council that the Committee would not set independence standards; that would remain a provincial responsibility. She explained that while the standards may be developed within the profession, the provincial bodies ultimately enact them. There is representation from outside of the profession on the provincial bodies boards and through the government and regulation change process of each province, which approves the independence standards.

One member suggested that Ms. Mottard consider adding two individuals independent of the profession to the Committee. Ms. Mottard said she is open to this suggestion and asked the Council members for recommendations on these individuals’ backgrounds.

The Chair expressed concern about the Committee’s size; that too many members could lead to inefficiencies. Ms. Mottard sympathized but stated that each of the provinces requires a seat on the table to ensure enactment.

The Council discussed the oversight role that it should play for the ISC. Ms. Mottard expressed her openness to receiving a proposal from the Council and encouraged it to give the idea some thought. Mr. Winter stated that this is an area where the Council will need to deliberate and develop its expectations. He committed to developing an outline for the Council to consider at its next meeting and invited Ms. Mottard to attend that discussion.

Mr. Winter thanked Ms. Mottard for her time and efforts leading this initiative.

Auditing and Assurance Standards Update

Auditor Reporting

Ken Charbonneau stated that there are three topics within Auditor Reporting to be discussed as part of this session:

  1. Update on a combined audit report. The AASB is working on developing a combined audit report for the cross-border filers that complies with the Public Company Accounting Oversight Board (PCAOB) and the CAS. The Board received detailed feedback from the PCAOB and the Securities and Exchange Commission (SEC) on examples previously provided in developing the combined report. One of the areas that caused an issue was dealing with the engagement partner name. It is a requirement in the Canadian auditor report but is not required in the PCAOB auditor report.
  2. Exposure Draft on communication of key audit matters (KAM) in the auditor report: Mr. Charbonneau stated that the AASB unanimously approved the Exposure Draft on expanding the communication of KAM on the auditor report at its December 2018 meeting. The Board expects to issue this Exposure Draft in January 2019, subject to a fatal-flaw review and translation. He stated that the Exposure Draft will have a 90-day comment period.
  3. Inclusion of engagement partner name in auditor report: Mr. Charbonneau explained that concerns have been raised recently regarding the personal liability of engagement partners when a Canadian auditor’s report is filed in the United States and the engagement partner’s name is disclosed. He explained that the original goal of this session had been to obtain AASOC’s input on a deferral of the requirement to include the engagement partner name. However, due to information received last night, suggesting that the SEC may change its direction on this requirement, Mr. Charbonneau suggested deferring any Council conclusion on this matter. He stated that the AASB will be discussing this matter at its meeting on January 24-25, 2019, and may request a further discussion with AASOC around the end of January, depending on the circumstances.

Mr. Charbonneau asked the Council for their comments and questions related to all of these items.

One member asked why the engagement partner’s name is reflected on the auditor report. Mr. Winter replied that this promotes accountability, when it is more than just the firm name included in the report. Another member commented that AASOC’s role is to represent the public interest and including the partner’s name would enhance transparency. The Council will continue to monitor these topics as the AASB moves forward.

AASB Update

Eric Turner provided an update on the AASB’s activities since the last Council meeting. One of the key projects the Board is discussing is Agreed-upon Procedures. Mr. Turner stated that the IAASB unanimously approved the Exposure Draft for this project at its September 2018 meeting and the AASB approved the equivalent Canadian Exposure Draft following its October 2018 meeting.

He also highlighted the IAASB’s and the AASB’s work activities related to the Quality Management project. Through consultations with stakeholders, the IAASB identified a need to strengthen standards addressing quality control. The IAASB is currently working on revising its standards related to this topic. The Board is comfortable with the direction of the IAASB’s revisions. The IAASB approved the exposure drafts of its quality management standards at its December meeting and the Board will be approving these in January 2019.

Mr. Turner discussed the development of the AASB’s 2019-2020 Annual Plan. The Board has conducted a risk assessment and environmental analysis, which are key inputs of the plan. The Board conducted a first read of the draft 2019-2020 annual plan. It is working with AASOC’s Performance Review Committee on these activities.

He updated the Council on the AASB’s initiative on enhancing the relevance of audit. He noted that the Board is working with CPA Canada to assemble multi-stakeholder teams to explore information beyond the financial statements that investors use in their decision making. This includes key performance indicators, and what the appropriate role for the auditor is in providing credibility of such information.

AASOC Observer Reports

Mr. Winter informed the Council that Bruce West attended the AASB’s October 15-16, 2018, meeting and Neil Sinclair attended the December 3-4, 2018, meeting and the December 14, 2018, conference call. Their reports are provided in the meeting materials.

Canadian Public Accountability Board’s 2018 Fall Inspection Report

Carol Paradine provided an overview of CPAB’s Fall Inspection Report, including:

  • CPAB has changed the name of its Big Four Inspection Report to the Fall Inspection Report.
  • Only one restatement was required as a result of this report, which the firm had done already.
  • Specific weaknesses and gaps were noted with every firm and two firms had lower results compared to previous years. These firms are currently in the process of putting controls in place to mitigate the risks identified.
  • The findings are difficult to compare year-over-year because CPAB uses a risk-based approach.
  • The report also details some information on emerging industries and issues, such as crypto assets and artificial intelligence.
  • CPAB noted that approximately 50 companies in Canada have crypto assets on their balance sheets. It is concerned that these auditors do not have the resources or technical knowledge to appropriately audit these balances. It is working with these auditors to understand the auditing challenges.
  • The next CPAB report will be published in March 2019.

IAASB Update

Ron Salole informed the Council that the IAASB met in New York in mid-December 2018. Mr. Salole said that the new Chair turned down the Chairmanship due to health reasons, so the current Chair’s term was extended for another six-months until a replacement is found. He told the Council that the public call for the Chair role was issued on December 19, 2018.

He noted that the December meeting was successful. Three new exposure drafts pertaining to quality management were approved. The exposure drafts will be posted in late January 2019 with a 150-day comment period. The IAASB agreed that the effective period for these new standards will be December 31, 2021.

Mr. Winter informed the Council that Mr. Salole has completed his term as an IAASB member, so this marks his last meeting with AASOC. Mr. Winter thanked him for his commitment to standard setting over many years and in many different roles.

Other Canadian Updates

Accounting Standards Oversight Council (AcSOC)

Stephenie Fox informed the Council that the AcSOC met in October 2018 in Quebec City.

With regards to nominating and governance, Ms. Fox said AcSOC is currently developing a new recruiting framework that it will discuss at its February 2019 meeting. She stated that AcSOC Chair Peter Jewett will end his second term on March 31, 2019, and Miville Tremblay will be his successor. Marie Giguere will be appointed AcSOC Vice-Chair effective April 1, 2019. With regards to risk management, Ms. Fox informed the Council that AcSOC created an ad hoc Risk Committee to assess the Council’s risks. The Committee will be providing the Council with a final report at the February 2019 Council meeting.

Ms. Fox stated that the AcSB’s Framework on Non-GAAP Performance Measures was issued in December 2018. She reminded the Council that this framework applies not only to publicly listed companies but also to private entities.

Canadian Securities Administrators (CSA)

Cameron McInnis, Chief Accountant of Ontario Securities Commission, provided the following updates:

  • The comment period of the CSA’s proposed National Instrument (NI) 52-112, Non-GAAP and Other Financial Measures Disclosure, recently closed in December 2018. The CSA hopes to issue the NI in the spring and have it effective for 2020.
  • The rule has been finalized to provide CPAB with access to component auditors. This rule will require component auditors to register with CPAB if access to their working papers is denied.
  • The CSA is looking into audit and assurance issues that would arise as a result of the use of cryptocurrencies. The CSA is reviewing this issue to further understand the implications cryptocurrencies will have on an audit.

Office of the Superintendent of Financial Institutions (OSFI)

Karen Stothers provided the Council with the following updates:

  • OSFI made an announcement on the domestic stability buffer that is intended to provide greater transparency to the market.
  • OSFI finalized its corporate governance guideline, which communicates the expectations with respect to corporate governance of federally regulated financial institutions.
  • Jeremy Rudin, Superintendent, made a speech in December 2018 at KPMG’s Annual Insurance Conference on the implementation of IFRS 17 Insurance Contracts.

International Updates

Public Interest Oversight Board

  • Karen Stothers provided the Council with the following updates:
  • She observed the IAASB meeting that was held in New York in December 2018. The IAASB approved an approach for finding a new Chair and approved the three new exposure drafts for quality management.
  • She acknowledged the hard work that IAASB members put into their roles and applauded their commitment to developing high-quality standards.

In-Camera Session

AASOC held two in-camera sessions at the end of the meeting; first without staff and then without the Chairs of the AASB and the Independence Task Force.

Next Meeting

The next AASOC meeting is planned for February 11-12, 2019, in Toronto.


There being no further matters to discuss, the meeting was terminated.