Auditing and Assurance Standards Oversight Council
March 25, 2019
Carol Paradine (Non-voting)
Karen Stothers (Non-voting)
Ellen Desmond (Observer – incoming AASOC member)
Gary Hannaford (Observer – incoming AASOC member)
Michael Tambosso (Observer – incoming AASOC member)
Noor Abu-Shaaban, Principal, Standards
Ken Charbonneau, Chair, AASB
Johanna Field, Principal, AASB
Stephenie Fox, Vice President, Standards
Jeremy Justin, CPAB
Eric Turner, Director, AASB
Birender Gill, Principal, AASB
Chairman’s Opening Remarks
Bruce Winter’s introductory comments included the following:
- Welcomed everyone to the meeting.
- Informed the Council that Gary Hannaford and Ellen Desmond, new AASOC members effective April 1, 2019, have joined the meeting as observers.
- Advised the members that AASOC will host an orientation session at its next meeting on June 13-14, 2019.
- Noted that Ian Bandeen and Karen Stothers will not be in attendance for this meeting. Mr. Winter also noted that Karen Stothers does not have any comments to the meeting materials posted by staff.
- Informed the Council that this is Mr. Winter’s last AASOC meeting.
Approval of AASOC Minutes
The Council recommended some minor edits to the minutes. Subject to these edits, the minutes of the meeting held on February 11-12, 2019 were approved.
AASB Annual Plan 2019 – 2020
Mr. Charbonneau informed the Council that all comments received from AASOC and its Performance Review Committee regarding the Annual Plan were reviewed by the Auditing and Assurance Standards Board (AASB) at its meeting on March 4–5, 2019. At its March meeting, the AASB approved the 2019–2020 Annual Plan. He noted that the purpose of this session is for AASOC to assess whether due process was followed by the AASB in developing its 2019–2020 Annual Plan.
In highlighting some of the changes made to the Annual Plan since AASOC’s meeting on February 11–12, 2019, Mr. Charbonneau noted that staff updated the language in the Annual Plan to be as proactive as possible. Staff also used language that conveys the Board’s independence of CPA Canada when referring to CPA Canada.
The Council provided their feedback and concluded that the AASB has followed due process with proper regard for the public interest in developing its 2019–2020 Annual Plan.
Mr. Charbonneau thanked the Council for their input and informed the members that the Annual Plan will be published on April 1, 2019.
AASB Observer Update
Carol Bellringer informed the Council that she attended the AASB’s March 4–5, 2019 meeting in Toronto. She provided the Council with her feedback and noted that her report will be included in the meeting materials for AASOC’s June meeting.
Mr. Winter reminded the Council that a large portion of the work of many practitioners relates to compilation engagements. He noted that it would be very useful for the Council, especially for the members who are non-accountants, to receive an education session on compilation engagements.
Mr. Charbonneau reminded the Council that a compilation engagement is not an assurance engagement. It does not require the practitioner to express an audit opinion or a review conclusion or provide any form of assurance on the financial information.
Rather, a compilation engagement is financial information that is compiled for a specific purpose determined by management. Mr. Charbonneau stated that the existing standard is approximately 30 years old and he advised the Council that through the outreach that was performed, it was clear to the AASB that the existing Compilation Engagements standard is outdated. He noted that on September 4, 2018, the AASB published the Exposure Draft, “Compilation Engagements”, a proposed standard that will replace the existing Section 9200 Compilation Engagements.
Mr. Charbonneau noted the Compilation Engagements Task Force’s initial analysis of the Exposure Draft feedback and recommendations was reviewed by the Board at its March 4–5, 2019 meeting. The Board provided views on the task force's recommendations. The AASB plans on approving a final Compilations standard by September 2019.
Mr. Charbonneau informed the Council that the Board is interested in hearing from AASOC specifically on three issues pertaining to Compilation Engagements.
- Using a General Purpose Financial Reporting Framework (GPFRF) – Stakeholders expressed concern that the Exposure Draft permits the compilation of financial information in accordance with a GPFRF. Their concern was that using a GPFRF to compile financial information would create a risk of unwarranted reliance by users and requires a higher level of work effort than contemplated in a compilation engagement. The Board decided to retain the ability to compile information in accordance with a GPFRF. In the rare instances when a GPFRF is used to compile financial information, the public would be better served when there is a standard to follow and a communication attached. The Board asked the Compilation Engagement Task Force to clarify some of the wording in the Exposure Draft in order to avoid misinterpretation by readers to be unduly restrictive.
One Council member commented that the issue of unwarranted reliance is very important. He further noted that it would not be appropriate to prohibit the use of an accounting framework and that the concern of unwarranted reliance by users should be addressed through the compilation engagement report.
Another Council member inquired if the AASB obtained feedback from non-practitioners (users or lenders). Mr. Charbonneau noted that the Board targeted non-practitioners by publishing a survey titled “Lenders’ views on new proposed standard for Compilation Engagements”. 26 survey responses were received from lenders. Mr. Charbonneau stated that the Board has not yet discussed the survey feedback from lenders and expects to do so at its upcoming April meeting.
A third member asked if, like practitioners, non-practitioner users are also concerned about the misinterpretation and over-reliance of financial information by using a GPFRF. Mr. Charbonneau stated that the feedback received from the Exposure Draft has mainly been from practitioners. In contrast, users (i.e. lenders), do not seem to share the same level of concern of misinterpretation because they read the disclosure of the basis of accounting. The analysis of issues will include the feedback of lenders to ensure the Board has a balanced view.
- Disclosure of the Basis of Accounting – Stakeholders expressed concern that the Exposure Draft requires the disclosure of the basis of accounting in the compiled financial information because this could potentially lead to confusion as to whether the practitioner is providing some level of assurance and may lead to unwarranted reliance on the information. The Board decided to retain the requirement to disclose the basis of accounting because this disclosure provides transparency and is fundamental to the readers’ understanding of the financial information.
The Council members did not make any comments on this issue.
- Concerns raised by the Public Business Accountants Society of Canada (PBAs) – The PBAs expressed concerns with the use of the word “professional” in the definitions of “practitioner” and “relevant ethical requirements”. The PBAs informed the Board that the term “professional” in the British Columbia CPA Act is reserved for CPAs and so this would prohibit them from performing compilation engagements in British Columbia. The Board decided to retain the use of the word “professional” in the definition of “practitioner” and “relevant ethical requirements”. This was decided to be consistent with the definition of practitioner in the review engagements standard and the proposed new standard requires a certain level of expertise that professional accountants possess. He further noted that addressing who can perform a compilation engagement is a provincial regulatory matter and not within the mandate of the AASB.
One Council member inquired if PBAs face the same issue in performing review or audit engagements. Mr. Charbonneau noted that PBAs would not be permitted to perform audit or review engagements because these assurance engagements require a public accounting license, whereas compilation engagements do not require a license in certain provinces.
Another Council member inquired if the Board would consider rewording the definitions to accommodate the PBA group. Mr. Charbonneau indicated the Board was not planning to revise the definitions for the reasons noted above. He also noted that the Board will continue to give this issue further consideration.
One member asked if the AASB has spoken to Chartered Professional Accountants of British Columbia (CPABC) to further understand the rationale of the BC legislation. Mr. Charbonneau advised the Council that he will be meeting with CPABC in the upcoming weeks to discuss this matter.
Due Process Manual
Mr. Charbonneau informed the Council that the AASB will be moving forward with a review of its due process with a goal to develop a due process manual consistent with the due process manuals developed by the Accounting Standards Board and the Public Sector Accounting Board. He noted that the AASB will provide AASOC with updates and opportunities for input as the project progresses.
Nominating and Governance Committee (NGC)
Ms. Bovolaneas informed the Council that Julie Corden, a member of the AASB, was appointed to the International Auditing and Assurance Standards Board (IAASB) as a member. The appointment of another Canadian to the IAASB is a very positive development and is beneficial to the broader public interest.
Ms. Corden has indicated that she will not be able to continue serving on the AASB due to the time commitment required in her new role on the IAASB. The NGC was tasked with appointing a replacement for Ms. Corden on the AASB. Ms. Bovolaneas stated that the goal of this session is to seek AASOC’s feedback and approval on the AASB candidate recommended by the NGC.
Ms. Bovolaneas informed the Council of the process undertaken by the NGC in order to replenish the Board’s membership on April 1, 2019. Ms. Bovolaneas also noted the due process considerations identified by the NGC to deal with this unique situation.
One member inquired if the NGC considered a public call to fill the Board’s vacancy. Ms. Bovolaneas stated that the NGC did in fact consider a public call, however it deemed it unnecessary given the unique situation and the need to replenish the AASB on a timely basis. She also noted that in speaking to Mr. Charbonneau, the AASB did not identify a specific skillset that was missing amongst members.
The Council had no issues with the NGC’s approach.
The Council discussed and reviewed the background of the proposed candidate and overall agreed with the NGC’s recommendation. The Council approved the appointment of Caroline Nadeau to the AASB for a three-year term, effective April 1, 2019.
While members were supportive of Ms. Nadeau’s appointment, some did highlight the need to consider the approach to the appointment of Big Six members on the AASB sooner than later. Ms. Bovolaneas informed the Council that the AASB will be facing a similar situation with the departure of another Big Six AASB member as part of the normal recruiting process in the upcoming cycle. Ms. Bovolaneas highlighted that the NGC had originally recommended deferring consideration of how to handle Big Six appointments until it can consider next stage Monitoring Group proposals – a recommendation the Council agreed with at the time.
However, at this time, members encouraged the NGC to consider the approach to Big Six appointments in the next recruiting cycle in the context of the variety of skill sets the AASB needs.
The next AASOC meeting is planned for June 13-14, 2019 in Toronto.
There being no further matters to discuss, the meeting was terminated.