Canadian Auditing Standards

Auditor Reporting – Key Audit Matter Reporting and Other Considerations  

Summary

Users of audited financial statements have asked auditors to provide more information in their reports about significant matters in the financial statements, as well as about the conduct of the audit.

In early 2017, the AASB unanimously approved enhanced auditor reporting standards.  

In late 2018, the AASB made amendments to CAS 700, Forming an Opinion and Reporting on Financial Statements, requiring auditors to communicate key audit matters in the auditor’s report for audits of complete sets of general purpose financial statements of entities listed on the Toronto Stock Exchange (TSX), other than entities that are required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure. Such requirements will be effective for periods ending on or after December 15, 2020.

Staff Contact(s)

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards Board

Project Status

  • Information gathering

    IAASB approved project proposal in December 2011

  • Approving project

    Research on key audit matter reporting currently underway

  • Consulting stakeholders

    Exposure Draft issued January 2019

    Exposure Draft comment deadline is May 15, 2019.

  • Deliberating feedback

    The AASB is deliberating feedback received on the Exposure Draft.

  • Final pronouncement

Meeting & event summaries


September 10, 2019

AASB Decision Summary – September 9-10, 2019 Meeting

The AASB discussed the status of matters that caused the deferral of paragraph 46 of CAS 700. This paragraph relates to disclosure of the engagement partner name in certain audit reports. The Board concluded that deferring paragraph 46 served its purpose and the issues that led to the deferral have been resolved. Paragraph 46 will be removed from the CPA Canada Handbook – Assurance in December 2020.

September 10, 2019

AASB Decision Summary – September 9-10, 2019 Meeting

The AASB unanimously approved amendments to CAS 700, Forming an Opinion and Reporting on Financial Statements. CAS 700 will require auditors to communicate key audit matters in the auditor’s report for audits of complete sets of general purpose financial statements of other listed entities for periods ending on or after December 15, 2022. This excludes listed entities required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure.

The AASB concluded that the revisions to the standard are significantly different from the proposals issued in the Exposure Draft, “Communicating Key Audit Matters in the Auditor’s Report." The Board decided not to re-expose the changes as they were based on the feedback received on the Exposure Draft.

Once the Auditing and Assurance Standards Oversight Council confirms that the AASB followed due process with proper regard for the public interest, the amendments will be included in the December 2019 Handbook update.

June 10, 2019

AASB Decision Summary — June 10-11, 2019

The AASB discussed issues related to developing an auditor’s report that complies with the requirements of both Public Company Accounting Oversight Board (PCAOB) standards and CASs. Key issues discussed include the differences between the PCAOB standards and CASs for:

  • the descriptions of auditor responsibilities and other information; and
  • critical audit matters versus KAMs.

The AASB concluded not to continue work on developing such a report due to the significant differences between the standards and the challenges in developing a report that would be understood. However, the Board agreed on future steps to address public interest issues that arise when there are separate PCAOB and CAS auditor’s reports on one set of financial statements.

June 10, 2019

AASB Decision Summary — June 10-11, 2019

The AASB discussed key issues stakeholders raised on the Exposure Draft, “Communication of Key Audit Matters in the Auditor’s Report,” including:

  • the unique regulatory environment of entities that comply with National Instrument 81-106, Investment Fund Continuous Disclosure;
  • the benefits and challenges of key audit matter (KAM) reporting for other listed entities and investment funds; and
  • the proposed effective date.

The AASB also discussed academic research that was conducted during the exposure period to identify whether there are benefits to KAM reporting for users of TSX-V financial statements.

The Board expects to approve final Handbook material at its September 2019 meeting.

June 10, 2019

AASB Decision Summary — June 10-11, 2019

The AASB discussed the status of matters that gave rise to the deferral of paragraph 46 of CAS 700, Forming an Opinion and Reporting on Financial Statements, relating to disclosure of the engagement partner name in certain audit reports. The Board concluded that extension of the one-year deferral is not required. However, it will continue to monitor any issues related to inclusion of the engagement partner name in CAS auditor reports filed with the U.S. Securities and Exchange Commission.

February 11, 2019

AASB Decision Summary — January 24-25, 2019

During its December 14, 2018, conference call, the AASB unanimously approved amendments to the effective date of paragraph 46 of CAS 700, Forming an Opinion and Reporting on Financial Statements. Paragraph 46 requires disclosure of the engagement partner name in the auditor’s report on financial statements of listed entities. In light of further information obtained since the December conference call, the Board decided that the amendments to the effective date of paragraph 46 will apply for one year. Therefore, paragraph 46 will not apply to audits of financial statements for periods ending before December 15, 2019, of entities whose engagement partner name appears on Form AP, Auditor Reporting of Certain Audit Participants, to be filed with the U.S. Public Company Accounting Oversight Board for that engagement.

This amendment will allow time for stakeholders to evaluate issues relating to Canadian Generally Accepted Auditing Standards auditor’s reports that are required to be filed with the U.S. Securities and Exchange Commission.

Once the Auditing and Assurance Standards Oversight Council confirms that the Board followed due process with proper regard for the public interest, the amendments will be included in a March 2019 Handbook update.

January 14, 2019

AASB Decision Summary — December 3-4, 2018

The AASB unanimously approved an exposure draft, “Communication of Key Audit Matters in the Auditor’s Report.” The exposure draft is expected to be issued in January 2019 and will have 90-day comment period.

The AASB is considering amending CAS 700, Forming an Opinion and Reporting on Financial Statements, to require auditors to disclose the engagement partner name when the auditor is also required to submit Form AP, Auditor Reporting of Certain Audit Participants, with the U.S. Public Company Accounting Oversight Board for that engagement. The Board plans to further discuss an amendment at a December 2018 conference call.

September 18, 2018

AASB Decision Summary — September 13-14, 2018

The AASB decided to amend CAS 700, Forming an Opinion and Reporting on Financial Statements. Auditors will be required to communicate key audit matters in the auditor’s report for audits of complete sets of general purpose financial statements of entities listed on the Toronto Stock Exchange (TSX), other than entities that are required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure. Such requirements would be effective for periods ending on or after December 15, 2020. The Board will approve the amendments at its next meeting.

In addition, the AASB decided to develop an exposure draft to address the applicability of requirements to communicate key audit matters for investment funds and all other listed entities, including TSX-venture issuers. The Board expects to issue this exposure draft in early 2019.

News


March 29, 2019

Resource

Video – Communicating Key Audit Matters in the Auditor’s Report

Watch this easy-to-understand video that takes you through the key aspects of AASB’s Exposure Draft, Communication of Key Audit Matters in the Auditor’s Report. Ensure you get your response on this important topic to the AASB by May 15, 2019!

January 31, 2019

Document for Comment

AASB Exposure Draft – Communication of Key Audit Matters in the Auditor’s Report

The AASB issued an Exposure Draft proposing revisions to CAS 700, relating to the communication of key audit matters in the auditor’s report. Stakeholders are encouraged to submit their comments by May 15, 2019.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.