Communication of Key Audit Matters in the Auditor’s Report
Following the AASB’s decision to require communication of key audit matters (KAM) for TSX-listed entities, the Board debated expanding the proposals. The expanded proposals are to require communication of KAM for other listed entities, as well as entities required to comply with National Instrument 81-106, Investment Fund Continuous Disclosure. These requirements would be effective for audits of financial statements for periods ending on or after December 15, 2021. The proposals can be found in the Exposure Draft, “Communication of Key Audit Matters in the Auditor’s Report.”
Decision Based on Stakeholder Feedback Received
Through its consultations, the AASB received valuable feedback from various stakeholder groups. After reviewing the feedback in detail, the Board unanimously agreed to expand the communication of KAM to audits of other listed entities.
However, the AASB decided not to go forward with its proposal for the communication of KAM for audits of entities required to comply with NI 81-106. It concluded that the benefits of communicating KAM for these types of entities would be very limited and result in additional costs. As well, the Board noted that the communication of KAM would likely not increase the transparency of the audit for entities that are required to comply with NI 81-106. These types of entities are already subject to regulations that include continuous disclosure requirements and restrictions related to securities held.
The expanded requirements are effective for audits of financial statements for periods ending on or after December 15, 2022. This is one year later than the effective date proposed in the Exposure Draft because the Board concluded stakeholders need more time to prepare.
The revisions, along with conforming amendments, will be issued in the December 2019 CPA Canada Handbook – Assurance update. The Basis for Conclusions on CAS 700, Reporting on Audited Financial Statements, will also be issued with the Handbook update. This document summarizes the feedback received on the Exposure Draft, including how the Board addressed stakeholder comments.
The AASB is working closely with CPA Canada, as well as the Reporting Implications of Assurance Standards Task Force, to provide timely guidance to support successful implementation of the new requirements.
A key CPA Canada publication developed by this Task Force is “Reporting Implications of the Canadian Auditing Standards,” 3rd Edition, updated in April 2019. The next edition is expected to be released in December 2019 and includes a new chapter on KAM.
For more information and to stay up to date, visit the Auditor Reporting – Key Audit Matters and Other Considerations project page.
Allison King, CPA, CA
Principal, Auditing and Assurance Standards Board
Tel.: 416 204 3473