In addition to these illustrations, there is an example of an audit engagement letter in Appendix 1 of CAS 210, Agreeing the Terms of Audit Engagements, which assumes an audit engagement of general purpose financial statements prepared in accordance with IFRS Accounting Standards. Similarly, there is an illustrative practitioner’s review engagement report in Appendix 2 of CSRE 2400, Engagements to Review Historical Financial Statements.
The AASB updated these illustrations to align relevant wording with the amendments to IAS 1. These updates were included in the mid-December 2022 CPA Canada Handbook – Assurance release.
Disclosures in the Financial Statements Impacted by the Change to IAS 1
The auditor’s responsibilities
When management prepares the entity’s financial statements accordance with IFRS Accounting Standards, the auditor will need to evaluate the appropriateness of management’s disclosures, including how management has addressed the effect the amendments to IAS 1 have on the entity’s disclosures about accounting policies. This includes understanding how the amendments affect the entity’s financial reporting process (i.e., what management may need to change to implement the amendments and the nature and extent of change in disclosures about the entity’s accounting policies) and the related impact on the auditor’s report.
Various CASs contain requirements that are relevant to the auditor’s work on disclosures in the financial statements. If the applicable financial reporting framework is IFRS Accounting Standards, these requirements include the entity’s disclosure of material accounting policy information as required in accordance with the amendments to IAS 1. CASs relevant to the auditor’s identification and assessment of risks of material misstatement related to disclosures in the financial statements, the auditor’s responses to assessed risks, evaluating information in disclosures, communicating significant findings from the audit, and reporting, may include:
- CAS 260, Communication with Those Charged with Governance;
- CAS 315, Identifying and Assessing the Risks of Material Misstatement;
- CAS 330, The Auditor’s Responses to Assessed Risks;
- CAS 450, Evaluation of Misstatements Identified during the Audit;
- CAS 700; and
- CAS 705.
Other aspects of the audit engagement that may be impacted include:
- agreeing the terms of the audit engagement, including the audit engagement letter; and
- communicating deficiencies in internal control to and requesting written representations from management and, where appropriate, those charged with governance.
About this Publication
The AASB acknowledges that this publication is based on Amendments to IAS 1 and the Impact on the ISAs: Disclosure of Material Accounting Policy Information, issued by the International Auditing and Assurance Standards Board, published by the International Federation of Accountants (IFAC) in December 2022 and is used with permission of IFAC.
1 Material that links to the CPA Canada Handbook is available to subscribers only.