Canadians speak out on IAASB’s Invitation to Comment

Canadian stakeholders firmly voiced their opinion on the IAASB’s Invitation to Comment (ITC) on Enhancing Audit Quality in the Public Interest; it’s important that this dialogue continue with the AASB as key standards get revised.

Canadians have had the opportunity to study the International Auditing and Assurance Standards Board (IAASB)’s Invitation to Comment: Enhancing Audit Quality in the Public Interest. The ITC focuses on professional skepticism, quality control and group audits. What were the key messages that came out of these recent consultations? Here’s a snapshot:

Auditing standards can help drive improvements in professional skepticism

While professional skepticism is an attitude influenced by personal traits and the auditor’s competence, Canadian stakeholders do see a role for the IAASB in enhancing how professional skepticism is articulated in auditing standards. Most did not see a need to change the overall mindset of the auditor when conducting an audit, and held the view that the IAASB should focus its immediate efforts on:

  • ensuring consistency in how professional skepticism is described throughout all the relevant standards
  • including guidance throughout the standards on how to appropriately demonstrate and document its application

Don’t forget the smaller firms

The IAASB is responding to audit regulators’ inspection findings from their inspections of audits of listed entities. While findings are often indicative of weaknesses in practices across all audits, many Canadian stakeholders commented that responses by the IAASB must be scalable, not only to the audits of smaller listed entities, but also to other audits. Further, changes to quality control standards need to reflect that the standards are applied by practitioners who do not necessarily perform audits at all.

If a standard isn’t broken…why fix it?

The IAASB proposes an overhaul of its quality control standard to implement a quality management approach (QMA). While a QMA has some conceptual appeal, many Canadian stakeholders believe that the requirements in the existing standard are still appropriate today. More application guidance would be useful in a number of areas, but, overall, stakeholders were not convinced that there is a compelling need to move to a QMA.

Yes, revise the group audit standard, but don’t over engineer it

Most Canadian stakeholders are highly supportive of the IAASB’s initiative to amend the group audit standard, and believe this is a high priority. Auditors have struggled in understanding and implementing key sections of this standard, and extensive non-authoritative guidance has been provided to help them. Changes would be welcome. However, stakeholders strongly support keeping the standard principles-based and not overly prescriptive. This is to reflect the fact that group structures can vary and evolve over time.

One key message from stakeholders is the need to clarify when to use, or analogize from, the group audit standard. When the audit involves auditors other than the head office team or where the entity has multiple locations, there appears to be confusion about whether the group audit standard applies and, if so, how it applies.

The AASB’s response

The Canadian Auditing and Assurance Standards Board (AASB) submitted a response to the IAASB’s ITC in May. Canadians should continue to monitor the IAASB projects arising from this consultation and be ready to provide their input as key standards are revised as a result of the ITC.

Keep the conversation going

Do you think Canadian views were on point? What other key observations do you have on the IAASB’s ITC?

Post a comment below; or email me directly.

Conversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada