The Auditing and Assurance Standards Board (AASB) recently approved changes to auditor reporting standards to extend the requirements for communication of key audit matters (KAM) to a broader range of listed entities. This brings to a close the AASB’s work in this area. Here are the details.\n\nAs a reminder, KAM are those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period. KAM are selected from matters communicated to those charged with governance. \nWhich entities are affected?\nIn December 2018, the AASB introduced requirements for communication of KAM for audits of TSX-listed entities, other than investment funds, for financial statement periods ending on or after December 15, 2020.\nThe requirements have been extended to other listed entities, including entities listed on exchanges other than the TSX (i.e. NEO, CSE and TSX-V), but excluding listed entities that are investment funds, for financial statement periods ending on or after December 15, 2022.\nThese requirements supplement those that have been in place since 2018 for auditors to communicate KAM when the auditor decides, or is otherwise required by law or regulation, to do so. \nInvestment funds (i.e. those required to comply with National Instrument (NI) 81-106, Investment Fund Continuous Disclosure) are excluded from the requirements because the feedback the AASB received during development of the standard indicated that the benefits of communicating KAM are unlikely to be realized for these entities.\nHow will a robust implementation of the new requirements be achieved?\nDuring extensive discussions with stakeholders throughout the standard-setting process, the AASB heard time and again that KAM communications will be useful only if they are specific to the entity and are not boilerplate in nature. This requires robust discussions among management, audit committees and auditors throughout the process. Although substantial experience in communicating KAM in auditor’s reports has been gained globally over the last four years, and more recently in the United States with its new communication model, stakeholders need time to prepare. This is particularly true for the many smaller listed entities that are affected, for example those listed on the TSX-V. The AASB therefore decided that the extended requirements should apply in 2022 rather than 2021, as originally proposed.\nSome of the materials CPA Canada will be developing to support implementation efforts include:\n\n a new chapter on communicating KAM in our reporting guide, Reporting Implications of Canadian Auditing Standards\n a summary of best practices for developing an effective KAM communication process within an audit firm\n briefings to assist audit committees and management in understanding the new reporting requirements\n FAQs for practitioners, audit committees, management and investors\n\nKeep the conversation going\nWatch for these and other communications over the next few months. Post a comment below or email me directly.\n\nConversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.\nDisclaimer\nThe views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.