Canadians go to the polls to provide input on auditor reporting issues

In September, over 1,000 attended a webinar on new auditor reporting proposals. Their responses to a series of polling questions make for interesting reading.

In September, over 1,000 attended a webinar on new auditor reporting proposals. Their responses to a series of polling questions make for interesting reading.

Staff of the Auditing and Assurance Standards Board (AASB) recently held a webinar to obtain input on suggested improvements to the auditor’s report put forward by the International Auditing and Assurance Standards Board (IAASB) in its Invitation to Comment (ITC) Improving the Auditor’s Report.

During the webinar, participants were asked to respond to a series of polling questions. Over 700, roughly evenly split between those in public practice and those in industry, provided responses. Here are some of the highlights (percentages are for those who responded “strongly agree” or “agree” unless otherwise stated):

Auditor commentary

Less than half (45 per cent) agreed with the IAASB proposal that the auditor’s report should include an auditor commentary on matters that the auditor believes are most important to users’ understanding of the financial statements or the audit. In considering specific matters the auditor might include, 57 per cent agreed that it should draw attention to important financial statement notes (a sort of roadmap to the financial statements). However, respondents strongly opposed the auditor describing audit procedures performed (62 per cent strongly disagreed or disagreed) or the audit strategy (72 per cent strongly disagreed or disagreed).

Going concern

Over half (56 per cent) agreed with the IAASB proposal that the auditor’s report should include an explicit conclusion from the auditor on the appropriateness of management’s use of the going concern assumption in preparing the financial statements. This is a surprising result given that a similar percentage believes that readers may misinterpret this conclusion as being a statement as to the future viability of the entity.

Auditor’s involvement with other information

An area where many users are confused about the auditor’s role is with respect to the financial statement auditor’s involvement with other information, such as the Management Discussion & Analysis (MD&A), which accompanies the financial statements. Sixty-five per cent agreed with the IAASB proposal that the auditor’s report should include a statement explaining the auditor’s work effort on the other information and a conclusion whether the auditor has identified material inconsistencies between the other information and the audit financial statements.

Who should the suggested improvements apply to?

Responses to questions about whether specific improvements should apply to all or only some entities gave rise to divergent results but over half (57 per cent) agreed that there may need to be different reporting requirements depending on the type of entity, and over three-quarters (78 per cent) believe that if the IAASB’s improvements apply to listed entities then they should apply to all of them, including small market cap companies. There was also a strong push from many (78 per cent) of the respondents who believe it is critical that Canadian auditor reporting requirements for cross-listed entities in Canada not be significantly different from those of the US Public Company Accounting Oversight Board (PCAOB).

The webinar demonstrated once again that Canadians have a strong interest in auditor reporting developments. The results were used by the AASB, along with other sources of input, in developing its response to the IAASB ITC.

Keep the conversation going…the auditor reporting project is ongoing, so watch this space for new developments and let me know what you think of them.

Post a comment below; or email me directly.

Eric

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

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