Canadian input crucial as auditing standards board works towards new assurance handbook

The Canadian Auditing and Assurance Standards Board’s (AASB) 2013-2016 strategic plan charts an ambitious course towards the development of a new handbook by March 31, 2016.

The Canadian Auditing and Assurance Standards Board’s (AASB) 2013-2016 strategic plan charts an ambitious course towards the development of a new handbook by March 31, 2016. There are going to be some challenging issues for the AASB along the way – will Canadians stand up and be counted?

The AASB plays an important public interest role in setting standards that contribute to high quality audit, other assurance and related services. One of the AASB’s key objectives is developing a future body of standards that:

  • reflects how standards are used in practice;
  • facilitates adoption of standards issued by the International Auditing and Assurance Standards Board (IAASB);
  • is based on a sound conceptual foundation; and
  • is flexible to accommodate future standard developments.
Achieving this objective will put the handbook on a sound footing for the future and help reduce confusion that currently can exist between recently adopted international standards and older domestic standards.

The AASB decided in 2006 that adopting international standards for audits of financial statements in Canada is in the public interest. The AASB makes limited amendments to such standards only in accordance with specific criteria. When amendments are made, they are clearly identified in the standards. To date, very few amendments have been required. But this is not a rubber-stamping process.

For other standards, the AASB does not necessarily adopt IAASB standards. The AASB may decide, on an individual project basis, to adopt an IAASB standard if it considers it will be in Canada’s public interest, including whether amendments, if any, can be made to address circumstances particular to the Canadian environment. Or, the AASB may consider that a Canadian-only project will better meet our needs (i.e., develop a standard from scratch).

Because the AASB needs to identify issues, if any, in making its project decisions, the input of Canadian stakeholders on the AASB’s proposals is critical. In the upcoming months, the AASB will be issuing key exposure drafts on a number of topics where our input will be important. The following provides a snapshot of just a few of them:

Auditor reporting

The IAASB has a major project underway to significantly revise the form and content of the auditor’s report on financial statements. Many Canadian stakeholders have already weighed in on earlier consultations on this topic, and views are mixed to say the least. A key concern is to what extent, and to what entities, should such new reporting apply to provide value to users at a reasonable cost.

Review engagements

The AASB is revising the Canadian review engagement standard because it is showing its age. The IAASB recently issued a revised review engagements standard. While this standard appears to be largely consistent with existing Canadian best practice, it could mean significant change for some practitioners if it was adopted here. The AASB is considering whether the IAASB standard, with amendment, might be a suitable upgrade for the Canadian environment.

Reporting on information supplementary to an assurance engagement

Practitioners are often requested, usually by regulators or other funders, to report on specific matters stemming from the practitioner’s involvement with the entity. Derivative reporting, as it is commonly known, poses challenges for practitioners, preparers and regulators alike. The AASB will need the views not only of practitioners but also of other stakeholders as it develops a new standard to guide practitioner performance and reporting in these situations.

Keep the conversation going…. are you going to contribute to standard setting in Canada? If so, what is the best way for the AASB to obtain your input, for example through local roundtables, webinars, or an email drop box?

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