Reporting on other information: Considerations for Canada

The IAASB has raised the bar on auditor responsibilities by approving ISA 720. Now, the AASB asks Canadian stakeholders: how do we ensure that the new standard meets our needs?

In recent years, calls have continued to reverberate in the corporate reporting world for greater transparency of the auditor’s work on the annual report, Management Discussion and Analysis (MD&A), and other documents that contain financial statements and the auditor’s report.

In response, the International Auditing and Assurance Standards Board (IAASB) initiated a project to bring greater clarity and enhanced consistency regarding the auditor’s responsibilities relating to these areas, or what is called “other information.” After extensive consultation on exposure drafts, the IAASB finally approved International Standard on Auditing (ISA) 720 The Auditor’s Responsibilities Relating to Other Information, in December 2014.

The new standard states that the auditor’s report must include a separate section when the auditor has obtained some or all of the other information by the date of the auditor’s report. For audits of listed entities, the section in the report must also include if the auditor expects to obtain other information after the date of the auditor’s report (in Canada this will most often be in the form of the annual report).

While it excites me to see that we’re making progress and stakeholders are getting involved in shaping reporting practices, I’m left asking the question: is this good for Canada? My answer: yes and no.

Including something about other information in the auditor’s report will no doubt help users understand the auditor’s involvement with this information; provided the auditor is able to identify what other information he or she has read, and explain his or her involvement. Chances of readers misinterpreting or taking unwarranted assurance from the auditor’s report will be minimized, helping address a key expectation gap.

Having said that, the greatest challenge as I see it is the requirement that the auditor of a listed entity indicate the information he or she expects to read after the audit is over. In Canada, securities regulations do not mandate an annual report be filed with other regulatory filings. The nature, timing and content of annual reports vary from entity to entity. Some annual reports are more akin to marketing pieces than factual accounts of the entity’s operations, financial results and financial position. As a result, if the requirement were adopted as is there is a risk that Canadian auditor’s reports for listed entities might not be consistent. Users might easily misunderstand the auditor’s involvement with the annual report.

So, I’ll say it — the IAASB’s reporting requirement for audits of listed entities does not seem to fit well within Canada’s regulatory environment. Is there a way for Canada to amend the standard so that it works appropriately in a Canadian context without going offside the IAASB standard?

That’s the key question that the Auditing and Assurance Standards Board (AASB) is grappling with. It is issuing an exposure draft in summer 2015 to cover this and other adoption issues relating to the standard. Get ready to say your piece.


Share your thoughts on the new standard. Will it work here in your view? Respond to the AASB exposure draft by October 30, 2015.

Post a comment below; or email me directly.

Chartered Professional Accountants of Canada (CPA Canada)’s Audit Quality Blog is designed to create an exchange of ideas on developments and issues in global audit quality, as well as their impact in Canada.


IAASB’s information page on ISA 720 The Auditor’s Responsibilities Relating to Other Information

AASB’s What’s New page for news on the exposure draft

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada