Reporting revolution! Significant changes to the auditor’s report are one step closer

The AASB plans to move forward with international standards for auditor reporting in 2017. What are your thoughts on addressing this transition?

Recent developments at the Auditing and Assurance Standards Board (AASB) are bringing closer to reality significant changes to the auditor’s report (form and content).

The question on every Canadian audit professional’s mind continues to be: What is AASB’s key message and plan? The recently issued AASB’s chair’s message says it all: Canada intends to move forward with adopting the international standards and now’s the time for stakeholders in financial reporting to bring up any concerns and challenges they foresee around implementation and timelines.

Although Canadians had raised concerns about the international proposals, the AASB carefully examined the changes the International Auditing and Assurance Standards Board (IAASB) made in finalizing its reporting standards and believes the concerns have been substantively addressed.

However, the AASB notes that there will be a number of challenges to implementing the standards in Canada, for example:

  • Effective implementation will require the engagement of all stakeholders, particularly those involved with listed entities, for which auditor’s reports will need to be expanded to include key audit matters. Canada has a significant number of listed entities, many of which are small resource entities. It will take time for preparers, audit committees and auditors to consider the implications the new standards will have on them.
  • The U.S. Public Company Accounting Oversight Board (PCAOB) intends to issue a revised proposal of auditor reporting standards in the third quarter of 2015. A significant proportion of total Canadian market value of listed entities is made up of Canadian entities listed in the United States. Significant differences between Canadian and PCAOB reporting standards could have major consequences. The AASB, and stakeholders, need to understand these differences as they move to implement the new standards.

In a move to bring stakeholders in on the roll-out plan, the AASB is issuing an invitation to comment in the summer to seek input on its tentative decision to set effective dates different from the IAASB. The AASB expects to issue final reporting standards in the first half of 2016 so that auditor’s reports will change for calendar year 2017 audits. There will also be a staggered implementation that provides a one-year delay for the expanded reporting for audits of many listed entities.

This may seem like a long way off, but the AASB emphasizes that it will be important for:

  • auditors to use the extra time to develop meaningful reports that are specific to the circumstances of the entity and do not contain generic or standardized wording
  • auditors, audit committees and management to begin now to familiarize themselves with the standards and the implications in the specific circumstances of their entities
So from where I sit, starting now is sound advice from the AASB. What’s your view?

KEEP THE CONVERSATION GOING

Have your say about the implementation challenges of the new reporting standards. Respond to the AASB invitation to comment by October 30, 2015.

Post a comment below; or email me directly.

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.

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About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada

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