PCAOB auditor reporting standards re-proposal

The PCAOB’s recent re-proposal provides a good indication of the future direction of U.S. auditor reporting standards, giving Canadian stakeholders a clearer understanding of what they need to prepare for as it relates to dual-listed companies.

The Canadian Auditing and Assurance Standards Board (AASB) has been watching to see the direction the United States will go with its auditor reporting standards. The U.S. Public Company Accounting Oversight Board (PCAOB)’s May 2016 re-proposal provides clear indication of the direction of travel. This is a key piece of the puzzle for the AASB as it completes the adoption of the International Auditing and Assurance Standards Board (IAASB) standards in accordance with its mandate.

PCAOB re-proposal highlights

Key elements of the PCAOB’s re-proposal include:

  • communication in the auditor’s report of critical audit matters arising from the audit
  • clarification of existing auditor responsibilities
  • the need to include a statement related to auditor tenure
  • placing the opinion as the first section of the auditor’s report

The re-proposal also states that “The IAASB standard is most similar to the [PCAOB’s] re-proposal since it requires the auditor to communicate key audit matters selected from matters communicated with those charged with governance.” However, the PCAOB is addressing auditor reporting about going concern and reporting on other information under separate initiatives with a different timeline from the IAASB.

How does this affect Canada?

The AASB’s mandate is to adopt the standards of the IAASB with minimal amendment. The AASB issued proposals last year to adopt the IAASB auditor reporting standards in 2017 but a major concern was the potential consequences if the PCAOB’s standards were significantly different.

Although the PCAOB still needs to complete its due process, including identifying an effective date based on responses received to the re-proposal, Canadian stakeholders should now have confidence that Canadian and U.S. auditor reporting standards have taken a relatively similar approach.

Investors will likely see this as a positive result so that there will be consistent reporting in the Canadian marketplace. To get a clearer understanding of the key aspects of IAASB's new and revised Auditor Reporting standards issued in January 2015 and the PCAOB re-proposal, refer to the IAASB recently-published comparison report.

So what’s next?

The AASB is continuing its discussions on the adoption of the IAASB standards, and will take into account the U.S. developments in reaching its conclusions, which are expected later this year.

Canadian stakeholders can now turn their attention to becoming familiar with the new reporting standards as their use in Canada is becoming more likely. Stay tuned!

Keep the conversation going

How do you feel about the U.S. moving in this direction? How will this affect you going forward?

Post a comment below; or email me directly.

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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