The adoption of international auditor reporting standards

The AASB’s adoption of International Standards on Auditing will affect not only auditors but also preparers, audit committees and investors.

The Auditing and Assurance Standards Board (AASB) will be adopting International Standards on Auditing (ISA) as Canadian Auditing Standards (CAS) dealing with auditor reporting on:

• audited financial statements — new and revised auditor reporting standards and related conforming amendments; and

• the auditor’s responsibilities relating to other information (ISA 720).

The coming changes to auditor reporting are significant and affect not only auditors but also preparers, audit committees and investors.

For this reason, the AASB is following a measured approach to adopting ISA as CAS. The AASB seeks input on two documents for comment and expects to issue final CAS in the first half of 2016.

Reporting on audited financial statements

The purpose of this project is to enhance the communicative value of the auditor’s report by providing more relevant information to users based on the audit.

The AASB intends to adopt ISA as CAS with limited amendments but has identified three key implementation challenges:

• Canada has a significant number of listed entities, including many small resource entities. It will take time for preparers, audit committees and auditors to consider the implications of the new standards;

• the US Public Company Accounting Oversight Board (PCAOB) intends to issue a revised proposal of auditor reporting standards in the third quarter of 2015. Significant differences between CAS and PCAOB reporting standards could have major consequences. The AASB needs to understand the significant differences as Canada moves to implement the standards; and

• reports by auditors of listed entities will be expanded to include reporting of key audit matters. However, the term “listed entity” needs to be considered and understood in the Canadian context so that stakeholders know whether reporting of key audit matters applies to their audits.

The AASB has issued an invitation to comment to obtain input on these implementation challenges and the AASB’s tentative decision to defer the effective dates.

ISA 720

The purpose of this project is to specify appropriate responsibilities for the auditor relating to other information, as well as to improve transparency in auditors’ reports.

The AASB will be issuing an exposure draft later this year of proposed Canadian amendments to ISA 720 (Revised) that are designed to clarify the scope of application of CAS 720 and set reporting requirements to provide more meaningful reporting by auditors in Canada. The AASB will also be seeking input on whether to align the effective date of CAS 720 with the effective date of the other auditor reporting CAS.

Input on the two documents for comment is critical to the AASB in issuing the final CAS that can be implemented in an effective manner. The AASB’s goal continues to be to help ensure that Canadian stakeholders are provided with high-quality audits using globally accepted standards.

For further details and to comment on these projects, go to: