Are you ready for new auditor reporting standards?

Here are three three key pieces of advice on how to prepare for the new auditor reporting standards.

The auditor’s report is changing for audits of every organization in Canada. It’s not just large, publicly listed corporations that are affected; auditors of all private, not-for-profit and public entities must comply with the new and revised auditor reporting standards. The changes are sweeping and significant, and will be effective for audits of financial statements with periods ending December 15, 2018, or later. Practitioners, are you ready?

One of the most visible changes is the location of the auditor’s opinion. It has been moved to the beginning of the report from the end, gaining pride of place. While the big picture is the same, there will be more details in each section of the report spelling out the scope of the auditor’s work and management’s responsibilities. For example, if a company issues an annual report or a similar document that goes by another name, that has to be discussed in the new auditor’s report. “The goal is to tell the reader how the auditor and management are involved with that document. The entity should state what the auditor is responsible for and is not responsible for with respect to the annual report,” says Dave Rasmussen, BDO Canada’s Greater Toronto Area group technical leader.

There will also be more to say regarding the responsibilities of management and the auditors about items such as assessing going concern, group audit situations and communication with those charged with governance. “Using a ‘standard’ or single template for all audit reports will be very difficult under the new standards; more customization will be required,” says Rasmussen.

Why change the auditor’s report now, you may wonder. The changes aren’t new; in fact, they have been in the works for some time. They take their cue from new international standards on auditing (ISA) that went into effect in December 2016. The ISA was a direct result of events such as the credit crisis of 2008 and the increasing demand for more transparency in the auditor’s report, including broader explanations of what the roles of management and the auditors are in an audit. Canada, which is committed to adopting the ISA, has decided to continue to move in the same direction in order to avoid falling further behind with international standards and to remain relevant on the global stage, while keeping a close eye on developments in auditing standards south of the border.

With the deadline for implementation in sight, Rasmussen offers three key pieces of advice on how to prepare.

Designate auditor-reporting champions. Choose a partner or group within the firm to be the go-to resource who can help everyone understand the changes. Although it seems obvious, everyone who is involved with audits needs to get familiar with the new and revised standards themselves. “This is not optional,” says Rasmussen. “The standards are approved and available, so get up to speed now. Create internal guides and training for staff, and ramp up while there is still some breathing room. It will be here before we know it.”

Talk to your clients about what to expect from the new report. “The wrap-up meeting for the 2017 audit is an ideal time to introduce the changes,” says Rasmussen. “Show [clients] what’s going to be in the new report. Raise any potential issues and get ahead of them; why let these come up at the last minute if you can deal with them early?”

Take advantage of available resources. “Look to recognized international resources, contacts, reports that are already out in the marketplace,” says Rasmussen. “Remember, the ISA will have already been in place for two years. If your firm is part of an international network or has international affiliates, tap into insights and resources they’ve developed. And CPA Canada already has a bunch of resources available — tap into those, too.”

CPA Canada has published Audit and Assurances Alerts and is revising the Reporting Implications Guide to reflect the new standards, offering examples and many Q&As (the guide should be available in December). It also has webinars and a client-briefing resource to assist practitioners in explaining to management what the new report will look like. For more information, visit cpacanada.ca/auditorreporting.