Resources

Revised standard – identifying and assessing the risks of material misstatement

The AASB revised a standard (CAS 315) to include enhancements and clarifications to help auditors in applying the audit risk model when identifying and assessing the risks of material misstatement.

Key revisions include:

  • Clarifying that the risk assessment process provides the basis for identification and assessment of the risks of material misstatement (whether due to fraud or error, at the financial statement and assertion levels), and provides an appropriate basis for the design of further audit procedures.
  • Providing scalability considerations for less complex entities.
  • Strengthening documentation requirements (e.g.: the exercise of professional skepticism).
  • Providing considerations for using automated tools and techniques.

Effective for audits of financial statements for periods beginning on or after December 15, 2021.

Revised standard – forming an opinion and reporting on financial statements

The AASB revised CAS 700 scoping in requirements to communicate key audit matters for general purpose financial statements of other listed entities (i.e.: NEO, CSE and TSX-V). Entities that are required to comply with the investment fund continuous disclosure (National Instrument 81-106) are excluded from this requirement.

Effective for periods ending on or after December 15, 2022.

New standard – compilation engagements

The AASB issued a new compilation engagement standard (CSRS 4200) replacing the existing compilation standard (Section 9200 and AuG-5).

Key changes include a new:

  • report which clearly communicates the respective responsibilities of management and the practitioner, and the nature and scope of a compilation engagement; and
  • requirement to include a note in the compiled financial information that describes the basis of accounting applied in the preparation of the compiled financial information.

Effective for compiled financial information for periods ending on or after December 14, 2021, with early application permitted.

New and revised standards – quality management

The AASB issued two new standards, quality management for firms (CSQM 1) and engagement quality reviews (CSQM 2), replacing the existing standard, CSQC 1. CSQMs largely mirror the international quality management standards (ISQM 1 and ISQM 2).

CSQMs will apply to both assurance and related service (i.e., non-assurance) engagements. This is a significant change from CSQC 1, which only scopes in assurance engagements.

The AASB also proposed revisions to the standard on quality management for an audit of financial statements (CAS 220) to clarify and strengthen the key elements of quality management at the engagement level.

CSQM 1 and 2 are effective for audits or reviews of financial statements or other assurance engagements as of December 15, 2022; and effective for related services engagements as of December 15, 2023.

CAS 220 (Revised) is effective for audits of financial statements for periods beginning on or after December 15, 2022.

New standard – agreed-upon procedures

The AASB issued a new standard (CSRS 4400) replacing the existing standard (Section 9100). CSRS 4400 applies to engagements on both financial (e.g.: revenues for determining royalties) and non-financial (e.g.: volume of greenhouse gas emissions) information. The current standard applies only to financial information.

CSRS 4400 clarifies the practitioner’s responsibilities in relation to the various parties involved in an agreed-upon procedures engagement (AUP) and provides guidance on how a practitioner’s expert can assist the practitioner in an AUP engagement.

Unlike the current standard, CSRS 4400 does not have a precondition for the practitioner to be independent. However, the practitioner is required to state in the report whether there is a requirement to comply with independence and, if so, include the relevant requirements.

Effective for agreed-upon procedures engagements for which the terms of engagement are agreed on or after January 1, 2022.

Exposure draft and discussion paper – less complex entities

The IAASB issued an exposure draft (ED) proposing a new standalone standard on auditing the financial statements of less complex entities (LCEs). This is to address some of the feedback received in the application of the auditing standards to the audits of LCEs.

In consideration of this, the AASB issued a discussion paper to obtain input on different options that might be explored in Canada in the audits of LCEs.

Comments to the discussion paper and ED are requested by December 10, 2021 and January 31, 2022 respectively.

Exposure draft – quality management – conforming amendments to other Canadian standards

The AASB issued an exposure draft (ED) proposing amendments to Other Canadian Standards (OCSs) to conform with the revised quality management standards (QM).

The ED proposes that the OCSs are subject to the QM standards or requirements that are at least as demanding, and that the engagement partner is ultimately responsible for managing and achieving quality. The ED also proposes that the firm is responsible to design, implement and operate a system of quality management including establishing policies and procedures to address engagements that must be subject to engagement quality reviews.

OCSs include Canadian standards on assurance engagements, the review standard, the standard on audits of internal control over financial reporting, the related services standards, the association standard and the assurance guideline on the examination of a financial forecast or projection included in a prospectus or other public offering document.

The comment period is closed.

New project – compilation of future-oriented financial information

The AASB approved a new project replacing AuG-16, Compilation of a Financial Forecast or Projection, with a new standard. This is required because of the inconsistencies in reporting and performance requirements between AuG-16 and the new compilation engagement standard (CSRS 4200).

Additional non-authoritative guidance and complimentary webinar/training

To stay ahead of the curve, find additional non-authoritative guidance to help you navigate the application of assurance and other Canadian standards.

COVID-19 resources

The COVID-19 pandemic continues to significantly impact Canadian organizations. Find relevant information on the application of assurance standards during the global pandemic and its impact on the profession.

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