Assurance Standards

Revised standard – audits of group financial statements (including the work of component auditors)

The AASB revised CAS 600 to include a more robust risk-based approach to planning and performing a group audit. The revised standard provides detailed guidance for group and component auditors when conducting a group audit.

Effective for audits of group financial statements for periods beginning on or after December 15, 2023, with earlier application permitted.

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).

The AASB also issued conforming amendments to Other Canadian Standards to avoid inconsistencies with the new and revised quality management standards.

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.

The conforming amendments will be effective on or after December 15, 2022 except the amendments to the compilation (CSRS 4200) and agreed upon procedures (CSRS 4400) standards, which will be effective for periods beginning on or after December 15, 2023.

Exposure draft – Proposed Narrow Scope Amendments to ISQMs, ISAs and ISRE 2400 (Revised)

The International Auditing and Assurance Standards Board issued an exposure draft that proposes narrow scope amendments to International Standards on Quality Management (ISQMs), International Standards on Auditing (ISAs) and International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements, as a result of revisions to the definitions of Listed Entity and Public Interest Entity (PIE) in the International Ethics Standards Board for Accountants (IESBA) Code. These proposed revisions have would 1) align definitions and requirements in IAASB standards with new definitions for publicly traded and public interest entities in the IESBA Code and 2) extend the applicability of existing differential requirements for listed entities to meet increased stakeholder expectations in relation to audits of PIEs.

Proposed revisions include extending the scope of the entities included under the International Standards on Quality Management and the International Standards on Auditing such that they will be subject to:

• Engagement quality reviews; 
• Providing transparency in the auditor’s report on specific aspects of the audit, including auditor independence, communicating key audit matters, and the engagement partner’s name; and 
• Communicating with those charged with governance to help them fulfill their responsibility overseeing the financial reporting process, (e.g., communicating about quality management and auditor independence).

The comment period for the IAASB exposure draft is closed.

The IAASB proposes these narrow scope amendments be effective for financial reporting periods beginning at least 18 to 24 months after approval of the final pronouncement.

The Canadian Auditing and Assurance Standards Board (AASB) has issued an exposure draft proposing the deferral of the IAASB’s PIE narrow scope amendments until the Public Trust Committee (PTC) has completed its due process to finalize its “public interest entity” definition for the Canadian Independence Standards. This deferral allows the AASB to evaluate the final updates to the Canadian Independence Standards, once approved by the PTC, and their interoperability with the IAASB’s narrow-scope amendments. The comment period for the AASB exposure draft is closed.

Exposure draft – Fraud

The International Auditing and Assurance Standards Board (IAASB) issued an exposure draft to revise International Standard on Auditing (ISA) 240 (Revised), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Proposed revisions to ISA 240 include:

• Clarifying auditor responsibilities relating to fraud in an audit.
• Emphasizing professional skepticism to ensure auditors remain alert to possible fraud and exercise professional skepticism throughout an audit.
• Strengthening identification and assessment of risks of material misstatement due to fraud.
• Clarifying the auditor’s response to fraud or suspected fraud identified during the audit.
• Increasing ongoing communication with management and those charged with governance about fraud.
• Requiring Key Audit Matters related to fraud to be included in the auditor’s report of listed entities to enhance transparency.
• Enhancing audit documentation requirements about fraud-related procedures.

Comments are requested by June 5, 2024. The IAASB proposes that ISA 240 be effective for financial reporting periods beginning at least 18 months after approval of the final pronouncement.

The Canadian Auditing and Assurance Standards Board (AASB) has also issued an exposure draft for Canadian Auditing Standard (CAS) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, that proposes no new Canadian amendments to the requirements or application material of proposed ISA 240 (Revised). Comments are requested by May 6, 2024. The AASB is proposing aligning the effective date of CAS 240 with the proposed effective date of ISA 240 (Revised).

Exposure draft – Sustainability Assurance

The IAASB issued an exposure draft for International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements that will:

• Serve as a comprehensive, stand-alone standard suitable for any sustainability assurance engagements.
• Apply to both limited and reasonable assurance engagements.
• Apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks, including the recently released IFRS Sustainability Disclosure Standards S1 and S2.
• Serve as a profession agnostic standard that can be used by both professional accountant and non-accountant assurance practitioners.

The Comment period for the IAASB exposure draft is closed.

The AASB has also issued an exposure draft for the Canadian Standard on Sustainability Assurance (CSSA) 5000, General Requirements for Sustainability Assurance Engagements. The Comment period for the AASB’s exposure draft is closed.

The IAASB and AASB are currently deliberating the feedback received.

The AASB has prepared a feedback statement on what they heard and the next steps. Over the next few months, the AASB will be working to ensure Canadian feedback is considered by the IAASB as the final standard is developed. The anticipated approval date for the final CSSA 5000 is December 2024.

Exposure draft – Going concern

The IAASB issued an exposure draft proposing the following changes to International Auditing Standard (ISA) 570, Going Concern, aiming to:

• Promote consistent practice and behavior and facilitate effective responses to identified risks of material misstatement related to going concern.
• Strengthen the auditor’s evaluation of management’s assessment of going concern, including reinforcing the importance, throughout the audit, of the appropriate exercise of professional skepticism.
• Enhance transparency with respect to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.

The Comment period for the IAASB exposure draft is closed.

The AASB has also issued an exposure draft on proposed amendments to CAS 570. The Comment period for the AASB’s exposure draft is closed.

The IAASB and AASB are currently deliberating the feedback received.

New standard  – Less complex entities

In December 2023, the IAASB issued the International Standard on Auditing (ISA) for Audits of Financial Statements of Less Complex Entities (LCE) alongside the Basis for Conclusions. ISA for LCE is  a stand-alone standard designed specifically for smaller and less complex businesses and organizations. Built on the foundation of the ISAs, audits performed using this standard provide the same level of assurance for eligible audits: reasonable assurance.

The ISA for LCE cannot be used for audits of listed entities, entities with public interest characteristics, groups where component auditors are involved (except for limited circumstances) or when otherwise prohibited by jurisdictions.

It is effective for audits of financial statements for periods beginning on or after December 15, 2025, for jurisdictions that adopt or permit its use. Early adoption is permitted.

After careful consideration, the AASB decided not to adopt the ISA for LCE. The Board believes the ISA for LCE would not adequately meet the needs of interested and affected parties in Canada nor serve the Canadian public interest. Following this decision, the AASB will continue to discuss possible alternative options for addressing the unique challenges faced by small and medium-sized entities and practitioners engaged in audits of LCEs.

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).

The Future-oriented Financial Information Task Force is currently deliberating issues while seeking input from the Reference Group. It is anticipated that an exposure draft will be issued in September 2024.

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.

• Respond to AASB Survey of 2026-2029 Strategic Plan by June 28, 2024 (AASB, 2024)
• Reporting implications of Canadian Auditing Standards - 5th Edition (CPA Canada, 2024)
• CPAB 2023 Annual Report (CPAB, 2024)
• Identifying and assessing the risk of material misstatement: Strengthening audit quality (CPAB, 2024)
• Insights from our conversations with audit committees (CPAB, 2024)
• The State of Play: Sustainability Disclosure & Assurance 2019-2022, Trends & Analysis (IFAC, 2024)
• Auditor Reporting and Communicating with Those Charged with Governance – Narrow-Scope Amendments (CPA Canada, 2023)
• The Evolving Fraud Landscape (CPAB, 2023)
• Use of Technology in Audits – Observations, Risks and Further Evolution (IFIAR, 2023)
• IAASB Issues Guidance for Assurance Practitioners When Citing IFRS Accounting Standards (IAASB, 2023)
• Audit considerations relating to an entity using service organizations: strengthening audit quality (CPAB, 2023)
• FRC publishes thematic review of audit sampling (FRC, 2023)
• CSQM and QMG Cloud Blog: What’s in it for you? (CPA Canada, 2023)
• Frequently Asked Questions: CAS 315 and Auditor’s Responsibilities for General IT Controls (CPA Canada, 2023)
• CPAB Symposium: The Evolving Fraud Landscape (CPAB, 2023)
• Canadian Roundtable on Audit Quality Addresses Current State and Emerging Risks (CPAB, 2023)
• Applying IESBA Code of Ethics' Conceptual Framework to Independence: Practical Guidance for Auditors In Technology-related Scenarios (IESBA and APESB, 2023)
• CPAB audit risk alert – Use of artificial intelligence applications in the audit (CPAB, 2023)
• A Deep Dive into Sustainability Assurance Engagements (IFAC, 2023)
• Key questions for audit committees overseeing sustainability related disclosure (IFAC, 2023)
• Corporate decision-making: Why choose a CPA for your ESG assurance needs? (The Centre for Audit Quality, 2023)
• Finding the right related services or assurance engagement (CPA Canada, 2023)
• Implementation tool for auditors: Revised CAS 315, risks of material misstatement (CPA Canada, 2023)
• Implementation tool for practitioners: Compilation engagements (CPA Canada, 2020)
• COSO releases internal control guidance for sustainability reporting (COSO, 2023)
• The Role of the Auditor in Climate-Related Information (The Centre for Audit Quality, 2023)
• Technology FAQs on investigating exceptions and relevance of performance materiality when using automated tools and techniques (IAASB, 2023)
• Audit and Assurance Summary Resource Guide (CPA Canada, 2022)
• Election Guidance: Attention CFOs, Official Agents, and Auditors of Election Candidates (CPA Ontario, 2020)
• Practitioner Alert: Comparing Compliance Engagements (CPA Canada, 2022)
• Guide for practitioners: Roadmap to the CPA Canada Handbook - Assurance Tool (CPA Canada, 2021)
• Understanding assurance needs: A framework for the decision-maker (CPA Canada, 2021)

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