Canada

New and revised auditor reporting standards

INSIGHT ARTICLE  | 

In April 2017, the Auditing and Assurance Standards Board (AASB) adopted International Auditing Standards (ISA) issued by the International Auditing and Assurance Standards Board (IAASB) as Canadian Auditing Standards (CAS) dealing with Auditor reporting.

The implications of these new and revised standards are significant and will impact those involved in the financial reporting process (i.e., management, Those Charged With Governance (TCWG), including audit committees) as well as external auditors and financial statement users. The new report provides reporting of going concern matters, as well as entity-specific reporting of other information, and key audit matters for certain entities. The report also provides enhanced transparency by clarifying the scope of the auditor’s work as well as the roles and responsibilities of the auditor, management and TCWG.

These changes aim to enhance communication by offering entity-specific information to make the auditor’s report more informative and relevant to user decision making.

Key audit matters (KAM) - Optional

A significant change that introduces a new level of transparency into the audit process in the new standards is the introduction of KAM. The final reporting standards, as adopted, do not contain a KAM reporting requirement at this time. However, they do allow for law or regulation to require reporting of KAM and for the auditor to decide to do so.

What are the significant changes?

For all audits

Auditor’s Opinion 

The format of the audit report has changed, with the auditor’s opinion presented at the beginning of the report, followed by the basis for opinion.

Auditor’s Independence and Ethics 

The new auditor’s report contains an affirmative statement of independence and fulfillment of relevant ethical responsibilities. 

Going Concern

Enhanced auditor reporting on going concern:

  • Description of management and auditor’s responsibilities related to going concern.
  • Separate dedicated section in the audit report is required, when there is material uncertainty related to going concern.

Other Information (OI)

  • The audit report includes a separate section under the heading “Other Information”, when an entity prepares other information (e.g., annual report or MD&A) containing or accompanying the entity’s financial statements and auditor’s report thereon
  • This section provides details of management and the auditor’s responsibilities for the other information and the auditor’s conclusion from reading and considering the other information.  .
  • For all entities, the report must discuss the auditor’s review of other information, which is available at the time of the audit report.  When some or all of the other information is not yet available at the time of the audit report, the following would apply:
  1. For listed entities, the auditor is required to identify other information that the auditor expects to obtain after the date of the audit report.
  2. For non-listed entities, the auditor is not required to identify other information expected to be obtained after the date of the audit report.  The auditor still has responsibilities to perform necessary procedures on the other information obtained after the date of the auditor’s report.

Other Information” is defined as financial or non-financial information (other than financial statements and the auditor’s report) included in an entity’s annual report. An entity’s annual report may be a single document or a combination of documents that serve the same purpose.

  • Roles and Responsibilities 
  • A description of management’s and auditor’s responsibilities relating to going concern is required.
  • The new auditor’s report discloses identification of those charged with governance (TCWG) within the management’s responsibilities section.
  • There is an expanded description of auditor’s responsibilities, including key features of an audit.

For audits of listed entities

The following are enhancements applicable for listed entities, beyond those enhancements noted for all entities

Roles and Responsibilities

A new description of the auditor’s responsibilities to provide a statement to TCWG that the auditor has complied with relevant ethical requirements regarding independence.

Engagement partner

Disclosure of the name of the engagement partner is required.

To illustrate the changes, take a moment to review a sample of the new Independent Auditor’s Report.

Access the sample report

AUTHORS


Subscribe to our newsletters

Subscribe


HOW CAN WE HELP YOU?

Contact us by phone +1.855.420.8473 or submit your questions, comments or proposal requests


Events

IN-PERSON EVENT

In-Person Events

We proudly sponsor and participate in events that provide innovative ideas and opportunities for you to improve and grow your business.

IN-PERSON EVENT

2019 AMO Conference: Municipalities - Ontario's Frontline

From August 18 – 21, RSM will be exhibiting at the 2019 Association of Municipalities Ontario’s Annual Conference and Trade Show.

  • August 18, 2019

IN-PERSON EVENT

Red Deer Royals 2019 Golf Classic

RSM is proud to sponsor the Red Deer Royals’ 2019 Golf Classic taking place on August 26 at the Red Deer Golf and Country Club.

  • August 26, 2019