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 |
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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:
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Other Information (OI) |
“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. |
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For audits of listed entities |
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The following are enhancements applicable for listed entities, beyond those enhancements noted for all entities |
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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.
