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AASB Decision Summary – Auditor Reporting

Oct 03, 2016

On October 3, 2016, the Auditing and Assurance Standards Board (AASB) released an update of its discussions and decisions on the auditor reporting standard at its September 12-13, 2016 meeting.

The AASB discussed issues related to the adoption of ISAs on auditor reporting, as well as views raised by AASOC members at its July 2016 meeting, including:

  • the scoping, and effective dates for the implementation of key audit matters reporting;
  • whether early application should be allowed and, if so, the implications;
  • how to support successful implementation of the standards;
  • timelines for issuance of the standards and related materials to support their implementation; and
  • key messages to highlight in a message from the Chair.

The AASB will continue to discuss these and other issues at its October 2016 meeting. The AASB Chair intends to issue a message to update stakeholders with more details on the progress of this project in late 2016.

Review the summary on the AASB's website.

AASB Strategic Plan – 2016-2021

Aug 17, 2016

On August 17, 2016, the Auditing and Assurance Standards Board (AASB) released its Strategic Plan for 2016-2021 which outlines its mission, vision, strategic objectives, specific strategies and actions that will guide it in carrying out its standard-setting mandate for this period.

As set out in this Strategic Plan, the AASB plans to continue to set high-quality standards that meet the needs of Canadian stakeholders while focussing on increasing stakeholder engagement.

In addition, on the same date, the AASB issued a staff-prepared Basis of Conclusions document which provides a brief summary of the AASB's objectives in developing its 2016-2021 Strategic Plan, the public exposure and approval steps for this plan and how the AASB dealt with significant matters arising from comments received in response to its Invitation to Comment.

AASOC Issues Paper on its Consideration of the Public Interest

Aug 02, 2016

On August 2, 2016, the Auditing and Assurance Standards Oversight Council (AASOC) issued a paper entitled, “AASOC’s Consideration of the Public Interest” AASOC is required to operate in the public interest. Key points outlined in the paper include: who are our public? what are the interests of our public? and how we assess whether an action, decision or policy is in the public interest?

Re­view the paper on the AASOC's Web site.

AICPA Proposes Criteria for Cybersecurity Risk Management

Sep 19, 2016

On September 19, 2016, the Assurance Services Executive Committee of American Institute of CPAs (AICPA) released two sets of criteria on cybersecurity for public comment, which the institute hopes will start to lay the groundwork for a new set of assurance services.

The first exposure draft, Proposed Description Criteria for Management’s Description of an Entity’s Cybersecurity Risk Management Program, is intended for use by management in designing and describing its cybersecurity risk management program and by public accounting firms to report on management’s description.

The second, Proposed Revision of Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy, outlines revised AICPA trust services criteria for use by public accounting firms that provide advisory or attestation services to evaluate the controls within an entity’s cyber risk management program, or SOC 2 engagements. Management also may use the trust services criteria to evaluate the suitability of design and operating effectiveness of controls.

Comments on the cybersecurity attestation exposure drafts are due by December 5, 2016.

Review the press release on the AICPA's website.

Alert – International Standards on Auditing Not Adopted as Canadian Auditing Standards as at December 15, 2016

Dec 05, 2016

On December 5, 2016, the Auditing and Assurance Standards Board (AASB) released an alert notifying that auditors performing audits of financial statements in accordance with CASs for periods ending on or after December 15, 2016 should not represent compliance with ISAs unless they have also complied with these ISAs issued by the IAASB.

The following ISAs, which are effective for audits of financial statements for periods ending on or after December 15, 2016, have not been adopted as CASs.

  • New Auditor’s Report: New and revised ISAs (and related conforming amendments) as a result of the project to enhance the communicative value of the auditor’s report
  • Other Information: Revisions to ISA 720, The Auditor’s Responsibilities Relating to Other Information (and related conforming amendments)
  • Disclosures: Changes to ISAs issued as a result of the Disclosures project.

Review the full alert on the AASB's website.

Assessing Initiatives to Improve the Quality of Group Audits Involving Other Auditors

Nov 30, 2016

In November 2016, the Public Company Accounting Oversight Board (PCAOB) released the paper "Assessing Initiatives to Improve the Quality of Group Audits Involving Other Auditors." The paper was presented at the PCOAB’s 2016 Conference on Auditing and Capital Markets on October 20-21, 2016.

One of the major current concerns of regulators internationally is the quality of the auditing of multinational groups, particularly those involving the co-ordination by the principal auditor of other auditors. These concerns resulted in changes to the international auditing standard on group audits, International Standards on Auditing (hereafter ISA) 600, which are consistent with current initiatives being considered by the PCAOB. The authors examine audit quality pre and post ISA 600 to help inform the IAASB as to the efficacy of the ISA 600 amendments and inform the PCAOB with regard their similar initiatives under consideration. They make use of unique Australian disclosures which allow them to identify the nature and extent of involvement of other auditors in group audits. They found that the revisions to ISA 600 have contributed to an improvement in audit quality, specifically for clients of non-Big 4 auditors. Further, the authors found that the quality of MNE group audits involving other auditors from the same network is lower, and this appears not to be affected by the ISA 600 revisions. Consistent with regulatory concerns, they also examine whether there are any incremental costs for group audits involving other auditors. While the authors found that group audits involving other auditors are more costly, they did not find evidence of an increase in audit fees associated with these regulatory initiatives.

Review the study on the PCAOB's website.

Auditors With or Without Styles? Evidence from Unexpected Auditor Turnovers

Nov 30, 2016

In November 2016, the Public Company Accounting Oversight Board (PCAOB) released the paper "Auditors With or Without Styles? Evidence from Unexpected Auditor Turnovers" by Tai-Yuan Chen and Hong-Da Wang. The paper was presented at the PCOAB’s 2016 Conference on Auditing and Capital Markets on October 20-21, 2016.

Using unexpected auditor turnovers as a quasi-experiment, in this study we examine whether individual auditors exhibit a significant impact on audit quality. More specifically, focusing on auditor turnovers precipitated by the incumbent auditor’s sudden death or by resignation due to health issues or a career change, we investigate audit quality changes surrounding these unexpected events. While we find some evidences that unexpected auditor turnovers are associated with significant audit quality changes for non-Big 4 audit firms, this is not the case for auditor turnovers at Big 4 firms even though there are greater differences in personal characteristics between outgoing and successor auditors in Big 4 firms. This finding suggests that notwithstanding differences in auditors’ personal characteristics, standardized audit procedures and strong internal controls can constrain individual auditors in large audit firms from impacting audit quality.

To summarize, their study suggests that on average individual auditors in Taiwan do not exhibit a significant personal effect on audit quality, particularly when they work for Big 4 audit firms. As Taiwan’s audit market is very similar to that of countries such as the U.S., Canada, or Australia, with Big 4 auditors accounting for 80% of public firm auditing, their findings have important implications for other countries. Specifically, as many countries are starting to mandate identification of signing audit partner(s) in the audit report, in an effort to hold individual auditors accountable for audit outcomes, their study suggests that whether this disclosure can improve overall audit quality is open to debate, in particular for Big 4 audit firms.

Review the study on the PCAOB's website.

Canadians speak out on IAASB’s Invitation to Comment

Jun 06, 2016

On June 6, 2016, CPA Canada released a blog by Eric Turner on how Canadian stakeholders firmly voiced their opinion on the IAASB’s Invitation to Comment (ITC) on Enhancing Audit Quality in the Public Interest; it’s important that this dialogue continue with the AASB as key standards get revised.

The ITC focuses on professional skepticism, quality control and group audits. In this blog, Eric gives a snapshot of the key messages that came out of these recent consultations.

Review the blog on the CPA Canada's Web site.

CAQ issues new audit alerts summarizing potential risk areas

Oct 04, 2016

On October 4, 2016, the Center for Audit Quality (CAQ) published two new member alerts, “Select Auditing Considerations for the 2016 Audit Cycle” (the “audit alert”) and “Select Auditing Considerations for the 2016 Audit Cycle for Brokers and Dealers” (the “broker-dealer alert”), that can help public company auditing firms address potential risks in a proactive and accelerated manner.

Topics discussed in the audit alert include:

  • Improving transparency by disclosing the engagement partner and certain other audit participants
  • Improper alteration of audit documentation
  • Effective communication with audit committees
  • Assessing and responding to risks of material misstatement
  • Internal control over financial reporting
  • Segment identification and disclosure
  • Going concern
  • Additional considerations for the 2016 audit cycle

Topics discussed in the broker-dealer alert include:

  • Revenue recognition
  • Assessing and responding to risks of material misstatement due to fraud
  • Financial statement presentation and disclosures
  • Auditor independence
  • Related-party transactions
  • Supplemental information accompanying financial statements

For additional information, see the press release on the CAQ’s Web site.

CAQ releases the 10th Annual Main Street Investor Survey: A Decade of Investor Confidence

Sep 29, 2016

On September 29, 2016, the Center for Audit Quality (CAQ) released the 10th Annual Main Street Investor Survey: A Decade of Investor Confidence. Each year, the Main Street Investor Survey measures retail investor confidence in U.S. capital markets, global capital markets, and audited financial information, as well as confidence in investing in publicly traded companies.

For the 10th edition, the strength of Main Street investor confidence is apparent across the major measures that the CAQ has tracked since 2007. In 2016:

  • 79% of investors express confidence in U.S. capital markets.
  • 81% of investors have confidence in investing in U.S. publicly traded companies, an all-time high in our survey.
  • Three-quarters of investors say they are confident in audited financial information released by publicly held companies.
  • Investors appreciate the key players in the financial system, showing high degrees of confidence in external auditors, independent audit committees, and stock exchanges.

Review the survey on the CAQ's website.

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