2022

CPAB Express – Existence of crypto-assets held by third parties

Aug 19, 2022

On August 19, 2022, the Cana­dian Pub­lic Ac­count­abil­ity Board (CPAB) re­leased a bulletin that high­lights their concerns about the quality of evidence that some auditors are obtaining when auditing the existence of crypto-assets held in custody by third parties.

The bulletin describes things that CPAB believes auditors should be considering when auditing the financial statements of reporting issuers that use custodians to safeguard their crypto-assets.

Re­view the bulleting on the CPAB’s web­site.

CPAB planned changes to disclosure and 2022 outreach overview

Dec 21, 2022

On December 21, 2022, the Canadian Public Accountability Board (CPAB) released its planned changes to disclosure and 2022 outreach overview.

Expanding the information CPAB discloses

In September, CPAB outlined planned changes to how we will disclose information about the results of our regulatory assessments.

Beginning in 2023, CPAB will publish information on recent enforcement and other regulatory actions imposed on audit firms.

2022 outreach overview

Here's a summary of CPAB's 2022 publications:

CPAB Exchange

Publications in the CPAB Exchange series highlight important issues and share practical insights with a view to prompting productive dialogue with audit firms and audit committees.

In 2022, they published the following:

  • Going concern thematic review focuses on ways for auditors to more proactively assess going concern and underscores the importance of identifying early warning indicators and consistently applying professional skepticism.
  • Fraud thematic review, also published in May, outlines steps that auditors could take to enhance the quality of their fraud risk identification and assessments, and identifies opportunities to enhance existing standards.
  • Auditing in the crypto-asset sector report provides important insights and recommendations for those auditing the existence of crypto-assets held in custody by third parties.

Inspections reports

Twice annually, CPAB publishes the results of our inspections work. The full-year report on inspections conducted in 2021 was published in March. The interim report, published in October, provided a snapshot of themes and insights from our audit quality assessment work in the first portion of 2022.

Strengthening audit quality

In 2022, they published two additional papers intended to strengthen audit quality:

CPAB publishes planned changes to information disclosure

Oct 04, 2022

On October 4, 2022, the Canadian Public Accountability Board (CPAB) published its disclosure recommendations document, outlining planned changes to how they will disclose information about the results of their regulatory assessments. Their recommendations include both near-term changes to be implemented in 2023 and longer-term modifications which require changes to legislation or to our rules.

Based on a comprehensive consultation process and a review of approaches in other jurisdictions, the changes outlined in the document are driven by a desire to provide more information and align with disclosure approaches in similar jurisdictions while respecting Canada’s unique regulatory environment.

Given continued high levels of inspection findings, and changes in audit and regulatory practices and stakeholder expectations, it is appropriate to evolve our current disclosures approach. This evolution is consistent with CPAB’s role as Canada’s public company audit firm regulator charged with protecting the investing public’s interests.

CPAB's recommendations include both near-term changes to be implemented in 2023 and longer-term modifications which require changes to legislation or to our rules. These longer-term changes are expected to take a minimum of two to three years because changes to CPAB’s Rules and its governing legislation require the involvement of provincial governments and securities regulators.

In the near-term, beginning in 2023, CPAB, where possible, will disclose:

  • Significant enforcement actions imposed on a firm following an inspection
  • Recommendations which were included in a firm report but not addressed by the firm

Over the longer term, CPAB will work to secure rule or legislative changes which will allow the following:

  • Mandatory disclosure of issuer-specific significant inspection findings to that issuer’s audit committee
  • Individual public inspection reports for each audit firm

Review the recommendations on the CPAB's website.

CPAB Regulatory Oversight Report: 2021 Annual Inspections Results

Apr 05, 2022

The Canadian Public Accountability Board’s (CPAB) Regulatory Oversight Report on its 2021 annual inspections features common findings and highlights several audit quality matters that impact audit committees, regulators and investors.

CPAB's 2021 findings show mixed inspection results with inconsistent audit performance among the 11 annually inspected audit firms. Key findings at the annually inspected firms include:

  • Two of the four largest firms met the target of no more than 10 per cent of files inspected with significant findings.
  • The findings rate at the other annually inspected firms in 2021 is substantially above CPAB’s target.
  • Four firms had significant findings in more than 50 per cent of files inspected and three firms had significant findings in more than 25 per cent of files inspected.
  • Investigations at two annually inspected audit firms resulted in the imposition of requirements and/or sanctions including public censure.

Overall, their reviews point to disappointing deficiencies in the areas of professional skepticism, sufficient audit evidence and forward-looking estimates. They expect a continued high level of enforcement and other regulatory intervention in 2022.

Review the report on the CPAB's website.

Exposure Draft – Joint Policy Statement Concerning Communications between Actuaries Involved in the Preparation of Financial Statements and Auditors

Jun 30, 2022

On June 30, 2022, the Auditing and Assurance Standards Board (AASB) and the Canadian Actuarial Standards Board (ASB) issued a joint Exposure Draft on the Joint Policy Statement Concerning Communications between Actuaries Involved in the Preparation of Financial Statements and Auditors. Comments are requested by September 19, 2022.

The JPS is intended to facilitate communications between an auditor and an actuary as the two professionals conduct their respective engagements relating to an entity’s financial statements. 

Review the following on the AASB's website:

FAQs – Extended External Reporting (EER)

Nov 30, 2022

The Auditing and Assurance Standards Board (AASB) issued FAQs regarding assurance in respect of sustainability and environmental, social and governance.

Review the FAQ on the AASB's website.

FRC publishes professional judgement guidance for auditors

Jun 23, 2022

On June 23, 2022, the Financial Reporting Council (FRC) published professional judgement guidance for auditors to improve how they exercise professional judgement.

The new guidance includes a framework for making professional judgements followed by a series of illustrative examples showing how professional judgement might be applied in practice.  The FRC anticipates that the guidance will improve audit quality by enhancing the consistency and quality of professional judgement exercised by auditors.
 
The guidance will be of particular use for auditors and central technical teams but will also have wider interest for those interested in audit quality, such as audit committee members and investors.  It is non-authoritative and is intended to be persuasive rather than prescriptive, encapsulating good practice.  However, practitioners who chose not to use or consider this guidance will need to be prepared to explain how they have complied with the relevant engagement standards.

Review the following on the FRC's website:

IAASB Fact Sheet Addresses Engagement Team Definition

May 02, 2022

On May 2, 2022, the International Auditing and Assurance Standards Board (IAASB) released a new fact sheet to help users of its standards adapt to the clarified and updated definition of “engagement team”.

The new fact sheet addresses the clarified definition and its possible impacts, including recognition that engagement teams may be organized in a variety of ways, including across different locations or by the activity they are performing. The fact sheet also includes a diagram that walks users through who specifically is included and excluded.

Review the press release and fact sheet on the IAASB's website.

IAASB fact sheet helps auditors navigate quality management for group audits

Dec 15, 2022

On December 15, 2022, the International Auditing and Assurance Standards Board (IAASB) published a new fact sheet on the interactions between International Standard on Audit (ISA) 220 (Revised), which addresses quality management at the engagement level, and ISA 600 on group audits.

The fact sheet highlights aspects of a group audit that may be affected by ISA 220 (Revised) and International Standard on Quality Management 1 addressing quality management at the firm level. This includes the revised definition of engagement team and leadership and direction, supervision, and review responsibilities.

Review the press release and fact sheet on the IAASB's website.

IAASB issues guidance on how amendments made to IAS 1 impact the ISAs

Nov 16, 2022

On November 16, 2022, the International Auditing and Assurance Standards Board (IAASB) published new guidance to help users understand the impact on the International Standards on Auditing (ISAs) due to narrow-scope amendments made to IAS 1, "Presentation of Financial Statements".

While the IAASB remains framework neutral when developing the ISAs, it considers financial reporting framework developments that may affect the ISAs, such as changes to the International Financial Reporting Standards (IFRS). Amendments to IAS 1 and the Impact on the ISAs: Disclosure of Material Accounting Policy Information, among other matters, provides users with guidance on how to address the effect of the amendments on a number of illustrative auditor reports throughout the ISAs that assume, as part of the fact pattern, that the financial statements are prepared by the management of the entity in accordance with IFRS Standards.

Review the press release and guidance on the IAASB's website.

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