Canadian Auditing Standard 315, Identifying and Assessing the Risks of Material Misstatement (CAS 315), was revised effective for 2022 calendar year-ends to better align with the increasing complexity of business models and the use of technology while emphasizing an iterative and dynamic approach to risk assessment.

While CPAB has observed improvements to auditors' risk assessment procedures, it believes that more remains to be done. CPAB identified findings related to implementing the revised standards across a range of audit areas, including revenue, business combinations, financial instruments, and inventory.

This CPAB’s communication is intended to highlight the importance of understanding the entity. It also provides insights into the significant findings identified through illustrative scenarios and shares good practices observed in files with no findings. CPAB expects audit firm leadership to develop targeted actions to improve the quality of auditor’s identification and assessment of risks. It also emphasizes the importance of holding management accountable for fulfilling the responsibilities, effective two-way communication with the audit committee and the importance of robust risk identification and assessment to audit quality.

Access the report on the CPAB’s website.