The FRC’s review highlights:

• Fair value measurements should use market participants’ rather than the company’s own assumptions.
• There is scope for improvement of the disclosures provided by many companies, especially regarding reporting about the valuation approach, underlying assumptions, management judgement and estimation uncertainty.
• Companies should consider using specialist third party advice when valuing a material item and where there is no internal expertise.

Re­ad the full review on the Financial Reporting Council website.

Specifically, audit deficiencies were observed in the following areas:

• Fraud and significant unusual transactions.
• Crypto asset ownership.
• Relevance and reliability of information used as audit evidence.
• Revenue recognition related to the transfer of crypto assets.
• Arrangements with mining pool operators.

In addition, the publication addresses best practices and reminders for auditors to consider when performing their audit procedures.

Re­view the publication on PCAOB’s website.

Fraud: The AASB discussed issues related to the International Auditing and Assurance Standards Board’s (IAASB) proposed revisions to International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.

Listed Entity/Public Interest Entity Track-1: The AASB discussed issues related to the IAASB’s narrow-scope amendments project to revise the definitions of “listed entity” and “public interest entity,” including proposed revisions to ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and ISA 260 (Revised), Communication with Those Charged with Governance.

Audits of Less Complex Entities (LCEs): The AASB discussed issues related to the IAASB’s project to develop an ISA for Audits of Financial Statements of Less Complex Entities (ISA for LCE).

Sustainability Assurance: The AASB discussed issues related to the IAASB’s project to develop International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements.  

Access the meeting summary on the FRAS Canada website.

The proposal would, among other things, “establish specific requirements for auditors to understand management’s processes regarding compliance with laws and regulations, which can provide insight into the company’s control environment, and to identify, through inquiry and other procedures, laws and regulations applicable to the company with which noncompliance could reasonably have a material effect on the financial statements.” Comments on the proposal are due by August 7, 2023.

Re­view the press release on PCAOB’s website and our project summary.

This MoU provides a framework for expanding the cooperation between the IBA and IFAC, with a particular focus on anti-corruption and how the professions can work more closely together in the fight against money-laundering and economic crime., with key stakeholders such as the United Nations and Financial Action Task Force. Other areas of cooperation include maintaining the reputations and integrity of the accountancy and legal professions; ensuring that initiatives to regulate both professions are proportionate and fit-for-purpose; and enhancing the strength of the IBA and IFAC’s collective voice on global policy issues so that the legal and accountancy professions are in the best position to serve the public interest.

Access the news release on the IFAC website.

Topics covered include:

• What is the Internet of Things? Why is it important?
• The latest developments
• What this might mean for the IAASB

Access the market scan on the IAASB website.

The roles and responsibilities of the Sustainability Assurance Committee are to:

• understand current and explore future Canadian trends, practices, and challenges related to sustainability assurance;
• review the IAASB agenda materials to determine the impact and issues relevant to Canada, and provide input to the AASB for its consideration;
• assist the AASB in its future Canadian sustainability assurance activities and standard setting; and
• assist the AASB with external outreach and collaboration activities with other Canadian Standard-setting Boards (AcSB, PSAB, and CSSB).

Access the details of this Committee on the FRAS Canada website.

Here’s an excerpt from the comments:

“We support the proposed amendments to ISA 700 (Revised). We agree that the revisions provide a clear mechanism to operationalize the IESBA’s transparency requirement, while recognizing that some jurisdictions, like Canada, adopt the ISAs but apply ethical requirements different from the IESBA Code.

However, we believe paragraph 17 of ISA 260 (Revised) should be amended to include an explicit requirement for the auditor to communicate with those charged with governance which independence requirements were applied. We believe those charged with governance should be fully informed regarding the firm’s independence, including which independence requirements were applied. We are concerned that proposed paragraph A29 of ISA 260 (Revised) may not, in all circumstances, achieve this desired transparency.

” Finally, we are concerned that the IAASB has other projects underway, in addition to this project, that may result in multiple changes to the auditor’s report. These changes, in relatively quick succession, could create implementation challenges and reduce the understandability of the auditor’s report. In considering any future revisions to the auditor’s report, we strongly urge the IAASB to ensure such revisions are coordinated to mitigate the risk of these potential unintended consequences.

Access the AASB comments on the IAASB website.

Here’s an excerpt from the comments:

“We are pleased with the IAASB’s proposal to include audits of group financial statements (Group audits) in the scope of the proposed ISA for LCE. Not all group audits exhibit characteristics of complexity. As such, audits of less complex groups should be within the scope of the proposed ISA for LCE.

However, we have significant concerns with the proposed “bright line” exclusion of the use of the proposed ISA for LCE when component auditors are involved. We believe that the proposed prohibition could increase the complexity of the auditor’s decision-making process regarding the use of the proposed ISA for LCE. Consequently, we believe the prohibition will considerably limit the application of the proposed ISA for LCE in Canada and will be a significant factor as we assess whether the proposed ISA for LCE meets the needs of Canadians.

As a result, we recommend that the Authority not include a prohibition when component auditors are involved. In our view, the qualitative characteristics set out in the Authority that describe the typical LCE, in addition to the group-specific qualitative characteristics set out in ED-ISA for LCE Part 10, should be adequate for the purpose of determining the appropriate use of the proposed ISA for LCE for group audits.”

Access the AASB comments on the IAASB website.

The proposed changes aim to:

• Promote consistent practice and behavior and facilitate effective responses to identified risks of material misstatement related to going concern;
• Strengthen the auditor’s evaluation of management’s assessment of going concern, including reinforcing the importance, throughout the audit, of the appropriate exercise of professional skepticism; and
• Enhance transparency with respect to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.

The IAASB invites all stakeholders to comment on the proposed revisions via the IAASB website. Comments are requested by August 24, 2023.

Re­view the news release on IAASB’s website.