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ISA 540 (Revised) implementation support: Audit client briefing

Nov 19, 2019

On November 19, 2019, the International Standard on Auditing (ISA) 540 (Revised) Implementation Working Group released an Audit Client Briefing (Briefing) based on the Canadian Auditing Standard (CAS) Audit Client Briefing of the Chartered Professional Accountants of Canada (CPA Canada), published in October 2019 and is used with permission of CPA Canada.

The purpose of this Briefing is to make chief financial officers, other senior management responsible for financial statement preparation, and staff directly involved in determining accounting estimates aware of matters to consider in preparing for the auditor’s requests pertaining to ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures.

This Briefing provides an overview of:

  • Management’s responsibilities in determining when accounting estimates are needed;
  • Management’s responsibilities regarding the main components of an estimation process; and
  • The impact on management because of changes to the auditor’s responsibilities, including broad questions auditors are likely to ask those involved in the detailed aspects of the estimation process.

This Briefing does not constitute an authoritative pronouncement of the International Auditing and Assurance Standards Board (IAASB), nor does it amend, extend or override the ISAs or other of the IAASB’s International Standards. It is not meant to be exhaustive and reading this Briefing is not a substitute for reading the ISAs.

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

Deloitte Canada's Julie Corden appointed to the IAASB

Nov 18, 2019

On November 18, 2019, the International Auditing & Assurance Standards Board (IAASB) announced their new appointments and re-appointments.

"It is a pleasure to welcome Ms. Almond, Ms. Jackson, and Ms. Corden, now in a permanent capacity, to the International Auditing and Assurance Standards Board.  I look forward to the diverse perspectives they will bring to our group of passionate, dedicated volunteers.  I am also delighted that Fiona Campbell will serve as Deputy Chair for another year," said Tom Seidenstein, IAASB Chair.  " I want to thank Karin French and Marek Grabowski for their steadfast service to our board.  Their contributions were invaluable, and we are grateful for their dedication and commitment".

Review the press release on the IAASB's website.

Update – AASB expands key audit matter reporting

Nov 08, 2019

On November 8, 2019, the Auditing and Assurance Standards Board (AASB) released an update following the feedback it received on its Exposure Draft, Communication of Key Audit Matters in the Auditor’s Report.

After reviewing the feedback received, the AASB agreed to require key audit matter reporting for other listed entities, excluding listed entities required to comply with National Instrument 81-106.

Review the update on the AASB's website.

Auditing in the crypto-asset sector

Nov 07, 2019

On November 7, 2019, the Canadian Public Accountability Board (CPAB) released its 2019 inspections insights on auditing in the crypto-asset sector. There are currently 48 Canadian reporting issuers with activities in the crypto-asset sector. Those activities include a variety of crypto-asset trading strategies and crypto-asset mining.

They found significant findings (deficiencies in the application of generally accepted auditing standards that could result in a restatement of the company’s financials) in seven of eight audit files inspected to date. Remediation remains in progress for some of those audits.

The five most common deficiencies include:

  1. Auditors did not have an adequate understanding of audit risks when they designed their audit approaches.
  2. Auditors relied on information obtained from crypto-exchanges and custodians without evaluating the reliability of that information.
  3. For entities that hold self-custodied crypto-assets, auditors did not obtain sufficient evidence to support the entities’ ownership claims to those assets.
  4. Auditors did not evaluate the reliability of information obtained from blockchains.
  5. For entities engaged in crypto-asset mining activities, auditors that limited their audit work to vouching crypto-assets received to the blockchain did not obtain sufficient audit evidence.

Review the publication on the CPAB's website.

The future of international standard setting

Oct 21, 2019

On October 21, 2019, the International Auditing and Assurance Standards Board (IAASB) published a speech by Tom Seidenstein IAASB Chair to the Institute of Chartered Accountants of England and Wales’s Audit Conference.

In his speech, Mr. Seidenstein expresses that he firmly believes that auditors must play a critical role in ensuring trust in markets. He worries that trust is eroding in these institutions and in the way the economy works. It is his belief that that the IAASB, in conjunction with their many stakeholders, can and must play a role in enhancing and possibly restoring trust where it has eroded.

Review the full speech on the IAASB's website.

Focus on professional skepticism

Oct 18, 2019

On October 18, 2019, the International Auditing and Assurance Standards Board (IAASB) published its third update to stakeholders highlighting the IAASB’s efforts to appropriately reflect professional skepticism in its standards.

Review the update on the IAASB's website.

AASB response – Audits of less complex entities

Oct 04, 2019

On October 4, 2019, the International Auditing and Assurance Standards Board (IAASB) published the Auditing and Assurance Standards Board's (AASB) comment letter responding to the IAASB’s Discussion Paper, Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges of Applying the ISAs.

Overall, the AASB is very supportive of the IAASB’s efforts to obtain a greater understanding of the challenges that practitioners encounter in applying the ISAs in a scalable and proportionate manner.

The challenges in applying the ISAs require a solution that focuses on the complexity of the elements of an entity’s operations and financial statements rather than on the complexity of the entity. Therefore, the AASB believes that the most effective solution is to address within each ISA the ability to scale or modify requirements for the less complex elements of an entity’s operations and financial statements. Also, the solution needs to be practical and achievable in a reasonable timeframe.

However, the AASB does not believe that the development of a separate auditing standard for LCEs based on the ISAs is an appropriate solution.

Review the comment letter on the IAASB’s website.

Critical audit matters: What firms are reporting

Oct 04, 2019

On October 4, 2019, the Journal of Accountancy released an article on how some important themes are emerging in auditors’ reporting of critical audit matters, which are the key component of the biggest change to public company auditor reporting in 70 years.

Goodwill and intangible assets, revenue, and income taxes were the most frequent topical areas reported identified in a summary of 52 audit reports of large accelerated filers analyzed by Deloitte.

Meanwhile, a sample of public company auditors’ reports reviewed for the JofA showed that in reporting on critical audit matters, practitioners are providing detailed discussion of the audit procedures they performed and including cross-references to the related notes in the financial statements that are related to the critical audit matters.

Critical audit matters provide auditors with an unprecedented opportunity to communicate in auditor’s reports, and the first reports filed under the new PCAOB rules show that practitioners are providing a thorough and thoughtful approach to that communication.

Review the full article on the Journal of Accountancy's website.

CPAB releases 2019 fall inspections results

Oct 03, 2019

On October 3, 2019, the Canadian Public Accountability Board (CPAB) released its "Audit Quality Insights Report: 2019 Fall Inspections Results".

CPAB has inspected 66 of 72 audit engagement files that will be reviewed by the end of 2019 across the four firms. To date, we have identified significant findings (deficiencies in the application of generally accepted auditing standards that could result in a restatement of the company’s financials) in 12 of those files. The total number of inspection findings to date is lower than 2018.

Most of these findings required the firm to carry out additional audit procedures to determine the need, if any, to restate the financial statements due to material error. The remaining findings required firms to add evidence to the audit file to show they had obtained sufficient and appropriate audit evidence with respect to a major balance sheet item or transaction stream.

CPAB expects firms to remediate file deficiencies before their reporting issuer’s next quarterly report. Where a restatement is required, the firm works with the reporting issuer and securities legal counsel to issue the restatement as soon as possible. No restatements have been required to date.

Review the report on CPAB's website.

"Keep Calm and Carry On": The role of regulators in cybersecurity and resiliency

Oct 03, 2019

On October 3, 2019, the Public Company Accounting Oversight Board (PCAOB) published a speech by Kathleen M. Hamm, PCAOB Board Member, where she shares her views on a topic that intertwines both technology and capital market regulation: cybersecurity, resiliency, and the role of financial regulators.

In her speech, she discusses the following:

  • Nature of cyber threats
  • Framework for effective responses
  • Levers of financial regulators
  • Baseline protections and best practices
  • Response and recovery

Review the full speech on the PCAOB's website.

Correction list for hyphenation

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