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Addressing Disclosures in the Audit of Financial Statements (Amendments to CASs 200, 210, 240, 260, 300, 315, 320, 330, 450 and 700) [Completed]

Effective date:

The new and revised auditor reporting standards will be effective for audits of financial statements for periods ending on or after December 15, 2018.

Included in the CPA Canada Handbook – Assurance:

Expected to be included in a Handbook update in mid-2017.

Last up­dated:

June 2017

Overview

Financial statement disclosures have become more detailed and complex as a result of evolving financial reporting standards. The IAASB has undertaken and recently completed, in July 2015, a project to develop guidance on the audit of financial statement disclosures.

The objective of the IAASB project was to gain robust understanding of the views and perspectives on issues relevant to auditing disclosures in a financial statement audit. The IAASB’s objectives further included: (i) determining whether revisions (in the form of new or revised requirements, or additional application material) to the ISAs with respect to auditing disclosures are required; (ii) considering how such revisions should be presented (for example, within the relevant ISAs or in a separate ISA); and (iii) determining whether another type of non-authoritative guidance should be developed and, if so, developing the content.

Which ISAs are affected by the changes?

Standard

Changes

ISA 200, Overall Objectives of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing

Change to definition of “financial statements and enhancement to related application material

ISA 210, Agreeing the Terms of Audit Engagements

New application material – encouraging management to provide information for disclosures earlier in the audit process  

ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements

New application material – considering whether there is intentional misstatement of disclosures that may constitute fraud

ISA 260 (Revised), Communication with Those Charged with Governance

New application material – communicating with those charged with governance regarding financial statements and disclosures earlier in the audit process

ISA 300, Planning an Audit of Financial Statements

New application material – encouraging auditors to consider disclosures earlier in the audit process.

ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment

Enhanced requirements and new application material – Highlighting the need for attention to information in disclosures obtained from outside of the general and subsidiary ledgers in the planning process. Revised assertions to integrate audit procedures for disclosures with account balances and transactions

ISA 320, Materiality in Planning and Performing an Audit

New introductory and application material – emphasizing that materiality needs to be considered for qualitative disclosures

ISA 330, The Auditor’s Responses to Assessed Risks

Enhanced requirements and new application material - strengthened procedures around the reconciliation of the financial statements and consideration of the adequacy of the presentation and disclosure in the financial statements

ISA 450, Evaluation of Misstatements Identified during the Audit

New application material – emphasizing that misstatements in disclosures need to be accumulated and evaluated

ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements

Enhanced requirements and new application material – strengthening the audit procedures auditors perform when evaluating the financial statements

The final amendments to the ISAs approved by the IAASB in July 2015 will include strengthened requirements in CAS 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment , CAS 330 , The Auditor’s Responses to Assessed Risks, and CAS 700, Forming an Opinion and Reporting on Financial Statements, as well as enhanced application material in these and several other ISAs to more explicitly address disclosures.

The amend­ments to the ISAs ap­proved by the IAASB are ef­fec­tive for pe­riods end­ing af­ter De­cem­ber 15, 2016, with ear­lier adop­tion per­mit­ted.

The AASB is committed to adopting the ISAs. Revisions that the IAASB has made to the ISAs will be reflected in the equivalent Canadian Auditing Standards (CASs).

The AASB decided that the effective date of the re­vised CASs should be should be consistent with the effective date of the new auditor reporting standards.

In April 2017, the AASB unanimously approved new and revised CASs relating to auditor reporting, and the auditor’s responsibilities relating to other information. The Board also unanimously approved related conforming amendments to other standards, and amendments to address disclosures in the audit of financial statements.

The Board concluded that changes made in finalizing the standards were significantly different from the proposals in the Exposure Drafts and Invitations to Comment. The significant differences from the proposals are:

  • deferring the effective date for application by one year; and
  • amending the scope of reporting of key audit matters so that such matters are communicated in the auditor’s report only when required by law or regulation or the auditor decides to do so.

Since these changes were made in response to feedback received, the Board unanimously decided not to re-expose the CASs. The new and revised standards will be effective for audits of financial statements for periods ending on or after December 15, 2018 and are expected to be included in the CPA Canada Handbook update in mid-2017.

 

Other developments

June 2017

On June 12, 2017, the AASB issued the Basis for Conclusions – Addressing Disclosures in the Audit of Financial Statements, which sets out how the AASB reached its conclusions.

October 2016

In October 2016, the AASB staff updated this project to advise that the final CPA Canada Handbook material is expected to be issued in Q2/2017. 

February 2016

On February 26, 2016, the AASB released a Bulletin where it provides an overview of several revisions to Canadian Auditing Standards (CASs) to more effectively address disclosures in the audit of financial statements. The AASB has approved revisions to a number of the CASs to more effectively address disclosures in the audit of financial statements. These revisions, which include some changes to requirements and more extensive changes to application material in several CASs, are expected to be effective for periods ending on or after December 15, 2017. In order to facilitate their effective implementation, the issuance of these revisions in the CPA Canada Handbook – Assurance will be deferred until the AASB completes its project to adopt the new auditor reporting standards. This Bulletin refers to these revisions and highlights matters that may be of relevance for auditors when addressing disclosures as part of an audit of financial statements. In particular, it describes financial reporting disclosure trends and their possible implications from an audit perspective and highlights how the CASs will guide the auditor in addressing disclosures. While the CASs are not yet effective, this Bulletin is issued to promote good practice in the auditing of financial statement disclosures.

December 2015

In December 2015, the AASB staff updated this project to advise that the final Canadian standards are expected to be issued in Q3/2016.

July 2015

On July 15, 2015, the IAASB issued a Press Release and published its Final Amendments to the ISAs in respect of this project including (i) its staff-prepared Basis for Conclusions document; (ii) a staff-prepared At a Glance summary of the amendments; and a staff-prepared Paper entitled, Addressing Disclosures in the Audit of Financial Statements.

June 2014

On June 9, 2014, the AASB issued its Exposure Draft, Addressing Disclosures in the Audit of Financial Statements, which proposes to adopt changes to certain ISAs issued by the IAASB dealing with disclosures in the audit of financial statements.  The AASB proposed no Canadian amendments to the proposed revised ISAs. Comments requested by August 15, 2014.

May 2014

On May 14, 2014, the IAASB issued an Exposure Draft, Addressing Disclosures in the Audit of Financial Statements, detailing its proposed changes to the ISAs to clarify expectations of auditors when auditing financial statement disclosures.  Comments requested by September 11, 2014.

 

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