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Enhancing Audit Quality in the Public Interest: A Focus on Professional Skepticism, Quality Control, and Group Audits (Possible Amendments to CAS 200, CAS 220, CAS 315, CAS 600 and CSQC 1) [Research]

Next Steps:

The AASB expects to issue an Exposure Draft on Quality Control for comment in Q1/2019.

Last up­dated:

July 2018

Overview

On July 19, 2013, the International Auditing and Assurance Standards Board (IAASB) issued its report on the Post-Implementation Review of the Clarified ISAs, including ISQC 1, Quality Control for Firms that perform Audits and Reviews of Financial Statements, and Other Assurance Engagements, (the PIR). The findings identified the need to make improvements to certain standards, specifically ISA 200, ISA 220 and ISQC 1, ISA 315 and ISA 600, in order to achieve more consistent and effective application of the ISAs. Subsequently, the IAASB’s public consultation on its Work Plan for 2015-2016 highlighted its commitment to addressing the significant findings of the PIR on a timely basis and respondents to this consultation urged the IAASB to do so in the public interest.

As a re­sult, on December 17, 2015, the IAASB issued an Invitation to Comment entitled, Enhancing Audit Quality in the Public Interest: A Focus on Professional Skepticism, Quality Control and Group Audits (the ITC) which highlights the Board’s discussions on the topics of professional skepticism, quality control and group audits – and flags potential standard-setting activities the IAASB could take to enhance audit quality. The IAASB also released a companion document, an Overview of the ITC, designed at soliciting feedback from investors, audit committees, and preparers. It summarizes the key areas the IAASB is exploring and the direction it may take and may be useful in facilitating outreach by stakeholders to develop their responses. Comments to the IAASB ITC are due by May 16, 2016.

Among the possible amendments being considered by the IAASB are in respect of the following:

Professional skepticism

  • whether interpretations of the concept of professional skepticism are consistent with how it is defined in ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with International Standards of Auditing, and referred to in the other ISAs, and, if not, how could the concept be better described?
  • what steps the IAASB should take to enhance the drivers of, and impediments to, the appropriate application of professional skepticism; and
  • what actions should others, such as the International Ethics Board for Accountants (IESBA), the International Accounting Education Standards Board (IAESB) and other professional bodies, take to address the factors that inhibit the application of professional skepticism and the actions needed to mitigate them.

Quality control

  • whether ISQC 1 should be broadened to include the use of a quality management approach and if this would improve audit quality or, if not broadened, how can this standard be improved in order to deal with differences in the size and nature of a firm or the services it provides;
  • whether or not ISQC 1 and ISA 220, Quality Control for an Audit of Financial Statements, should be updated for a number of specific improvements identified by the IAASB; and

Group audits

  • what steps should the IAASB take to revise ISA 600, Special considerations — Audits of Group Financial Statements (including the Work of Component Auditors), in order to respond to issues with group audits.

The AASB is committed to making corresponding changes to the CASs in the event that the IAASB amends the ISAs. Accordingly, on February 29, 2016, the AASB issued its own Invitation to Comment in respect of the IAASB’s consultation which requests comments to the AASB from Canadian stakeholders by April 16, 2016.

 

Other Developments

July 2018

In July, 2018, the staff of the AASB updated the information in respect of this project to advise that the AASB expects to issue an Exposure Draft on Quality Control for comment in Q1/2019.

November 2017

In November 2017, the AASB staff updated this project to indicate that the AASB expects to issue an Exposure Draft on Quality Control for comment in Q3/2018.

July 2017

In July 2017, the CPA Canada staff updated the information on this project to advise that the AASB expects to issue an ED in respect of Group Audits in Q2/2018.

April 2017

In April 2017, the CPA Canada staff updated the information in respect of this project to advise that the AASB expects to issue an ED on Quality Control in the first half of 2018 and an ED on Group Audits in the second half of 2018.

July 2016

On July 1, 2016, the PCAOB posted to its website an updated standard-setting agenda that outlines milestones on various standard-setting projects, including its projects on (i) Supervision of Audits Involving Other Auditors, where the PCAOB has issued a proposal for public comment by July 29, 2016 and (ii) Quality Control Standards, Including Assignment and Documentation of Firm Supervisory Responsibilities, which project is in the research and outreach stage.

February 2016

On February 29, 2016, the AASB issued an Invitation to Comment in respect of the IAASB’s consultation. Comments are due by April 15, 2016.

December 2015

On December 17, 2015, the IAASB issued an Invitation to Comment entitled, Enhancing Audit Quality in the Public Interest: A Focus on Professional Skepticism, Quality Control and Group Audits. Comments are due by May 16, 2016.

 

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