Overview

This Section deals with the auditor's responsibilities, after the completion of the audit of the entity's financial statements, when the auditor agrees to consent to the use of the auditor's report in connection with a designated document. A designated document consists of one or more of the following continuous disclosure documents filed with securities regulatory authorities: (a)     The entity's financial statements and the auditor's report thereon; (b) The entity's Management Discussion and Analysis (MD&A) filed in connection with the material in paragraph (a); and (c) Any other continuous disclosure document of the entity containing, or incorporating by reference, financial statements and the auditor's report thereon.

This Section also deals, in paragraphs 23-24, with the auditor's responsibilities when the auditor agrees to consent to the use of the auditor's report on an entity's financial statements and the entity intends to file an Annual Information Form (AIF) with securities regulatory authorities. The AIF is not a designated document for the purposes of this Section since the entity's AIF does not contain, or incorporate by reference, the entity's financial statements or the auditor's report thereon and because the AIF is not required to be filed with the entity's financial statements. Nevertheless, the auditor is deemed to be associated with the entity's AIF when the auditor consents to the use of the auditor's report on an entity's financial statements filed with a securities regulatory authority,

The entity's MD&A does not contain, or incorporate by reference, its audited financial statements or the auditor's report thereon. However, securities legislation in many Canadian jurisdictions requires the MD&A to be filed concurrently with the entity's financial statements. Further, the MD&A is meant to complement and supplement the entity's financial statements and is meant to be read in conjunction with the entity's financial statements. Accordingly, the auditor is deemed to be associated with the MD&A when the auditor consents to the use of the auditor's report on the entity's financial statements.

Consenting to the use of the auditor's report in the circumstances described in paragraph 1 is a matter of contract between the auditor and the entity. Accordingly, the auditor is never obliged to consent to the use of the auditor's report in connection with a designated document unless the auditor has agreed to provide consent. There may be differing interpretations as to whether and how existing generally accepted accounting principles apply to specific transactions and financial products. Management and others may consult with accountants other than the incumbent accountant on the application of accounting principles to those transactions and products on which the incumbent accountant has already provided guidance. A reporting accountant needs to be alert to possible undue pressure on the judgment and objectivity of an incumbent accountant and, accordingly, would seek to minimize the risk of giving inappropriate guidance because of limited knowledge of facts and circumstances. The guidance in Section 7600, Reports on the Application of Accounting Principles, helps to ensure that reporting and incumbent accountants have access to the same information.

This Section applies when an entity requests that a reporting accountant provide a written report or oral advice on: (i) the application of accounting principles to a specific transaction; or (ii) the type of opinion that may be rendered on the entity's financial statements; after having already obtained guidance from its incumbent accountant on this matter.