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Historically, the auditor’s report is a succinct expression of a pass or fail opinion on the audited financial statements. There has however been a move for auditors to provide their perspectives on the financial statements,including explaining more clearly their responsibility for fraud discovery, the going concern assertion and discussing the key audit matters encountered during the audit. In this issue, National Assurance Services partner Julie Corden shares her thoughts on an upcoming invitation to comment on proposals that may well revolutionize the auditor's report.

Warm regards,



Chantal Rassart
Partner | Audit Knowledge Management Officer

As financial reporting continues to adapt to the sharp increase in business complexity in recent years, judgment and estimation uncertainty underlying the financial statements has also increased. Meanwhile, the key deliverable from a financial statement audit – the auditor’s report – has remained unchanged, and fails to provide the financial statement reader specific information relating to the entity or the complexities relating to the audit. Not surprisingly, financial statement users have demanded more insight and greater transparency into the audit process.

In response, the standard auditor’s report of today is about to change dramatically. After a lengthy project, the International Auditing and Assurance Standards Board (IAASB) released new and amended International Standards on Auditing (ISAs) in September 2014, which will significantly change auditor reporting for listed entities and will provide financial statements' users with information relating to the audit. The effective implementation date for the amended ISAs is for years ending on or after December 15, 2016.

The most significant changes to the auditor’s report are:

While the changes described above relate specifically to the preparation of the auditor’s report, it is expected that these changes could significantly alter the interactions between auditors, management and audit committees.

For example, with respect to reporting KAMs, auditors and audit committees may want to consider the timing of meetings in light of the audit process and reporting timelines. Audit committees may challenge the auditor’s response to KAMs, and may want to review early drafts of the auditor’s report relative to KAM reporting. In the future, the auditor’s report may need to go through a more rigorous review cycle between the entity and audit firm, which could extend the timeline significantly.

I’ve discussed the changes made to international auditing standards above. But what does all this mean for Canadian listed entities?

Beginning with the adoption of the ISAs as Canadian Auditing Standards (CASs) in 2009, it is expected that the Canadian Auditing and Assurance Standards Board (AASB) will adopt the amended ISAs as CASs with limited amendments. However, the AASB is still deliberating on potential challenges as was apparent in a communication from the Chair, issued April 15, 2015. Those challenges include:

Because this is such as significant change, the AASB will continue to obtain input from various stakeholders as it deliberates on the scope and effective date for adoption of the new and amended CASs in Canada. An invitation to comment will come later this calendar year, and it is expected that the final CASs will be issued in the first half of 2016.

What can you do in the meantime?

As mentioned above, the new and amended ISAs were issued by the IAASB in September 2014. Information relating to the new ISAs and conforming amendments to other ISAs as a result of the new reporting standards can be found here.

You may also want to keep abreast of the Canadian project at http://www.frascanada.ca/, and consider responding to the AASB’s Invitation to Comment and Exposure Draft later in 2015 to express your views on the proposed auditor reporting standards and their impact to Canadian listed entities.

Julie Corden
Partner | National Assurance Services

Standard-setting activities & insights

International Financial Reporting Standards

Hans Hoogervorst speaks about the reasons behind the IASB's work
On April 16, 2015, at the IFRS Foundation trustees’ stakeholder event in Toronto, International Accounting Standards Board (IASB) Chairman Hans Hoogervorst presented a mission statement for the IASB and the IFRS Foundation explaining not only "what" the organization does, but also "why."

Summary of March GPF meeting now available
On April 16, 2015, the minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the IASB held in London on March 5, 2015 were released.

Accounting Standards Board (AcSB) Decision Summary – March 18-19, 2015
On April 7, 2015, the AcSB published an executive summary of discussions and decisions with respect to the topics addressed at this meeting. The following topics were addressed:

Accounting Standards for Private Enterprises

Accounting Standards Board Decision Summary – March 18-19, 2015
On April 7, 2015, the AcSB published an executive summary of discussions and decisions with respect to the topics addressed at this meeting.

The AcSB began considering responses to its Exposure Draft, “Redeemable Preferred Shares Issued in a Tax Planning Arrangement”, as well as the results of all roundtable discussions with stakeholders, including the additional discussions conducted in January and February 2015 with practitioners and lenders that use financial statements. The AcSB will continue discussions of this topic at its May 2015 meeting.

Accounting Standards for Not-for-Profit Organizations

Accounting Standards Board Decision Summary – March 18-19, 2015
On April 7, 2015, the AcSB published an executive summary of discussions and decisions with respect to the topics addressed at this meeting.

The AcSB held a discussion with the Public Sector Accounting Board to consider a number of fundamental issues needing to be addressed prior to initializing specific work related to the Statement of Position on improvements to NPO standards. The Boards are committed to continuing to provide ongoing communications to inform stakeholders of developments. The AcSB plans to agree on the next steps it will undertake with respect to the standards for not-for-profits in the private sector at its meeting in May 2015.

Public Sector Accounting Standards

Message from the Chair – April 2015
On April 9, 2015, the Public Sector Accounting Board released a message from the Board Chair, Rod Monette, where he highlights discussions held at the Board’s March 2015 meeting as well as other topics.

US GAAP

Financial Accounting Foundation (FAF) strategic plan confirms that convergence may happen in instances but is not a top priority for the Financial Accounting Standards Board (FASB)
On April 10, 2015, the FAF board of trustees has approved a final version of the strategic plan for the FAF, the FASB, and the Governmental Accounting Standards Board (GASB), which outlines the three organizations' long-term vision and goals.

Securities regulatory matters

Canadian regulators seek comment on further expansion of passport system
On April 16, 2015, the Canadian Securities Administrators (CSA) published proposals to further expand the passport system to two new areas: applications to cease to be a reporting issuer and cease trade orders resulting from the failure to file continuous disclosure documents.

Canadian securities regulators’ review finds room for improvement in mining issuers’ investor presentations
On April 9, 2015, members of the CSA released CSA Staff Notice 43-309 Review of Website Investor Presentations by Mining Issuers, which summarizes the findings of staff of the Autorité des marchés financiers (AMF), the British Columbia Securities Commission (BCSC) and the Ontario Securities Commission (OSC) (collectively, the Principal Mining Jurisdictions) and outlines the CSA’s expectations for website disclosure by mining issuers.

Canadian securities regulators finalize rule amendments to reduce regulatory burden on venture issuers
On April 9, 2015, the Canadian Securities Administrators announced the final implementation of amendments that will streamline and tailor disclosure by venture issuers. The amendments address continuous disclosure and governance obligations, as well as disclosure for prospectus offerings.

South African study into how integrated reporting fosters integrated thinking and better decision-making
On April 7, 2015, the South African Institute of Chartered Accountants published the results of a survey that show that among organizations that produce high-quality integrated reports there is a strong awareness of the concept of integrated thinking and how it benefits the organization. However, the survey also shows that many aspects of integrated thinking are not yet fully understood.

Assurance

Final Standard – The Auditor’s Responsibilities Relating to Other Information
On April 17, 2015, the International Auditing and Assurance Standards Board (IAASB) issued ISA 720 (Revised), which addresses the auditor’s involvement with financial and non-financial information, other than the audited financial statements, that are included in entities’ annual reports. The revised ISA is effective for audits of financial statements for periods ending on or after December 15, 2016.

Message from the Chair – Adoption of Auditor Reporting and Other Standards
On April 15, 2015, the Auditing and Assurance Standards Board (AASB)’s Chair, Cathy MacGregor, explained why the AASB plans to issue an invitation to comment on an exposure draft addressing specific proposed Canadian amendments to the international standards.

IESBA Reinforces Auditor Independence Provisions; Further Limits Exceptions and Clarifies Guidance around Non-Assurance Services
On April 14, 2015, the International Ethics Standards Board for Accountants (IESBA, the Ethics Board) released Changes to the Code Addressing Certain Non-Assurance Services Provisions for Audit and Assurance Clients. The changes enhance the independence provisions in the Code of Ethics for Professional Accountants (the Code) by, in particular, no longer permitting auditors to provide certain prohibited non-assurance services to public interest entity (PIE) audit clients in emergency situations, and ensuring that they do not assume management responsibility when providing non-assurance services to audit clients.

IESBA April 13-15, 2015 meeting
On April 13-15, 2015, the IESBA held its meeting in New York. Discussion points included: i) Responding to Non-Compliance or Suspected Non-Compliance with Laws and Regulations (NOCLAR); ii) Long Association of Personnel (including Partner Rotation) with an Audit Client; iii) Review of Part C of the Code; iv) Structure of the Code; v) Safeguards; vi) Accelerated Response Process; and vii) EIOC Presentations.

IAASB’s Revised Standard ISA 720 Enhances Auditor Focus on Annual Reports in Light of Increased Investor Focus on Qualitative Disclosures
On April 8, 2015, the IAASB released International Standard on Auditing (ISA) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information. The revisions aim to clarify and increase the auditor’s involvement with “other information,” defined in the standard as financial and non-financial information, other than the audited financial statements, that is included in entities’ annual reports.

Canadian standard-setting governance activities

Auditing and Assurance Standards Oversight Council Minutes of Meeting
On April 17, 2015, the Auditing and Assurance Standards Oversight Council (AASOC) released the minutes of its February 20, 2015 meeting where it discussed the activities and performance of the Auditing and Assurance Standards Board and the Independence Task Force. As part of its monitoring responsibilities, AASOC also received reports on the activities of a number of domestic and international accounting and auditing standard-setting, oversight and regulatory entities.

Webcasts & learning resources

Past events

Publications & tools

Deloitte’s Tech Trends 2015: The fusion of business and IT

Publication date: March 2015
Our Tech Trends 2015 report examines eight current technology trends, ranging from the way some organizations are using application programming interfaces to extend services and create new revenue streams, to the dramatic impact connectivity and analytics are having on digital marketing; from the evolving role of the CIO to changing IT skill sets and delivery models. The theme for this year’s report – the fusion of business and IT – is broadly inspired by a fundamental transformation in the way C-suite leaders and CIOs collaborate to leverage disruptive change, chart business strategy, and pursue potentially transformative opportunities.

Clearly IFRS — Joint meeting on Revenue (March 2015)

Publication date: March 2015
This publication provides a summary of the March 2015 meeting of the IASB and FASB joint revenue transition resource group (TRG) where the following potential issues related to implementing the boards’ new revenue standard were discussed: (i) Allocation of the transaction price for discounts and variable consideration; (ii) Material rights; (iii) Consideration payable to a customer; (iv) Partially satisfying performance obligations before identifying the contract; (v) Warranties; (vi) Significant financing components; (vii) Distinct goods or services; and (vii) Whether contributions are within the scope of the new revenue standard.

Business news highlights

We continuously review relevant business e-publications and publish below a selection of newsworthy items that we believe you will find interesting and relevant.

U.S. news

International news

Chief Editor

Chantal Rassart, CPA, CA
Partner | Audit Knowledge Management Officer