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In June 2017, the Auditing and Assurance Standards Board (AASB) issued new and revised auditor reporting standards and related conforming amendments. These standards were developed in response to requests from users of audited financial statements for a more informative auditor’s report that includes communication of significant matters in the financial statements and the conduct of the audit.
The new and revised auditor reporting standards require the reporting of going concern matters, and entity-specific other information. The new auditor’s report also provides improved transparency regarding the scope of the auditor’s work and the roles and responsibilities of the auditor, management and those charged with governance.
The equivalent International Standards on Auditing require that the auditor’s reports of all listed entities include the communication of key audit matters. This requirement has not yet been included in the Canadian Auditing Standards as the AASB is working with members of the Auditor Reporting Implications of the New Canadian Auditing Standards Task Force to deliberate how best to address the differences between the Canadian and US Public Company Oversight Accountability Board’s (PCAOB) new auditor reporting standards, including key audit matter reporting and the implications for auditor’s reports on the financial statements of dual-listed entities. Currently, the Canadian auditor reporting standards state that auditor’s reports are only required to communicate key audit matters if law or regulation requires the auditor to do so. Auditors may also voluntarily choose to communicate key audit matters.
On October 24, 2017, the U.S. Securities and Exchange Commission (SEC) approved significant enhancements to PCAOB standards regarding the auditor’s report, including changing the location of the paragraphs, enhancing the description of the auditor’s responsibilities, and introducing the requirement to communicate critical audit matters (“CAMs”) and disclose auditor tenure. Consequently, audits of SEC issuers may be impacted, particularly issuers obtaining a combined Generally Accepted Auditing Standards (CAS/PCAOB) auditor’s report for fiscal years ending on or after December 15, 2017.
In Canada, the new and revised auditor reporting standards are effective for audits of financial statements for periods ending on or after December 15, 2018. Earlier application is permitted. The effective date for key audit matters reporting for exchange-listed entities will be decided at a future AASB meeting.
CPA Canada recently issued the following guidance relating to the changes to the auditor’s report:
For more information on the financial reporting library, contact a local
MNP Assurance Professional, or
Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of January 22, 2018. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2018. All rights reserved.
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