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Canadian Auditing Standards (commonly known as CAS) will be applicable for all Canadian audit engagements for periods ending on or after December 14, 2010. The new standards are based on the International Standards on Auditing (ISA) and have been modified, where necessary, for use by Canadian auditors when performing audit engagements.
So what does this mean for your company’s audit? For the most part, the new standards will have a minimal impact on the audit of your company’s financial statements. However, there is one change that you need to be aware of.
Under current Canadian generally accepted auditing standards (GAAS), the date of the auditor’s report is the date of substantial completion of the audit work. This often means that the auditor’s report is dated before the company’s board of directors (or equivalent governing body) approves the financial statements. However under CAS, the auditor’s report cannot be dated earlier than the date the financial statements are approved by the company’s board of directors (or equivalent governing body).
This change in date could result in additional time and work to complete the audit. Under both the current GAAS and the new CAS, the auditor is required to perform procedures to understand the effects of any significant events subsequent to year end on your business, and, if necessary, incorporate these effects into your annual audited financial statements. Therefore, under CAS, the longer the period between substantial completion of the audit work on the financial statements and their approval, the more time you and your auditor will need to cover to ensure that any subsequent events have been appropriately accounted for and/or disclosed.
Say, for example, that your year end is November 30. Under the existing standards, your auditor might complete most of their audit work, and date their audit report, on February 22. However, under the new CAS rules, even if your auditor completes most of their audit work by February 22, the audit report cannot be dated until the date your Board approves the financial statements for issuance. If your Board does not meet to consider and approve your financial statements until April 15, then the auditor must consider the effects of any material subsequent events up to that April date, and ensure these are appropriately presented and/or disclosed in the final approved financial statements.
Being aware of this change to the audit standards up front will allow your organization to ensure that the date the financial statements are approved is as close as possible to the date of substantial completion of the audit work. This will save everyone time and resources!
For more information on CAS and how they may impact your organization, please feel free to
contact me or your
local MNP advisor.
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