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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 changes result from harmonization with the International Standards on Auditing (ISA).
So what does this mean for your company’s audit and what can you expect from your auditors? For the most part, the new standards will have a minimal impact on the audit of your company’s financial statements. However, there are a few changes that you’ll want to be aware of.
Under current Canadian audit standards, 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, but the audit and financial statements are not yet fully finalized. Under CAS, there is a requirement for approval of the financial statements by the company’s board of directors (or equivalent governing body) before the audit is considered substantially complete. This means that the auditor’s report cannot be dated earlier than the date the financial statements are approved. This date change could result in additional time and work to complete the audit as procedures may be required at a later date for subsequent events. Therefore, under CAS, the longer the period between completion of audit work and the ultimate approval of financial statements, the longer the time frame that you and your auditor will need to ensure that any subsequent events have been appropriately accounted for and/or disclosed.
Being aware of this change to the audit standards up front will allow your organization to plan for finalization by ensuring that the date the financial statements are approved is as close as possible to the date of substantial completion of the audit work.
The auditor’s report is changing – it will be almost twice as long and more detailed. Amongst other things, managements’ and the auditors’ responsibilities have been expanded and clarified within the report.
The new audit reporting model also provides guidance regarding additional paragraphs that may need to be included in the auditor’s report:
The EOM paragraph draws the users’ attention to an important issue that is disclosed in the financial statements (for instance a going concern disclosure).
The OM paragraph allows the auditor to communicate an important matter, other than those presented in the financial statements, that is fundamental to the users’ understanding of the audit and/or company’s financial position.
The inclusion of either paragraph requires management’s approval.
It is important to understand the changes to the new standards now so you can determine how it will affect your upcoming audit. Please talk with your auditor to make sure you're all on the same page when it comes to these changes, or contact your
local MNP advisor.
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