This summary of decisions of the Auditing and Assurance Standards Board (AASB) has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on projects and other matters, which might change after further deliberations by the AASB. Decisions to publish exposure draft and Handbook material are final only after a formal ballot process.
For more detailed information about AASB projects, please refer to the project summaries under Projects. |
Pro Forma Financial Information
The AASB decided, subject to a final review of agreed changes by the AASB Chair and Vice Chair, to issue an Invitation to Comment (ITC) on the IAASB’s Exposure Draft of ISAE 3420, Assurance Reports on the Process to Compile Pro Forma Financial Information Included in a Prospectus. This ITC will note that the AASB has significant concerns regarding the proposed ISAE 3420 and has no plans to adopt the standard for use in Canada. While the AASB is committed to adopting the International Standards on Auditing (ISAs), it has not decided to adopt, as a whole, other international standards. Therefore, the AASB will not be issuing an exposure draft of a Canadian Standard for Assurance Engagements (CSAE) equivalent to ISAE 3420.
Communications with Law Firms The AASB reviewed and approved an Assurance and Related Services Guideline, Communications with Law Firms under New Accounting and Auditing Standards. The approval of this Guideline was made subject to there being no significant changes arising from a final review of the Guideline by representatives of the Canadian Bar Association. The Guideline is intended to provide interim guidance to assist financial statement preparers, auditors and law firms to communicate when either financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) or the auditor is conducting the audit in accordance with the CASs. The AASB also discussed whether it should issue a Draft Guideline for comment. The AASB’s due process does not require public exposure of Guidelines but the AASB may do so if it feels this approach is warranted. In this case, the AASB decided that the nature of the matters covered in the Guideline did not warrant exposure before final approval. Section 7050, Auditor Review of Interim Financial Statements The AASB discussed the need for changes to the wording of three paragraphs in Section 7050 as a result of the changeover to IFRSs and the desire to maintain a consistent approach between securities regulations and Section 7050 regarding the public issuance of auditor’s reports on interim financial statements. Securities regulations permit an exemption from presentation of comparative financial information under limited circumstances. This securities regulatory exemption closely reflects the exemption permitted under Section 1751, Interim Financial Statements, in the CICA Handbook – Accounting. Going forward, some entities will prepare their annual and interim statements using IFRSs. IAS 34 Interim Financial Reporting requires presentation of comparative financial information; (i.e., it does not contain the exemption in Section 1751). However, securities regulations, consistent with current practice, will still not require the interim financial statements to include comparative figures in limited circumstances. When the comparative figures are not provided, the auditor will be required to include a reservation in his or her interim review report. Also, under Section 7050, the auditor would be required to request that the report with the reservation be included in documents containing the interim financial statements, even though this financial statement presentation would be the result of an exemption allowed under securities regulation. Therefore, the AASB approved changes to Section 7050 to address this issue by clarifying that when the auditor is required to include a reservation in his or her interim review report and when the matter giving rise to the reservation is the result of an exemption permitted by securities regulations, the auditor would not be required to request that the written interim review report be included in documents containing interim financial statements. - The AASB discussed whether public exposure of the changes to Section 7050 is required. The AASB voted to not issue an exposure draft for the following reasons:
- The changes were made to maintain what is currently required under Section 7050.
These requirements are consistent with what is required under securities regulations. Therefore, the changes will not result in any change from current practice. - This issue is expected to arise only in rare circumstances occurring in the future. It is unlikely that any entity would currently know whether it would ever encounter such circumstances.
The AASB also decided that AASB staff should prepare a non-authoritative communication to inform stakeholders of these changes. Assurance Implications of Changeover to IFRSs The AASB reviewed a draft Question and Answer (Q&A) dealing with the nature and extent of work that would be undertaken by a newly appointed successor auditor to deal with the first-time transition to IFRSs. The Q&A was developed by the Task Force on Assurance Implications of Changeover to IFRSs. The AASB asked the Task Force to reconsider some of the material in the Q&A that in the AASB’s view was overly-prescriptive. |