Re-exposure Draft
Auditing and Assurance Standards Board
Proposed Canadian Auditing Standard
The Auditor’s Responsibilities
Relating to Other Information
May 2014
COMMENTS TO THE AASB MUST BE RECEIVED BY
JULY 4, 2014
COMMENTS TO THE IAASB MUST BE RECEIVED BY
JULY 18, 2014
A PDF response form has been posted with this document to assist you in submitting your comments to the
AASB. Alternatively, you may send comments via email (in Word format), to: ed.assurancestds@cpacanada.ca
addressed to:
Greg Shields, CPA, CA
Director, Auditing and Assurance Standards
Auditing and Assurance Standards Board
277 Wellington Street West
Toronto ON M5V 3H2
This Re-exposure Draft reflects proposals made by the International Auditing and Assurance Standards Board
that the Auditing and Assurance Standards Board (AASB) intends to adopt as Canadian generally accepted
auditing standards.
Individuals and organizations are invited to send written comments on the Re-exposure Draft proposals.
Comments are requested from those who agree with the Re-exposure Draft as well as from those who do not.
Comments are most helpful if they are related to a specific paragraph or group of paragraphs. Any comments
that express disagreement with the proposals in the Re-exposure Draft should clearly explain the problem and
include a suggested alternative, supported by specific reasoning. All comments received by the AASB will be
available on the web site shortly after the comment deadline, unless confidentiality is requested. The request
for confidentiality must be stated explicitly within the response.
Highlights
The Auditing and Assurance Standards Board (AASB) proposes, subject to comments
received following exposure, to adopt with appropriate amendments:

proposed International Standard on Auditing (ISA) 720 (Revised), The Auditor’s
Responsibilities Relating to Other Information; and

conforming amendments to other ISAs,
issued by the International Auditing and Assurance Standards Board (IAASB).
The result would be a revised Canadian Auditing Standard (CAS) 720 and other
amended CASs.
This Re-exposure Draft consists of:

a link to the IAASB’s Exposure Draft re-exposing proposed revisions to ISA 720,
including its Explanatory Memorandum (2014 Exposure Draft);

a description of the AASB’s process for adopting ISAs;

information about the IAASB’s Exposure Draft issued in November 2012 (2012
Exposure Draft), and the AASB’s response;

a discussion of proposed significant changes to the auditor’s responsibilities relating
to other information in the IAASB’s 2014 Exposure Draft;

a discussion of proposed significant Canadian amendments; and

a proposed effective date.
Please review “Comments requested” on page vi for information on preparing your
response to this Re-exposure Draft.
IAASB 2014 Exposure Draft
The IAASB’s 2014 Exposure Draft, “The Auditor’s Responsibilities Relating to Other
Information,” is available on the IAASB’s website.
In addition to the text of proposed ISA 720 (Revised) and conforming amendments, the
2014 Exposure Draft includes an Explanatory Memorandum, which provides
background to, and an explanation for, the proposed revisions to extant ISA 720.
Process for adopting ISAs
In adopting the ISAs as CASs, the AASB issues as a Canadian exposure draft (or reexposure draft), every IAASB exposure draft of a proposed ISA. However, in doing so,
the AASB recognizes that it has a vital role to play in monitoring changes made by the
IAASB to ensure that standards remain in the public interest and that adoption of an ISA
The Auditor’s Responsibilities Relating to Other Information | i
is not automatic. The AASB follows amendment criteria set out in the Appendix that
allow the AASB to make amendments in specific circumstances.
Other key attributes of the process for adopting ISAs as CASs are set out below:

The deadline for responding to a CAS Exposure Draft (or Re-exposure Draft)
provides the time needed for the AASB to consider the responses of Canadian
stakeholders in developing its response to an IAASB Exposure Draft.

The AASB uses the same effective date for the CASs as the IAASB does for the
ISAs.

The AASB makes CASs available shortly after they are approved, so Canadian
auditors can become familiar with them and prepare to implement them by the
effective date.
IAASB 2012 Exposure Draft and the AASB’s response
The IAASB issued an Exposure Draft, “The Auditor’s Responsibilities Relating to Other
Information in Documents Containing or Accompanying Audited Financial Statements
and the Auditor’s Report Thereon,” in November 2012.
The IAASB’s proposals in the 2012 Exposure Draft significantly expanded the scope of
ISA 720 and the auditor’s work effort in identifying misstatements in the other
information. The 2012 Exposure Draft also required the auditor to report on the results
of his or her procedures on the other information.
Consistent with its due process, the AASB issued its Exposure Draft of CAS 720 in
December 2012 to obtain Canadian stakeholders’ input on the IAASB’s Exposure Draft
of ISA 720. In addition, the AASB held numerous consultation sessions with various
stakeholder groups across Canada to obtain their views on the IAASB’s proposals.
Based on the input the AASB received from Canadian stakeholders, the AASB
expressed support for strengthening the auditor’s responsibilities with respect to the
other information, provided that the changes to ISA 720 would not widen the
expectations gap or otherwise cause confusion among users of the auditor’s report, and
that the benefits of extending the auditor’s responsibilities would clearly exceed related
costs. However, the AASB expressed concerns that neither of the above caveats was
met by the proposals in the IAASB’s 2012 Exposure Draft. Further, the AASB was
concerned that the proposals in the IAASB’s 2012 Exposure Draft would, in effect,
imbed within the financial statement audit an unspecified type of separate engagement
related to other information.
ii | Re-exposure Draft – May 2014 | ii
Proposed significant changes to the auditor’s responsibilities
relating to other information
Based on the input received on its 2012 Exposure Draft, the IAASB issued its 2014
Exposure Draft. The IAASB significantly modified the positions taken in the 2012
Exposure Draft as a result of comments received from global stakeholders, including
those of the AASB. The following summarizes the significant changes in the proposed
revised ISA 720 from the extant ISA:
Proposed changes in scope
Extant ISA 720 deals with the auditor’s responsibilities relating to other information in
documents containing audited financial statements and the auditor’s report thereon.
Proposed ISA 720 (Revised) deals with the auditor’s responsibilities relating to other
information included in an entity’s annual report. An annual report is defined as:
A document, or combination of documents, prepared typically on an annual
basis by management or those charged with governance in accordance with
law, regulation or custom, the purpose of which is to provide owners (or similar
stakeholders) with information on the entity’s operations and the entity’s
financial results and financial position as set out in the financial statements. An
annual report contains or accompanies the financial statements and the
auditor’s report thereon and usually includes information about the entity’s
developments, its future outlook and risks and uncertainties, a statement by the
entity’s governing body, and reports covering governance matters. The content
of an annual report, and the name by which it is known, may vary by law,
regulation or custom across jurisdictions.
There are two fundamental proposed changes to the scope. First, the scope is
expanded to include a combination of documents that accompany the audited financial
statements, as opposed to being limited to a document that contains the audited
financial statements. Second, the scope is narrowed to limit it to a document, or
combination of documents, that meets the definition of an annual report.
Proposed changes in objectives
The objective of the auditor in extant ISA 720 is as follows:
The objective of the auditor is to respond appropriately when documents
containing audited financial statements and the auditor's report thereon include
other information that could undermine the credibility of those financial
statements and the auditor's report.
The Auditor’s Responsibilities Relating to Other Information | iii
The objectives of the auditor in proposed ISA 720 (Revised) are as follow:
The objectives of the auditor, having read and considered the other information,
are:
(a) To consider whether there is a material inconsistency between the other
information and the financial statements;
(b) To consider whether there is a material inconsistency between the other
information and the auditor’s knowledge obtained during the course of the
audit;
(c) To respond appropriately when the auditor identifies that such material
inconsistencies appear to exist, or when the auditor otherwise becomes
aware that other information appears to be materially misstated; and
(d) To report in accordance with this ISA.
There are two fundamental proposed changes in the objectives. First, there would be
increased emphasis on considering whether there is a material inconsistency between
the other information and the financial statements, and the auditor’s knowledge
obtained during the course of the audit. The AASB notes that paragraph 2 of the
proposed ISA clarifies that the auditor is not required to obtain audit evidence beyond
that required to form an opinion on the financial statements.
Second, the auditor would have the objective of reporting under the ISA regarding the
results of the procedures performed on other information as required by the standard.
As set out in paragraph 21(d) of proposed ISA 720 (Revised), the auditor’s report would
contain a statement addressing whether the auditor has identified a material
misstatement in the other information and, if so, a description of the misstatement.
Auditor’s responsibilities relating to other information obtained subsequent to the date of
the auditor’s report
Under ISA 560, Subsequent Events, and extant ISA 720, there is ambiguity as to the
auditor’s responsibilities relating to other information obtained after the date of the
auditor’s report. On the one hand, paragraph 10 of ISA 560 states that the auditor has
no obligation to perform any audit procedures regarding the financial statements after
the date of the auditor's report. On the other hand, paragraph 7 of extant ISA 720
requires the auditor to read the other information as soon as practicable if it is not
obtained prior to the date of the auditor's report.
Although not a change from extant ISA 720, paragraph 6 of proposed ISA 720 (Revised)
clarifies that the auditor’s responsibilities relating to other information, other than the
reporting responsibilities, apply regardless of whether the other information is obtained
by the auditor prior to, or after, the date of the auditor’s report.
iv | Re-exposure Draft – May 2014 | iv
Proposed significant Canadian amendments
The amendments the AASB proposes to make to proposed ISA 720 (Revised), and the
reasoning for the amendments, are set out below. Amendments to ISAs are clearly
identified in the CPA Canada Handbook – Assurance by adding an explanation at the
beginning of the standard and by adding the letter C at the start of the amended
paragraph or footnote number. New paragraphs or footnotes are also uniquely
identified. The Preface to the CPA Canada Handbook – Assurance addresses
amendments.
Clarifying the documents within the scope of CAS 720 (Revised)
Due to the proposed changes in scope, certain documents that are currently outside the
scope of extant CAS 720 would be within the scope of CAS 720 (Revised). Subject to
further consideration of input from Canadian stakeholders, the AASB is proposing to
include a Canadian-only application and other explanatory paragraph to assist
Canadian stakeholders in understanding how CAS 720 (Revised) would apply to
common documents particular to the Canadian environment:
CA4a. In Canada, the Management Discussion and Analysis (MD&A) issued
under the provisions of Canadian securities legislation would normally
be considered to be within the scope of CAS 720 as the MD&A is
meant to complement and supplement the financial statements. If an
entity issues an annual report, the annual report would also be within
the scope of CAS 720 if it meets the definition set out in
paragraph 12(a).
Relevant ethical requirements
Footnote 2 of proposed ISA 720 (Revised) includes a reference to the International
Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants
(IESBA Code). In Canada, auditors are generally required to comply with the rules of
professional conduct/code of ethics established by professional accounting bodies
whose rules/code may differ from the IESBA Code. Accordingly, the AASB proposes to
eliminate footnote 2.
Translated annual reports
Paragraph A9 indicates that local law or regulation may provide guidance on translated
annual reports. In Canada, ASSOCIATION, Section 5020, contains requirements and
guidance on a practitioner’s professional responsibilities relating to translated
information. The AASB proposes to include a reference to Section 5020 in
paragraph A9:
CA9.
When the annual report is translated into other languages pursuant to
law or regulation (such as may occur when a jurisdiction has more than
one official language), or multiple “annual reports” are prepared under
different legislation (for example, when an entity is listed in more than
The Auditor’s Responsibilities Relating to Other Information | v
one jurisdiction), consideration may need to be given as to whether
one, or more than one of the “annual reports” form part of the other
information. Local law or regulation may provide further guidance in this
respect. In Canada, an auditor may have additional professional
responsibilities relating to translated information as set out in
ASSOCIATION, Section 5020.
Canadian amendment to exclude offering documents from the scope of CAS 720
(Revised) proposed in 2012 no longer necessary
The IAASB’s 2012 Exposure Draft proposed to include offering documents that meet
certain criteria within the scope of ISA 720 (Revised). In Canada, the auditor’s
responsibilities relating to the auditor’s consent to the use of the auditor’s report in an
offering document are covered by AUDITOR’S CONSENT TO THE USE OF A REPORT OF
THE AUDITOR INCLUDED IN AN OFFERING DOCUMENT, Section 7150. Therefore, the
AASB’s 2012 Exposure Draft of CAS 720 (Revised) proposed to exclude offering
documents from the scope of CAS 720 (Revised). The 2014 Exposure Draft of ISA 720
(Revised) excludes offering documents from the scope of the ISA. Consequently, the
proposed Canadian amendment to exclude offering documents from CAS 720 (Revised)
is no longer necessary.
Proposed effective date
The IAASB is proposing that the effective date for ISA 720 (Revised) be aligned with the
effective date of the revisions arising from the auditor reporting project. ISA 720
(Revised) is expected to be effective approximately 12 to 15 months after the issuance
of ISA 720 (Revised) and the new and revised ISAs resulting from the auditor reporting
project as final standards. CAS 720 (Revised) would have the same effective date as
ISA 720 (Revised).
Comments requested
Stakeholders are asked to provide comments on the IAASB’s 2014 Exposure Draft
directly to the IAASB, and provide the AASB with a copy of the response. The AASB will
take these comments into account in drafting its own response to the IAASB’s 2014
Exposure Draft. Respondents are asked not to include comments on matters particular
to the Canadian environment in their responses to the IAASB. Such comments should
be included only in responses sent to the AASB.
Please refer to the “Guide for Respondents” contained in the IAASB’s 2014 Exposure
Draft and respond to the specific questions therein.
Stakeholders are asked to provide comments directly to the AASB on matters that the
AASB should consider in finalizing CAS 720 (Revised).
vi | Re-exposure Draft – May 2014 | vi
The AASB has proposed Canadian amendments to ISA 720 (Revised) as noted above.
Stakeholders are asked to provide comments directly to the AASB on the proposed
Canadian amendments, including whether they believe that such amendments are
warranted and meet the AASB’s criteria for amendments as set out in the Appendix. In
particular, the AASB would appreciate receiving stakeholder input on the following:
1. As set out under the subheading, “Auditor’s responsibilities relating to other
information obtained subsequent to the date of the auditor’s report,” the IAASB is
clarifying that the auditor’s responsibilities relating to other information apply
regardless of whether the other information is obtained by the auditor prior to, or
after, the date of the auditor’s report. Are you aware of any circumstances particular
to Canada that would merit a Canadian amendment to deal with practical issues
that may arise if the other information is obtained subsequent to the date of the
auditor’s report? In considering this matter, the AASB is particularly interested in
comments from financial statement preparers, financial statement users (including
regulators) and auditors of small and medium-sized entities with respect to practical
issues that may arise.
2. The AASB is proposing a Canadian amendment to clarify that the MD&A issued
under the provisions of Canadian securities legislation is within the scope of CAS
720 (Revised). The MD&A is required by securities legislation in many Canadian
jurisdictions to be filed concurrently with the reporting issuer’s financial statements
and is meant to complement and supplement the financial statements. Do you
agree with this Canadian amendment?
3. The AASB also considered whether the Annual Information Form (AIF) and
certifications of annual filings, filed with securities regulatory authorities, are within
the scope of CAS 720 (Revised). The AASB is of the view that the AIF and the
certifications of annual filings do not meet the definition of an annual report as their
primary purpose is not to provide owners with information on the entity’s operations,
and the entity’s financial results and financial position as set out in the financial
statements. Do you agree with the AASB’s view that the AIF and the certifications of
annual filings are not within the scope of CAS 720 (Revised)?
4. Are you aware of any other documents commonly issued in the Canadian
environment for which guidance on whether they are within the scope of CAS 720
would be useful? This includes documents issued by any type of entity, including
small and medium-sized enterprises, public sector entities and not-for-profit
organizations. If you are aware of such documents, please describe the nature,
purpose and intended users of the document(s).
5. What are your views relating to the other proposed Canadian amendments?
The Auditor’s Responsibilities Relating to Other Information | vii
6. Are there any other Canadian amendments that you believe the AASB should
consider? If so, please describe the nature and extent of the amendments. Note
that any amendments proposed would need to meet the criteria set out in the
Appendix.
The deadline for providing your comments to the AASB on the above is July 4, 2014.
Comments are most helpful if they are related to a specific paragraph or group of
paragraphs. Any comments that express disagreement with the proposals in the Reexposure Draft should clearly explain the problem and include a suggested alternative,
supported by specific reasoning. When a respondent agrees with proposals in the Reexposure Draft, it will be helpful for the AASB to be made aware of this view.
For your convenience, a PDF response form has been posted with this document. You
can save the form both during and after its completion for future reference. Alternatively,
written comments may be submitted by email (Word format preferred) to:
ed.assurancestds@cpacanada.ca
viii | Re-exposure Draft – May 2014 | viii
APPENDIX
Criteria for amending ISAs when adopting them as Canadian
Auditing Standards
With respect to the adoption of ISAs, the AASB’s overriding goal is to adopt ISAs into
the Assurance Handbook without amendment. However, there may be circumstances
where amendments are required. The following sets out the limited circumstances when
the AASB makes amendments to ISAs:
1. The AASB limits additions to an ISA to those required to comply with Canadian
legal and regulatory requirements.
1
2. The AASB limits deletions from, or other amendments to, an ISA to the following:
(a) the elimination of options (alternatives) provided for in the ISA;
(b) requirements or guidance, the application of which Canadian law or regulation
1
does not permit, or which require amendments to be consistent with law or
regulation; and
(c) requirements or guidance, where the ISA recognizes that different practices
may apply in different jurisdictions and Canada is such a jurisdiction.
3. The AASB may make amendments to an ISA with respect to requirements or
guidance that do not fall within 1 or 2 above when it believes that there are
circumstances particular to the Canadian environment where such amendments are
required to serve the Canadian public interest and maintain the quality of auditing
and reporting in Canada.
4. To the extent possible, amendments that are:
(a) additions to an ISA will not be inconsistent with the current requirements or
guidance in the ISA; and
(b) deletions from, or other amendments to, an ISA will be replaced by an
appropriate alternative that achieves the objective of the deleted requirement.
Proposed amendments to an ISA are highlighted in exposure drafts of proposed
Canadian standards. The AASB indicates the reasoning for the amendments and
respondents are invited to comment on them, including when the amendment will not
result in convergence with the ISA in accordance with the International Auditing and
Assurance Standards Board’s guide for national standard setters. Amendments to ISAs
are separately identified in the final Handbook material.
1
Canadian incorporating and other governing legislation often requires entities to prepare financial
statements in accordance with Canadian GAAP. Accordingly, if Canadian GAAP necessitates a different
audit response in Canada, these differences fall within the definition of a legal or regulatory requirement.
The Auditor’s Responsibilities Relating to Other Information | ix
© 2014 Chartered Professional Accountants of Canada
Excerpts from and/or links to this publication may be used, provided that full and clear
credit is given to the appropriate Financial Reporting & Assurance Standards Canada
board, oversight council, committee or individual author, with appropriate and specific
direction to the original content.
For assistance with crediting this publication, please contact fras-nifccanada@cpacanada.ca.