The CICA’s Guide to
New CASs
in Canada
August 31, 2009
About the CICA
The Canadian Institute of Chartered Accountants (CICA)
conducts research into current business issues and supports the setting of accounting, auditing and assurance
standards for business, not-for-profit organizations and
government. It issues guidance on control, best practices
and governance, publishes professional literature, develops continuing education programs and represents the
CA profession nationally and internationally.
Together with the provincial, territorial and Bermuda
institutes/ordre of Chartered Accountants, the CICA
represents a membership of approximately 74,000 CAs
and 10,000 students in Canada and Bermuda. The CICA
is a founding member of the International Federation of
Accountants (IFAC) and the Global Accounting Alliance
(GAA).
The CICA’s
CAS Website
For the latest information to help you manage the transition to the new Canadian Auditing Standards (CASs) and
Canadian Standards on Quality Control (CSQC 1), go to
www.cica.ca/CAS, or to the website of your provincial
institute/ordre.
Make sure to bookmark our CAS site. It is updated regularly, and links you to the resources you need to ensure
a smooth transition.
About this Guide
The CICA has prepared this reference guide to help you
prepare for the new Canadian Auditing Standards (CASs)
and Canadian Standards on Quality Control (CSQC 1). This
Guide highlights areas of similarity and difference between
CASs and existing Canadian standards as set out in the
CICA Handbook – Assurance.
How the CICA
Can Help
The CICA is the recognized leader in providing information and professional education that clarifies and aids in
the application of standards in Canada. The new Canadian
Auditing Standards represent a significant change for
financial statement auditors, and the change to CSQC 1
will affect firms providing assurance services. Chartered
Accountants of Canada, through the CICA and the provincial institutes/ordre, are committed to helping you prepare
for the transition.
Foreword
In June 2006, following extensive consultation with CAs and business leaders
across Canada, the Canadian Auditing
and Assurance Standards Board (AASB)
announced its decision to adopt International Standards on Auditing (ISAs)
as Canadian Auditing Standards (CASs),
and International Standards on Quality Control (ISQC 1)
as Canadian Standards on Quality Control, (CSQC 1). The
changes to the standards will affect all financial statement
auditors in Canada.
ISAs and ISQCs are issued by the International Auditing
and Assurance Standards Board (IAASB) and are used by
auditors around the world. As of June 1, 2009, there are
36 ISAs dealing with financial statement audits and one
comprehensive ISQC dealing with quality control standards
for firms performing assurance engagements. All have been
redrafted by the IAASB using a new clarity format which
is clear, consistent, and easy to use. ISAs and ISQC 1 have
been adopted as CASs and CSQC 1 with minimal amendments to accommodate unique Canadian circumstances.
These minimal amendments are clearly identified in the
new standards.
The CASs come into effect for audits of financial statements for periods ending on or after December 14, 2010.
Firms that provide assurance services are required to
establish a system of quality control in compliance with
CSQC 1 by December 15, 2009.
Any change of this magnitude will inevitably need some
preparation, planning and training. Those firms that have
project leaders ready to prepare and plan for how to
incorporate the CASs into their practices should find the
transition to be relatively smooth. This concise reference
guide provides an excellent starting place for the needed
preparation and planning.
Ron Salole
Vice-President, Standards
Canadian Institute of Chartered Accountants
Canada’s adoption of international standards for auditing and quality control is
an important change for all CAs in public
practice. While there is significant overlap
between current Canadian standards
and the new standards, elements of the
transition will present challenges. Some
auditors in particular may be apprehensive about the
impact CASs will have on their audit practices.
The Canadian Institute of Chartered Accountants and the
provincial institutes/ordre are gearing up their information
and education resources to prepare you to manage the
transition. This guide is one element in a comprehensive
program of implementation support. I encourage you
to visit our CAS website at www.cica.ca/CAS to access
the downloadable publications, implementation tools,
and a range of provincially offered courses and e-learning
opportunities.
The time to begin preparing for this transition is now. This
concise reference guide, which provides a comparative
overview of changes on a standard-by-standard basis,
will help you identify the changes you need to consider
in order to get started.
Tim Forristal CA
Vice-President, Education
Canadian Institute of Chartered Accountants
List of Acronyms
AASB: Auditing and Assurance Standards Board (Canada)
CASs: Canadian Auditing Standards
EDs: Exposure Drafts
ISA: International Standards on Auditing
ISQC: International Standards on Quality Control
CSQC: Canadian Standards on Quality Control
pica/ordre: provincial institute of chartered accountants/
ordre de comptables agréés du Québec
GAAS: Canadian Generally Accepted Auditing Standards
GSF-QC: General Standards of Quality Control for Firms
Performing Assurance Engagements
IAASB: International Auditing and Assurance Standards
Board
Contents
New Canadian Standards for Auditing and Quality Control
1
The New Clarity Format
2
Canada’s Timeline for Change
3
The AASB’s Process for Adopting CASs and CSQC 1
5
The Expected Impact
6
What to Watch for
6
How to Prepare for the Transition
8
Resources Available from the Chartered Accountants of Canada 9
The CICA Handbook – Assurance Sections Related to Audits
of Financial Statements Concordance
11
Overview of the New CASs, Cross-referenced to Existing
CICA Handbook – Assurance Sections Dealing with Audits
of Financial Statements
13
Notes on Disposition of Other Existing CICA Handbook
– Assurance Sections Dealing with the Audit of
Financial Statements
19
Overview of Existing CICA Handbook – Assurance Sections
Dealing with Audits of Financial Statements, Cross-referenced
to the New CAS
20
New Canadian Auditing Standards
25
Overview and Comparisons
29
Understanding the Implications of Canadian
Auditing Standards
30
The CICA’s Guide to New CASs in Canada
New Canadian
Standards for
Auditing and
Quality Control
For many years, Canada’s auditing standard setters have
been involved with the efforts of the International Auditing and Assurance Standards Board (IAASB) to develop
global auditing standards. These efforts have culminated
in the development of reformatted, and in some cases,
revised:
•
International Standards on Auditing (ISAs) for the
audits of financial statements and other historical
financial information for all entities; and
•
International Standards on Quality Control (ISQC)
for firms.
Together, these new standards provide a basis on which
auditors worldwide may conduct high quality, consistent
and comparable audits.
The Canadian Auditing and Assurance Standards Board
(AASB) is adopting ISAs as Canadian Auditing Standards
(CASs) for the audits of financial statements. Once effective, the CASs will constitute Canadian Generally Accepted
Auditing Standards (GAAS) for financial statement audits.
No decision has yet been made on adopting international
standards for other assurance engagements such as
reviews and compilations.
The AASB is also adopting International Standards on
Quality Control (ISQC 1) as Canadian Standards on Quality
Control (CSQC 1), which will apply to all firms performing
assurance engagements.
Why Change Now?
There is nothing unique about auditing in Canada.
The high quality, consistent and transparent global standards that have been established by the IAASB effectively
eliminate the need for Canada to maintain its own separate and distinct set of standards. The increasingly global
1
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The CICA’s Guide to New CASs in Canada
economy, meanwhile, strengthens the impetus for moving
to international auditing rules.
In addition:
•
The IAASB’s principles-based approach to standard
setting is consistent with the existing Canadian
approach.
•
The IAASB’s process for developing and issuing
standards is rigorous and transparent, and allows for
appropriate input from the Canadian Auditing and
Assurance Standards Board and Canadian CAs.
•
The AASB has developed a set of criteria for making
amendments to ISQC 1 and ISAs when adopting them
to address particular Canadian circumstances.
•
The IAASB has developed a format for ISQC and ISAs
called the clarity format, which auditors will find clear,
consistent and easy to understand.
•
ISQC and ISAs are being adopted globally; Canada
joins more than 100 countries, which have already
adopted ISAs or are in the process of doing so.
The New Clarity
Format
The IAASB has redrafted its ISQC 1 and ISAs using a new
drafting convention called the clarity format. This new format is clear, consistent and easy to understand. Canadian
standard setters have actively participated in the development of the clarity format, and are confident that it will be
appropriate for the Canadian profession.
The clarity format presents each standard in five parts:
•
Introduction: which explains the purpose and scope
of the CASs;
•
Objectives: which define the context in which the
requirements are set;
•
Definitions: which include specific meanings of terms
in the CASs;
The CICA’s Guide to New CASs in Canada
•
Requirements: which define what the auditor must
comply with, using the words “the auditor shall;” and
•
Application and other Explanatory Material: crossreferenced to the Requirements, and providing
further explanation of and guidance for carrying
out the requirements of the standard.
Canadian standard setters will continue to influence the
development of international standards and their application in Canada.
Canada’s Timeline
for Change
The change to audit standards will come into effect for all
financial statement audits for periods ending on or after
December 14, 2010. CASs will become Canadian GAAS
for these audits at that time. CASs will NOT apply to other
assurance work, such as reviews and compilations.
The change to the quality control standard for firms takes
effect December 15, 2009. All firms that provide assurance services need to establish a system of quality control
compliant with CSQC 1 by December 15, 2009.
The new CICA Handbook – Assurance, which includes
CSQC 1, is planned for release in June 2009.
3
2009
Current Canadian GAAS
Canadian GAAS for
Financial Statement Audits
2010
2011
2011
For example for year ends:
�• Nov. 30, 2010 — Audit and Audit Report under
current standards
�• Dec 31, 2010 — Audit and new Audit Report
under CASs
During the transition, auditors will begin using the
new standards and new Audit Report for certain
audits, while continuing to use the current standards
and current Audit Report for other audits, depending
on the year ends of their clients, and the timing of
the audit work.
2010
New Canadian
Auditing Standards (CASs)
New Audit Standards become
effective for audits of financial
statements for periods ending
on or after this date. Early
adoption is not permitted.
Dec. 14, 2010
New Canadian Standard on Quality Control (CSQC 1)
CSQC 1 becomes effective. Quality
Control systems must comply with
CSQC 1 from this date.
Dec. 15, 2009
Current QC Standards
2009
Quality Control Standards for Firms for
all Assurance Engagements
Transition Timeline
4
The CICA’s Guide to New CASs in Canada
The CICA’s Guide to New CASs in Canada
The AASB’s Process
for Adopting CASs
and CSQC 1
The AASB is adopting international auditing and quality
control standards as Canadian standards with minimal
amendments. Most stakeholders have expressed strong
support for this approach. For the detailed criteria under
which ISAs/ISQC 1 may be amended in adopting them as
CASs/CSQC 1, see the AASB’s website at www.aasb.ca.
The AASB has made few amendments to ISA wording
in adopting those standards as CASs. One key change
relates to references in the ISAs to compliance with the
IFAC Code. These references have been replaced with
references to rules of professional conduct and codes
of ethics, which are applicable to the practice of public
accounting issued by various professional accounting bodies. The CASs also include Joint Policy Statements with
the Canadian Bar Association and the Canadian Institute
of Actuaries.
In adopting international standards as the Canadian standards, the AASB has followed established Canadian due
process for releasing Exposure Drafts (EDs) for comment,
ensuring that Exposure Drafts of all clarified standards
are available for a reasonable consultation period. The
exposure periods for CASs/CSQC 1 were somewhat
shorter than for the related ISAs/ISQC 1 to allow the
AASB to obtain input from Canadian stakeholders in
time to respond to the ISA/ISQC 1 Exposure Draft
before the deadline set by the IAASB.
The AASB will continue to follow established due process
for future changes to CASs and CSQC 1.
To review and comment on EDs, visit the AASB’s website
at www.aasb.ca.
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The CICA’s Guide to New CASs in Canada
The Expected
Impact
All Canadian assurance providers should be preparing now
for the introduction of new Canadian auditing and quality
control standards.
•
All financial statement auditors will require detailed
working knowledge of the CASs. Preparers of audited
financial statements should also understand how
changes in standards may affect the audit process, in
particular interactions between the auditor and the
preparer. The CA profession is committed to helping
members achieve the level of expertise their professional responsibilities require.
•
All firms providing assurance services will require
detailed knowledge of CSQC 1 to ensure its effective
implementation by December 15, 2009.
All new standards will be published in the new CICA Handbook – Assurance, which will be available in June 2009.
What to Watch for
CASs
CASs are principles-based, as are existing Canadian
standards for audits of financial statements. Most are
consistent with existing Canadian practice. Some, however, contain significant changes from existing standards
and will require auditors to prepare accordingly.
The CICA’s Guide to New CASs in Canada
Areas of Financial Statement
Auditing Consistent with Existing
Canadian Practice
The following areas of financial statement auditing are
essentially unchanged under the new CASs:
•
Compliance with professional ethics and auditor
responsibilities;
•
Understanding business entities and business risk;
•
Audit planning; and
•
Internal control evaluation and testing.
There are no significant changes to standards governing
other public accounting services and reports.
Further, some significant standards contained in the existing CICA Handbook – Assurance already closely mirror the
incoming CASs. These standards, which should already
have been implemented by auditors, deal with audit risk,
fraud and audit planning.
Areas of Financial Statement
Auditing with Significant
Changes under CASs
Some CASs contain significant differences from existing standards for audits of financial statements. These
changes represent good auditing practice. The time
and effort required to implement these CASs could be
significant for some auditors, depending in part on the
processes and procedures they currently use.
Readers can learn more about significant differences
between the CASs and existing standards for audits
of financial statements in the section, “Overview and
Comparisons: The Existing CICA Handbook – Assurance
— CASs and CSQC1”, beginning on page 29.
New Quality Control Standards
CSQC 1 shares many similarities with the current General
Standards of Quality Control for Firms Performing Assurance Engagements (GSF-QC). Firms providing assurance
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The CICA’s Guide to New CASs in Canada
services should, however, review the new standard in
detail and update their systems of quality control before
the December 15, 2009 implementation date.
There are two areas of significant difference which all
firms providing assurance services should review:
•
The need to complete the engagement quality control
review and resolve differences of opinion before the
date of the auditor’s report; and
•
The prohibition of those performing the engagement or the engagement quality control review from
being involved with the inspection of the completed
engagement as part of the monitoring function.
The AASB has issued a Risk Alert on these two matters,
which you can review on its website at www.cica.ca/CAS.
How to Prepare
for the Transition
Now is the time for all auditors to start preparing for the
transition to CASs, and for all firms providing assurance
services to start preparing for the transition to CSQC 1.
Information, education and training will be needed to
ensure a smooth transition.
Here are important things auditors can do to start preparing for CASs:
•
Ensure you are up to date with current auditing
standards, including all recent changes;
•
Familiarize yourself with the clarified CASs;
•
Appoint a person or team to be in charge of the
transition;
•
Prepare your transition plan, including professional
education plans for all audit staff; and
•
Talk to your staff and to your clients about the
potential impact.
All assurance providers should follow this same familiarization and education process in preparing for the implementation of CSQC 1.
The CICA’s Guide to New CASs in Canada
These steps will help minimize the impact of the transition
on your staff and your clients.
Remember to bookmark the CA profession’s CAS website
at www/cica.ca/CAS. It will keep you up to date on the
transition process, and provide you with immediate access
to CAS information and resources offered by the Chartered Accountants of Canada.
Resources Available
from the Chartered
Accountants of
Canada
The CA profession’s capacity to provide information and
knowledge development on International Standards on
Auditing throughout the transition and beyond is unrivalled.
The provincial institutes/ordre and the CICA will provide a
full range of information and learning opportunities to help
you prepare for the transition to CASs and CSQC 1.
Other resources available will include:
•
The CICA Practice Engagement Manual (PEM)
•
The CICA Quality Assurance Manual (QAM)
•
Information and Guidance on International Standards
on Auditing
•
Training and self-study materials
•
Up-to-date courses and conferences
•
Materials developed by the Auditing and Assurance
Standards Board staff.
You can access the CAS resources of the CA profession through the CICA website at www.cica.ca/CAS,
or through your provincial institute/ordre website.
9
The CICA
Handbook –
Assurance
Sections Related
to Audits
of Financial
Statements
Concordance
The Existing CICA Handbook – Assurance
— CASs and CSQC 1
Overview of the
New CASs, Crossreferenced to
Existing CICA
Handbook –
Assurance Sections
Dealing with
Audits of Financial
Statements
Agreeing the Terms of Audit Engagements
Quality Control for an Audit of Financial
Statements
Audit Documentation
Auditor’s Responsibilities Relating to Fraud
in an Audit of Financial Statements
CAS 210
CAS 220
CAS 230
CAS 240
Overall Objectives of the Independent Auditor
and the Conduct of an Audit in Accordance
with Canadian Auditing Standards
CAS 200
200-299 GENERAL PRINCIPLES AND RESPONSIBILITIES
100-199 INTRODUCTORY MATTERS
(no CASs currently in this section)
AUDITS OF HISTORICAL FINANCIAL INFORMATION
CAS 100-999
Canadian Auditing Standards
CANADIAN STANDARDS ON QUALITY CONTROL (CSQCs)
CSQC 1
Quality Control for Firms that Perform Audits
and Reviews of Financial Statements, and
Other Assurance Engagements.
5145
5135
5090
5095
5100
5110
5030
GSF-QC
Introduction
Audit of Financial Statements
Reasonable Assurance and Audit Risk
Generally Accepted Auditing Standards
Terms of the Engagement
Quality Control Procedures for Assurance
Engagements
Documentation
The Auditor’s Responsibility to Consider
Fraud
Introduction to general standards of quality
control for firms performing assurance
engagements
General Standards of Quality Control for
Firms Providing Assurance Services
Existing Section/
Guideline No.
Title of Section/Guideline
New Standard
No.
Title of Standard
Existing CICA Handbook – Assurance Sections/Guidelines
New CICA Handbook – Assurance
Canadian Auditing Standards
14
The CICA’s Guide to New CASs in Canada
New Standard
No.
Consideration of Laws and Regulations in an
Audit of Financial Statements
Communication with Those Charged with
Governance
Communicating Deficiencies in Internal
Control to Those Charged with Governance
and Management
5220
5751
5136
CAS 402
Audit Considerations Relating to an Entity
Using a Service Organization
AuG 42
5310
300-499 RISK ASSESSMENT AND RESPONSE TO ASSESSED RISKS
CAS 300
Planning an Audit of Financial Statements
5150
CAS 315
Identifying and Assessing the Risks of Material 5141
Misstatement Through Understanding the
Entity and Its Environment
CAS 320
Materiality in Planning and Performing an
5142
Audit
AuG-41
CAS 330
The Auditor’s Responses to Assessed Risks
5143
CAS 265
CAS 260
CAS 250
Planning
Understanding the Entity and Its Environment
and Assessing the Risks of Material
Misstatement
Materiality
Applying the concept of materiality
The Auditor’s Procedures in Response to
Assessed Risks
Audit Evidence Considerations when an Entity
Uses a Service Organization
Service organizations that use other service
organizations
Communications with Those Having Oversight
of the Financial Reporting Process
Internal Control in the Context of an
Audit — Weaknesses in Internal Control
Misstatements — Illegal Acts
200-299 GENERAL PRINCIPLES AND RESPONSIBILITIES (continued from previous page)
Title of Standard
Existing CICA Handbook – Assurance Sections/Guidelines
Existing Section/
Guideline No.
Title of Section/Guideline
New CICA Handbook – Assurance
Canadian Auditing Standards
The CICA Comparison
15
Initial Audit Engagements—Opening Balances
Analytical Procedures
Audit Sampling
Auditing Accounting Estimates, Including
Fair Value Accounting Estimates, and Related
Disclosures
CAS
CAS
CAS
CAS
CAS 550
CAS 560
Related Parties
Subsequent Events
External Confirmations
CAS 505
510
520
530
540
Audit Evidence — Specific Consideration
for Selected Items
CAS 501
Evaluation of Misstatements Identified During
the Audit
500-599 AUDIT EVIDENCE
CAS 500
Audit Evidence
CAS 450
Audit of Accounting Estimates
Auditing Fair Value Measurements and
Disclosures
Audit of Related Party Transactions
Subsequent Events
Date of the Auditor’s Report
5305
5306
6010
6550
5405
Analysis
Communications with Law Firms Regarding
Claims and Possible Claims (Including the
Joint Policy Statement)
5301
6560
5303
AuG-26
Audit Evidence
Communications with Actuaries
5300
Appendix to
Section 5365
6030
6560
Inventories
Communications with Law Firms Regarding
Claims and Possible Claims (including the
Joint Policy Statement)
Applying audit procedures to segment
disclosures in financial statements
Confirmation
Materiality
5142
Existing Section/
Guideline No.
Title of Section/Guideline
New Standard
No.
Title of Standard
Existing CICA Handbook – Assurance Sections/Guidelines
New CICA Handbook – Assurance
Canadian Auditing Standards
16
The CICA’s Guide to New CASs in Canada
CAS 706
5701
5600
5510
CAS 705
Modifications to the Opinion in the
Independent Auditor’s Report
Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent
Auditor’s Report
5400
5600
5050
5049
700-799 AUDIT CONCLUSIONS AND REPORTING
CAS 700
Forming an Opinion and Reporting on
Financial Statements
CAS 610
CAS 620
6930
CAS 600
Special Considerations — Audits of Group
Financial Statements (Including the Work of
Component Auditors)
Using the Work of Internal Auditors
Using the Work of an Auditor’s Expert
5370
CAS 570
Going Concern
CAS 580
Written Representations
600-699 USING WORK OF OTHERS
Auditor’s Report on Financial Statements
Prepared Using a Basis of Accounting
Other than Generally Accepted Accounting
Principles
Other Reporting Matters
The Auditor’s Standard Report
Auditor’s Report on Financial Statements
Prepared Using a Basis of Accounting
Other than Generally Accepted Accounting
Principles
Reservations in the Auditor’s Report
Using the Work of Internal Audit
Use of Specialists in Assurance Engagement
Reliance on Another Auditor
Management Representations
New Standard
No.
Title of Standard
Existing CICA Handbook – Assurance Sections/Guidelines
Existing Section/
Guideline No.
Title of Section/Guideline
New CICA Handbook – Assurance
Canadian Auditing Standards
The CICA Comparison
17
Comparative Information — Corresponding
Figures and Comparative Financial
Statements
Engagements to Report on Summary
Financial Statements
CAS 810
Auditor’s Report on Financial Statements
Prepared Using a Basis of Accounting
Other than Generally Accepted Accounting
Principles
Special Reports — Introduction
Special Reports — Audit Reports on Financial
Information Other Than Financial Statements
Auditor’s report on summarized financial
statements
5600
AuG-25
5800
5805
7500
Other Reporting Matters
Auditor’s report on comparative financial
statements
Annual Reports, Interim Reports and Other
Public Documents*
5701
AuG-8
*Section 7500 has been redrafted as “Auditor’s Consent to the Use of the Auditor’s Report in Connection with Designated Documents” and will be
effective at the same time as the CASs.
Special Considerations— Audits of Single
Financial Statements and Specific Elements,
Accounts or Items of a Financial Statement
CAS 805
The Auditor’s Responsibilities Relating to
Other Information in Documents Containing
Audited Financial Statements
800-899 SPECIALIZED AREAS
CAS 800
Special Considerations — Audits of Financial
Statements Prepared in Accordance with
Special Purpose Frameworks
CAS 720
CAS 710
Existing Section/
Guideline No.
Title of Section/Guideline
New Standard
No.
Title of Standard
Existing CICA Handbook – Assurance Sections/Guidelines
New CICA Handbook – Assurance
Canadian Auditing Standards
18
The CICA’s Guide to New CASs in Canada
The CICA Comparison
Notes on
Disposition of
Other Existing
CICA Handbook
– Assurance
Sections Dealing
with the Audit
of Financial
Statements
The new Handbook will not contain separate CASs comparable to the following current Handbook Sections:
•
Section 5365 “Communications with Actuaries.”
The “Joint Policy Statement Concerning Communications Between Actuaries Involved in the Preparation
of Financial Statements and Auditors,” currently an
Appendix to Section 5365, will appear as an Appendix to CAS 500.
•
Section 5750 “Communication with Management
of Matters Identified During the Financial Audit.”
Aspects of communications with management will
be dealt with in various CASs.
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20
The CICA’s Guide to New CASs in Canada
Overview of Existing
CICA Handbook –
Assurance Sections
Dealing with Audits of
Financial Statements,
Cross-referenced to
the New CASs
Existing CICA Handbook –
Assurance Sections
Introduction to General
Standards of Quality Control
for Firms Performing Assurance
Engagements
New CICA Handbook –
Assurance Canadian Auditing
Standards/Practice Statements
CSQC-1
Quality Control for
Firms that Perform
Audits and Reviews of
Financial Statements,
and Other Assurance
Engagements.
GSF-QC
General Standards
of Quality Control
for Firms Performing
Assurance
Engagements
5030
Quality Control
Procedures
for Assurance
Engagements
CAS 220 Quality Control for
an Audit of Financial
Statements
5049
Use of Specialists
in Assurance
Engagements
CAS 620 Using the Work of an
Auditor’s Expert
5050
Using the Work of
Internal Audit
CAS 610
5090
Audit of Financial
Statements
CAS 200 Overall Objectives
of the Independent
Auditor and the
Conduct of an Audit
in Accordance with
Canadian Auditing
Standards
Using the Work of
Internal Auditors
The CICA Comparison
Existing CICA Handbook –
Assurance Sections
New CICA Handbook –
Assurance Canadian Auditing
Standards/Practice Statements
5095
Reasonable
Assurance and Audit
Risk
CAS 200 Overall Objectives
of the Independent
Auditor and the
Conduct of an Audit
in Accordance with
Canadian Auditing
Standards.
5100
Generally Accepted
Auditing Standards
CAS 200 Overall Objectives
of the Independent
Auditor and the
Conduct of an Audit
in Accordance with
Canadian Auditing
Standards.
5110
Terms of the
Engagement
CAS 210
5135
The Auditor’s
Responsibility to
Consider Fraud
CAS 240 The Auditor’s
Responsibilities
Relating to Fraud in
an Audit of Financial
Statements
5136
Misstatements –
Illegal Acts
CAS 250 Consideration of Laws
and Regulations in
an Audit of Financial
Statements
5141
Understanding
the Entity and its
Environment and
Assessing the Risks of
Material Misstatement
CAS 315
5142
Materiality
CAS 320 Materiality in Planning
and Performing an
Audit
Agreeing the Terms of
Audit Engagements
Identifying and
Assessing the
Risks of Material
Misstatement Through
Understanding
the Entity and Its
Environment
CAS 450 Evaluation of
Misstatements
Identified During the
Audit
5143
The Auditor’s
CAS 330 The Auditor’s
Procedures in
Responses to
Response to Assessed
Assessed Risks
Risks
5145
Documentation
CAS 230 Audit Documentation
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The CICA’s Guide to New CASs in Canada
Existing CICA Handbook –
Assurance Sections
New CICA Handbook –
Assurance Canadian Auditing
Standards/Practice Statements
5150
Planning
CAS 300 Planning an Audit of
Financial Statements
5220
Internal Control in
CAS 265 Communicating
the Context of an
Deficiencies in
Audit — Weaknesses in
Internal Control to
Internal Control
Those Charged with
Governance and
Management
5300
Audit Evidence
CAS 500 Audit Evidence
5301
Analysis
CAS 520 Analytical Procedures
5303
Confirmation
CAS 505 External Confirmations
5305
Audit of Accounting
Estimates
CAS 540 Auditing Accounting
Estimates, including
Fair Value Accounting
Estimates, and Related
Disclosures
5306
Auditing Fair Value
Measurements and
Disclosures
CAS 540 Auditing Accounting
Estimates, including
Fair Value Accounting
Estimates, and Related
Disclosures
5310
Audit Evidence
Considerations when
an Entity Uses a
Service Organization
CAS 402 Audit Considerations
Relating to an Entity
Using a Service
Organization
5365
Communications with
Actuaries
Appendix
to CAS
500
5370
Management
Representations
CAS 580 Written
Representations
5400
The Auditor’s Standard CAS 700 Forming an Opinion
Report
and Reporting on
Financial Statements
5405
Date of the Auditor’s
Report
CAS 560 Subsequent Events
5510
Reservations in the
Auditor’s Report
CAS 705 Modifications to
the Opinion in
the Independent
Auditor’s Report
Joint Policy
Statement Concerning
Actuaries Involved
in the Preparation of
Financial Statements
and Auditors*
*Please see notes on disposition of other existing Handbook Sections dealing
with the audit of financial statements.
The CICA Comparison
Existing CICA Handbook –
Assurance Sections
5600
5701
New CICA Handbook –
Assurance Canadian Auditing
Standards/Practice Statements
Auditor’s Report on
Financial Statements
Prepared Using a
Basis of Accounting
Other than Generally
Accepted Accounting
Principles
CAS 706 Emphasis of Matter
Paragraphs and Other
Matter Paragraphs
in the Independent
Auditor’s Report
Other Reporting
Matters
CAS 706 Emphasis of Matter
Paragraphs and Other
Matter Paragraphs
in the Independent
Auditor’s Report
CAS 800 Special
Considerations —
Audits of Financial
Statements Prepared
in Accordance with
Special Purpose
Frameworks
CAS 710
Comparative
Information —
Corresponding
Figures and
Comparative Financial
Statements
5750
Communication
with Management
of Matters Identified
During the Financial
Statement Audit
Aspects of communications with
management is dealt with in
various CASs*
5751
Communications
with Those Having
Oversight of the
Financial Reporting
Process
CAS 260 Communications with
Those Charged with
Governance
5800
Special Reports —
Introduction
5805
Special Reports —
Audit Reports on
Financial Information
Other Than Financial
Statements
CAS 805 Special
Considerations
— Audits of Simple
Financial Statements
and Specific
Elements, Accounts
or Items of
a Financial Statement.
*Please see notes on disposition of other existing Handbook Sections dealing
with the audit of financial statements.
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The CICA’s Guide to New CASs in Canada
Existing CICA Handbook –
Assurance Sections
New CICA Handbook –
Assurance Canadian Auditing
Standards/Practice Statements
6010
Audit of Related
Party Transactions
CAS 550 Related Parties
6030
Inventories
CAS 501
6550
Subsequent Events
CAS 560 Subsequent Events
6560
Communications with
Law Firms Regarding
Claims and Possible
Claims (including
the Joint Policy
Statement)
CAS 501
6930
Reliance on Another
Auditor
CAS 600 Special
Considerations
— Audits of Group
Financial Statements
(including the Work
of Component
Auditors)
Audit Evidence
— Specific
Considerations for
Selected Items
Audit Evidence
— Specific
Considerations for
Selected Items
The CICA Comparison
New Canadian
Auditing Standards
Canada is joining more than 100 countries in its commitment to adopt the 36 clarified ISAs and ISCQ 1. ISAs
and ISQC 1 have been adopted as CASs and CSQC 1 with
minimal amendments to accommodate unique Canadian
circumstances. The effective date for CSQC 1 is December 15, 2009. The effective date for the CASs is for periods
ending on or after December 14, 2010.
CANADIAN STANDARDS ON QUALITY CONTROL
CSQC 1:
Quality Control for Firms that Perform Audits
and Reviews of Financial Statements, and Other
Engagements
200-299 GENERAL PRINCIPLES AND RESPONSIBILITIES
CAS 200: Overall Objective of the Independent Auditor,
and the Conduct of an Audit in Accordance
with Canadian Auditing Standards
CAS 210: Agreeing the Terms of Audit Engagements
CAS 220: Quality Control for an Audit of Financial
Statements
CAS 230: Audit Documentation
CAS 240: The Auditor’s Responsibilities Relating to Fraud
in an Audit of Financial Statements
CAS 250: Consideration of Laws and Regulations in an
Audit of Financial Statements
CAS 260: Communication with Those Charged with
Governance
CAS 265: Communicating Deficiencies in Internal Control
to Those Charged with Governance and
Management
300-499
CAS 300:
CAS 315:
CAS 320:
CAS 330:
CAS 402:
CAS 450:
RISK ASSESSMENT AND RESPONSE TO
ASSESSED RISKS
Planning an Audit of Financial Statements
Identifying and Assessing the Risks of Material
Misstatement Through Understanding the Entity
and Its Environment
Materiality in Planning and Performing an Audit
The Auditor’s Responses to Assessed Risks
Audit Considerations Relating to an Entity
Using a Service Organization
Evaluation of Misstatements Identified During
the Audit
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The CICA’s Guide to New CASs in Canada
500-599 AUDIT EVIDENCE
CAS 500: Audit Evidence
CAS 501: Audit Evidence — Specific Considerations for
Selected Items
CAS 505: External Confirmations
CAS 510: Initial Audit Engagements — Opening Balances
CAS 520: Analytical Procedures
CAS 530: Audit Sampling
CAS 540: Auditing Accounting Estimates, Including
Fair Value Accounting Estimates, and Related
Disclosures
CAS 550: Related Parties
CAS 560: Subsequent Events
CAS 570: Going Concern
CAS 580: Written Representations
600-699 USING WORK OF OTHERS
CAS 600: Special Considerations — Audits of Group
Financial Statements (Including the Work
of Component Auditors)
CAS 610: Using the Work of Internal Auditors
CAS 620: Using the Work of an Auditor’s Expert
700-799 AUDIT CONCLUSIONS AND REPORTING
CAS 700: Forming an Opinion and Reporting on Financial
Statements
CAS 705: Modifications to the Opinion in the Independent
Auditor’s Report
CAS 706: Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s
Report
CAS 710: Comparative Information — Corresponding
Figures and Comparative Financial Statements
CAS 720: The Auditor’s Responsibilities Relating Other
Information in Documents Containing Audited
Financial Statements
800-899 SPECIALIZED AREAS
CAS 800: Special Considerations — Audits of Financial
Statements Prepared in Accordance with
Special Purpose Frameworks
CAS 805: Special Considerations — Audits of Single
Financial Statements and Specific Elements,
Accounts or Items of a Financial Statement
CAS 810: Engagements to Report on Summary Financial
Statements
Overview and
Comparisons
The Existing CICA Handbook – Assurance
— CASs and CSQC 1
Comparison of Existing CICA Handbook – Assurance
Sections Dealing with Audits of Financial Statements,
Cross-referenced to the New CASs and CSQC 1
30
The CICA’s Guide to New CASs in Canada
Understanding
the Implications of
Canadian Auditing
Standards
This CICA publication has not been adopted, endorsed,
approved, disapproved or otherwise acted upon by the
Auditing and Assurance Standards Board (AASB), or any
CICA Board or committee, the governing body or membership of the CICA, or any Provincial Institute/Ordre.
Changes identified here represent significant differences
between existing Recommendations in the CICA Handbook – Assurance at December 31, 2007, and the requirements in the CASs. What is significant to any individual
user will depend on the particular circumstances. Users of
this comparison should note that it may not identify all the
differences between the current standards and the CASs
that are significant to a particular engagement. Therefore
readers should perform their own review of the entire
CASs and other relevant materials to understand how its
proposals would require changes to their current practices, policies or methodologies.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 200
Overall Objective of the Independent Auditor,
and the Conduct of an Audit in Accordance
with Canadian Auditing Standards
Existing Handbook Section(s) replaced
There is no single Section in the existing Handbook that
is comparable to CAS 200. CAS 200 will replace material
contained in Sections 5090, Audit of Financial Statements, 5095, Reasonable Assurance and Audit Risk
and 5100, Generally Accepted Auditing Standards. These
Sections deal with aspects of overall concepts that are
applicable to performing a financial statement audit
similar to the matters covered by CAS 200.
•
Section 5090 requires the auditor to perform an audit
with an attitude of professional scepticism. CAS 200
has the same requirement in paragraph 15.
•
Section 5095 quotes examination standard (i) from
Section 5100 and has no other Recommendations.
•
Section 5100 includes the general standard, the
three examination standards and the four reporting
standards. The concepts are covered in CAS 200 or
in other CASs as follows:
—— The general standard is replaced with the
requirement in CAS 200 to comply with relevant
ethical requirements.
—— Examination standard (i) dealing with the
concept of reducing audit risk to an acceptably
low level is dealt with in CAS 200 paragraph 17.
Direction and supervision of engagement team
members are covered, for example in paragraph
15 of CAS 220 and paragraph 10 of CAS 300.
—— Examination standard (ii) dealing with obtaining
an understanding of the entity and its environment is not covered in CAS 200. It is covered in
paragraphs 11-23 of CAS 315.
—— Examination standard (iii) dealing with obtaining
sufficient appropriate audit evidence is comparable to the requirement in paragraph 17 of
CAS 200.
Section 5100 contains overall reporting requirements
while CAS 200 does not. CAS 700, CAS 800 and
other CASs in the 700 and 900 series provide reporting requirements.
•
Section 5021 in the existing Handbook applies to all
assurance engagements while CAS 200 applies only
to audits of financial statements and may be adapted
as necessary in the circumstances when applied to
audits of other historical financial information. In the
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The CICA’s Guide to New CASs in Canada
new Handbook, Section 5021 will describe the authority of standards and guidance, other than the CASs.
•
The three Recommendations in Section 5021 are dealt
with in CAS 200, in relation to financial statement
audits, as follows:
—— Paragraph 5021.04 deals with compliance with
the Recommendations in the Handbook and is
comparable to requirements in paragraphs 22
and 23 of CAS 200.
—— Paragraph 5021.06 deals with the use of interpretive publications (i.e., the Assurance and
Related Services Guidelines).
—— Paragraph 5021.09 deals with the use of professional judgment in applying other auditing and
assurance publications. These matters are not
addressed in CAS 200.
Difference(s) in scope
Differences in scope between CAS 200 and relevant existing Handbook Sections are noted above.
New concept(s)
CAS 200 introduces the concepts of “applicable financial
reporting framework” including “fair presentation frameworks” and “compliance frameworks.” These concepts
pervade the CASs and affect, for example, the form and
content of the report on the relevant financial statements,
as discussed in the 700 and 800 series of CASs dealing
with auditor’s reports.
Changes to requirement(s)
Requirements in CAS 200 that could represent a significant change for Canadian auditors include the following:
•
The auditor shall have an understanding of the entire
text of a CAS, including its application and other
material, to understand its requirements. This matter
is addressed in explanatory material in Section 5021.
•
The auditor is prohibited from representing that he
or she has complied with the Canadian generally
accepted auditing standards in the auditor’s report
unless the auditor has complied with CAS 200 and
all other CASs relevant to the audit. This concept
is implicit in the existing Handbook, but there is no
comparable requirement.
—— Each CAS contains an objective or objectives
that provide the context in which the requirements of the CASs are set. Existing Handbook
Sections do not contain objectives. The objectives in the CASs support the overall objective
of the auditor, which, similar to the objective
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
——
——
——
in the current Canadian standards, is to obtain
reasonable assurance about whether the financial statements as a whole are free from material
misstatement whether due to fraud or error,
and to report on the financial statements in
accordance with the auditor’s findings. CAS 200
requires the auditor to:
use the objectives in planning and performing
the audit, having regard to the interrelationships
amongst the CASs and having complied with the
requirements of the CASs:
oo to determine whether any audit procedures
in addition to those required by the CASs
are necessary in pursuance of the objectives
stated in the CASs; and
oo to evaluate whether sufficient appropriate audit evidence has been obtained in
the context of the overall objective of the
auditor.
evaluate, where an individual objective has
not been or cannot be achieved, whether this
prevents the auditor from achieving the auditor’s
overall objective (to obtain reasonable assurance
about whether the financial statements as a
whole are free from material misstatement); and
document a failure to achieve an objective.
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The CICA’s Guide to New CASs in Canada
CAS 210
Agreeing the Terms of Audit Engagements
Existing Handbook Section(S) Replaced
CAS 210 replaces Section 5110, Terms of the Engagement.
Difference(s) in scope
None.
New concept(s)
Management and, where appropriate,
those charged with governance
CAS 210 uses the Definitions section to explain that references to “management” should be read as “management
and, where appropriate, those charged with governance”
in the remainder of the CAS. As explained in paragraphs
A12 and A21, the decision as to whether the auditor should
agree matters with management or those charged with
governance is to be made in light of their respective
responsibilities or roles in the entity and any relevant
law or regulation.
Change(s) to requirement(s)
Preconditions for an Audit
CAS 210 paragraph 6 requires the auditor to establish
whether the preconditions for an audit are present. In
order to do so, the auditor is required to:
(a) determine whether the financial reporting framework
to be applied in the preparation of the financial statements is acceptable;
(b) obtain an agreement of management that it acknowledges and understands its responsibilities:
(i) for the preparation of the financial statements in
accordance with the applicable financial reporting framework, including where relevant their fair
presentation;
(ii) for such internal control as management determines is necessary to enable to preparation
of the financial statements that are free from
material misstatement, whether due to fraud
or error; and
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
(iii) to provide the auditor with:
oo access to all information of which management is aware that is relevant to the preparation of the financial statements such as
records, documentation and other matters;
oo additional information that the auditor may
request from management for the purpose
of the audit; and
oo unrestricted access to persons within the
entity from whom the auditor determines
it necessary to obtain audit evidence.
Section 5400, The Auditor’s Standard Report requires
that general purpose financial statements be prepared
in accordance with GAAP for the auditor to issue a
clean opinion. The concept of other acceptable financial
reporting frameworks is addressed, in part, in Section 5110, Terms of the Engagement. For example,
paragraph 5110.12 makes reference to Auditor’s Report
on Financial Statements Using a Basis of Accounting
other than Generally Accepted Accounting Principles,
Section 5600 which specifies the types of engagements
that the auditor can accept and the reporting requirements for such engagements.
Paragraph 5110.17(a) contains a requirement similar to that
in CAS 210 paragraph 6(b)(i).
Paragraph 5110.17(c) contains a requirement similar to that
in CAS 210 paragraph 6(b)(ii). In addition to describing
such responsibility in the written agreement, the auditor is required, by paragraph 5141.100 and paragraph
5135.090(a), to obtain a written representation regarding
management’s responsibility for internal control. The
description of management responsibility for internal control in the extant standards is more explicit than CAS 210.
The extant standards require that management acknowledge its responsibility for the “design and implementation
of internal control”; CAS 210 requires that management
acknowledge its responsibility “for such internal control
as management determines is necessary.”
Section 5110 does not contain the requirement in CAS 210
paragraph 6(b)(iii).
If the preconditions for an audit are not present, CAS 210
requires the auditor to discuss the matter with management. Section 5110 does not contain
a similar requirement.
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The CICA’s Guide to New CASs in Canada
CAS 210 contains a requirement that the auditor not
accept an audit engagement, unless required by law
or regulation, if:
•
the auditor has determined that the financial reporting framework to be applied in the preparation of the
financial statements is unacceptable, unless specific
requirements are met (see below); or
•
management has not provided an agreement that it
acknowledges and understands its responsibility set
out in item (b) above; or
•
management or those charged with governance
impose a scope limitation that the auditor believes
would result in a disclaimer of opinion.
Specified requirements where the auditor has determined
that the financial reporting framework prescribed by law
or regulation would be unacceptable.
CAS 210 paragraph 19 states that if the auditor determines
that, for the fact that it is prescribed by law or regulation,
the applicable financial reporting framework would not be
acceptable, the auditor may accept the engagement only if:
(a) management agrees to provide additional disclosures in the financial statements required to avoid
the financial statement being misleading; and
(b) it is recognized in the terms of the engagement that
the auditor’s report will incorporate an Emphasis of
Matter paragraph drawing users’ attention to the
additional disclosures and, unless required by law or
regulation, will not include the phrases “present fairly,
in all material respects,” or “give a true and fair view.”
If these conditions are not present and the auditor is
required by law or regulation to undertake the audit
engagement, the auditor shall evaluate the effect of the
misleading nature of the financial statements on the
auditor’s report, and include appropriate reference to
this matter in the terms of the audit engagement.
Section 5110 does not contain a similar requirement.
Agreeing on Engagement Terms
CAS 210 paragraph 9 requires the auditor to agree the
terms of the audit engagement with management or those
charged with governance. In the context of the CASs and
ISAs or means and/or (unless specifically stated otherwise)
so the auditor may agree the terms of engagement with
both parties. Requirement paragraph 5110.02 requires
the auditor to establish an understanding of the terms of
engagement with both parties (not just one of the parties).
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 210, paragraph 10 requires that:
•
The auditor include in the engagement letter the
identification of the applicable reporting framework
for the preparation of the financial statements.
Section 5110 does not contain such requirement as
it assumes the application of Canadian GAAP for
general-purpose financial statements. Section 5600
required the auditor to confirm in writing with the
entity the basis of accounting used when reporting
under a basis of accounting other than GAAP.
•
The auditor include in the engagement letter reference to the expected form and content of any reports
to be issued and a statement that there may be
circumstances in which the report may differ from its
expected form and content. Section 5110 does not
contain such a requirement.
CAS 210, paragraph 11 requires that if law or regulation prescribes in sufficient detail the terms of the audit
engagement required in this CAS, the auditor need not
record them in a written agreement, except the auditor is
required to seek the written agreement that such law or
regulation applies and that management acknowledges
and understands its responsibilities as set out in the
requirements of this CAS. Section 5110 does not contain
such a requirement.
CAS 210, paragraph 12 requires that if law or regulation
prescribes responsibilities of management and the auditor
determines that such responsibilities are equivalent in
effect to those set out in the requirements of this CAS, the
auditor may use the wording of the law or regulation to
describe them in the written agreement. For those responsibilities that are not prescribed by law or regulation such
that their effect is equivalent, the written agreement shall
use the description set out in the requirements of this
CAS. Section 5110 does not contain such a requirement.
Section 5110 requires that the written agreement describe:
•
the limitation of the engagement. CAS 210 does not
contain such requirement but provides similar application and explanatory material in paragraph A23;
•
specific information that management is responsible
to provide to the auditor, when applicable. CAS 210
does not contain such an explicit requirement;
•
specific auditor responsibilities, when applicable.
CAS 210 does not contain such an explicit requirement but provides similar application and explanatory
material in Appendix 1;
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The CICA’s Guide to New CASs in Canada
•
management responsibility for providing written
confirmation of significant representation to the auditor. CAS 210 does not contain such a requirement but
provides similar application and explanatory material
in paragraph A13;
•
any other matters that are relevant and important
to the engagement. CAS 210 does not contain such
a requirement but conveys the same message in
paragraph A23 of the application and explanatory
material.
Recurring Audits
•
CAS 210 paragraph 13 requires that on recurring
audits, the auditor shall assess whether circumstances
require the terms of the audit engagement to be
revised and whether there is a need to remind the
entity of the existing terms of the audit engagement.
Section 5110 does not contain such a requirement but
provides similar application and explanatory material
in paragraph 5110.06.
Acceptance of a Change in the Terms
of the Engagement
•
CAS 210 paragraph 14 requires the auditor to not
agree to a change in the terms of the audit engagement where there is no reasonable justification
for doing so. Section 5110 does not contain such
a requirement.
•
CAS 210 paragraph 15 contains a requirement related
to circumstances when the auditor is requested to
change the engagement to one that provides a lower
level of assurance. Section 5110 does not contain such
a requirement.
•
CAS 210 paragraph 16 contains a requirement
that any change in the terms of the agreement be
recorded in a written agreement. Section 5110 does
not contain such a requirement but provides similar
application and explanatory material in paragraph
5110.04.
•
CAS 210 paragraph 17 contains requirements related
to circumstances when the auditor is unable to agree
to a change of the terms of the engagement and
is not permitted by management to continue the
original engagement. Section 5110 does not contain
such requirements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Financial Reporting Standards Supplemented by Law
or Regulation
•
CAS 210 paragraph 18 contains requirements, not
contained in Section 5110, dealing with circumstances
when the financial reporting standards are supplemented by law or regulation. In such case, CAS 210
requires the auditor to:
—— Determine whether there are any conflicts
between the financial reporting standards
and the additional requirements; if so,
—— Discuss with management the nature of the
additional requirements and agree whether:
(a) the additional requirements can be met
through additional disclosures in the financial statements; or
(b) the description of the applicable financial
reporting framework in the financial statements can be amended accordingly.
If neither of these actions is possible, the
auditor shall determine whether it will be
necessary to modify the auditor’s opinion.
Auditor’s Report Prescribed by Law or Regulation
•
CAS 210 paragraph 21 contains requirements, not
contained in Section 5110, that deal with circumstances when, law or regulation prescribes the
layout or wording of the auditor’s report in a form
or in terms, that are significantly different from the
requirement of the CASs. In these circumstances,
CAS 210 requires the auditor to evaluate:
—— whether users might misunderstand the assurance obtained from the auditor of the financial
statements and, if so,
—— whether additional explanation in the auditor’s
report can mitigate possible misunderstanding.
If the auditor concludes that additional explanation cannot
mitigate possible misunderstanding, the auditor shall not
accept the audit engagement unless required by law or
regulation to do so. An audit which the auditor is required
to accept in these circumstances would not comply with
the CASs, and accordingly the auditor shall include no
reference in the auditor’s report to the audit having been
conducted in accordance with the CASs.
Other matter(s)
None.
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The CICA’s Guide to New CASs in Canada
CAS 220 and CSQC 1
Quality Control for an Audit of Financial
Statements and Quality Control for Firms
that Perform Audits and Reviews of Financial
Statements and Other Assurance Engagements
Existing Handbook Section(s) replaced
CAS 220 replaces Section 5030, Quality Control
Procedures for Assurance Engagements.
CSQC 1 replaces GSF-QC, General Standards of Quality
Control for Firms Performing Assurance Engagements.
Difference(s) in scope
Limited to Audits of Financial Statements
CAS 220 applies only to audits of financial statements
(adapted as necessary for audits of other historical financial information). Section 5030 applies to all assurance
engagements. An updated Section 5030 will be retained
in the CICA Handbook – Assurance to deal with quality
control procedures for assurance engagements other than
audits of financial statements and other historical financial
information.
New concept(s)
Timing of Completion of the Engagement Quality
CAS 220 and CSQC 1 require the completion of the
engagement quality control review and resolution of any
differences of opinion on or before the date of the auditor’s report. CAS 700 requires the auditor’s report to be
dated no earlier than the date the auditor has obtained
sufficient appropriate audit evidence on which to base
the auditor’s opinion, including evidence that those with
the recognized authority have asserted that they have
taken responsibility for those financial statements. When a
quality control review is performed, its completion assists
the auditor in determining whether sufficient appropriate
evidence has been obtained.
The approach noted above represents a significant change
from Section 5030 and GSF-QC. Those standards require
that the engagement quality control review be completed
before the date of issuance of the engagement report.
For many firms, the date of the engagement report
may be significantly earlier than the date of issuance of
that report. For these firms, the implementation of the
CAS 220 and CSQC 1 requirement may represent a significant change in practice.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Listed Entity versus Public Enterprise
CAS 220 and CSQC 1 include a definition of the term
“listed entity” which differs from the existing Canadian
definition of “public enterprise”.
Change(s) to requirement(s)
Changes to Requirements – CAS 220
CAS 220 contains, in addition to the requirement discussed above relating to the timing of completion of
engagement quality control review, additional or more
stringent requirements regarding:
•
specific engagement quality control review procedures regarding discussion of significant matters
and review of financial statements and the proposed
auditor’s report [paragraphs 20(a) and (b)];
•
engagement quality control review procedures specific to audits of financial statements of listed entities
[paragraph 21];
•
engagement partner’s consideration of the results of
the firm’s monitoring process [paragraph 23]; and
•
documentation of the work performed by the auditor
and the engagement quality control reviewer [paragraphs 24 and 25].
Changes to Requirements – CSQC 1
Prohibition of those performing the engagement or the
engagement quality control review from being involved
with the inspection of the completed engagement as part
of the monitoring function.
There is no significant difference between CSQC 1 and
GSF-QC regarding requirements and guidance relating to
most aspects of the monitoring process. Both CSQC 1 and
GSF-QC take the position that in determining the scope
of the firm’s inspection of completed engagements, the
firm may take into account the scope or conclusions of an
independent external inspection program performed, for
example, by the provincial institutes/ordre or Canadian
Public Accountability Board (CPAB). Under both standards, such an independent external inspection program
does not act as a substitute for the firm’s own internal
monitoring program.
However, there is a significant difference between CSQC 1
and GSF-QC regarding who can perform the inspection
of completed engagements. CSQC 1 requires that those
performing the engagement or the engagement quality
control review not be involved in inspecting the completed
engagement. GSF-QC, on the other hand, states that
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The CICA’s Guide to New CASs in Canada
whenever possible, an inspection of a completed engagement be undertaken by individuals not involved with
performing the engagement or acting as an engagement
quality control reviewer for it. Therefore, CSQC 1 is more
rigorous in determining who is eligible to inspect completed engagements. As a result, smaller firms, for example, may need to use the services of a suitably qualified
external person or another firm to carry out inspections
of completed engagements. Alternatively, smaller firms
may wish to establish arrangements to share resources
with other appropriate organizations and thereby facilitate
certain monitoring activities.
Other changes that primarily reflect matters that were
formerly non-italicized paragraphs in extant GSF-QC.
In addition to the changes in requirements noted above,
CSQC 1 contains additional or more stringent requirements
regarding:
•
acceptance or continuance of an engagement
when a potential conflict of interest is identified
[paragraph 27(b)];
•
review responsibilities in an engagement [paragraph
33];
•
specific engagement quality control review procedures regarding discussion of significant matters and
review of financial statements or other subject matter
information and the proposed report [paragraphs
37(a) and (b)];
•
engagement quality control review procedures specific to audits of financial statements of listed entities
[paragraph 38];
•
maintaining of engagement quality control reviewer’s
objectivity and the firm’s response when the objectivity is impaired [paragraphs 40 and 41];
•
assembly of the final engagement files on a timely
basis after the engagement reports have been finalized [paragraph 45]; and
•
monitoring procedures specific to the circumstance
where firms within a network operate under common
monitoring policies and procedures and these firms
place reliance on such a monitoring system [paragraph 54].
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Other Matter(s)
Rotation of Senior Personnel
For audits of financial statements of listed entities, CSQC
1 requires the rotation of the engagement partner and
the individuals responsible for the engagement quality
control review, and where applicable, others subject to
rotation requirements, after a specified period in compliance with relevant ethical requirements. This wording is
somewhat more specific than the requirement in GSF-QC
that the firm establish policies and procedures to address
applicable ethical requirements where the rotation of the
practitioner and others is prescribed. However, there is
no difference in substance between the requirements in
CSQC 1 and GSF-QC. Both standards refer to compliance
with relevant ethical requirements. For example, both
CSQC 1 and GSF-QC recognize that under current ethical requirements for chartered accountants, a firm may
choose not to require the rotation of senior personnel
responsible for audits of listed entities with less than
$10 million in market capitalization and total assets.
Of course, under CSQC 1 and GSF-QC, as well as the applicable ethical requirements, the firm must always establish
policies and procedures (which may or may not involve
the rotation of senior personnel) to effectively deal with
a familiarity threat.
Inspection Cycles for Completed Engagements
Both CSQC 1 and GSF-QC require that a firm establish a
monitoring process, including inspection of completed
engagements on a cyclical basis, which provides it with
reasonable assurance that the policies and procedures
relating to the system of quality control are relevant,
adequate and operating effectively. The wording in
application material in CSQC 1 regarding the timing of the
inspection of completed engagements is different from
that in GSF-QC. However, the same underlying principle
regarding the need to maintain an effective system of
quality control drives the determination of the nature,
timing and extent of the inspection cycle for completed
engagements. An arbitrarily long inspection cycle would
not be consistent with meeting this underlying principle.
Further, as firms are already required to establish an
inspection cycle for completed engagements under GSFQC, the nature, extent and timing of the inspection cycle
is unlikely to change simply because of the introduction
of CSQC 1.
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CSQC 1 provides a list of factors that may affect the manner in which a firm organizes its inspection cycle, including
the timing of selection of individual engagements. The following are examples of a firm’s considerations in establishing its inspection process:
•
A firm may find it prudent to inspect complex and/or
high-risk engagements annually and other engagements less frequently.
•
If results of external practice inspection programs
(for example, by the provincial institutes/ordre or
CPAB) or internal monitoring has identified significant
deficiencies in files completed by a particular engagement team, the firm may find it prudent to inspect
engagements completed by the particular engagement team more frequently and may select such files
without prior notification to the engagement team.
On the other hand, in a situation where previous
monitoring procedures did not identify significant
deficiencies, a firm may select an inspection cycle
with a longer period, such as three years.
•
In the case of a firm with engagements in a variety of
industries, or where different types of engagement
are performed, a firm may select engagements in a
manner that allows the firm to inspect the full spectrum of industries and types of engagement.
•
When accounting or auditing standards have
changed over a particular period, a firm may select
more engagements during the inspection cycle, or
perform inspections more frequently, to provide
greater assurance that the engagement teams are
following the new standards.
•
Inspections can highlight areas where engagements
can be performed more effectively or efficiently.
Accordingly, firms may use inspections as a means
of identifying opportunities for improvement to the
quality of engagement performance.
Authority and Application of CSQC 1
The authority and application of CSQC 1 is set out within
the standard in paragraphs 4–9 and paragraphs 13–15 and
paragraph A1. Currently in the Handbook, the authority
and application of GSF-QC is set out in the “Introduction
to General Standards of Quality Control for Firms Performing Assurance Engagements.” This Introduction will be
withdrawn when CSQC 1 becomes effective.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 230
Audit Documentation
Existing Handbook Section(s) replaced
The CAS replaces Section 5145, Documentation.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Completion of the Audit File
Section 5145 requires the auditor to assemble a complete
and final audit file as at a date not more than 45 days:
•
after the report release date, if a report is issued in
connection with the engagement;
•
from the date that the examination was substantially
completed, if a report is not issued in connection with
the engagement; or
•
from the date the engagement ceased, if the auditor
was unable to complete the engagement.
For purposes of Section 5145, the report release date is
defined as the date the auditor grants permission to use
the auditor’s report in connection with the issuance of the
entity’s financial statements.
CAS 230 requires assembly of the final audit file on a
timely basis after the date of the auditor’s report. The
AASB has changed the definition of auditor’s report date,
as discussed in the summary of significant differences
under CAS 560. CAS 230 states that the final audit file
would normally be assembled as at a date no more than
60 days after the date of the auditor’s report.
Documentation of a Departure from a Basic Principle
or Essential Procedure
CAS 230 recognizes that there may be exceptional
circumstances where the auditor judges it necessary to
depart from a basic principle or an essential procedure
that is relevant in the circumstances of the audit. In such
circumstances, CAS 230 requires the auditor to document
how the alternative audit procedures performed achieved
the objective of the audit, and, unless otherwise clear, the
reasons for the departure. This is consistent with Section
5021. Section 5021 requires the auditor not to depart from
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Recommendations unless there is a clear and compelling
reason to do so. The auditor is required to document the
reason for any departure, and how the alternative was sufficient to achieve the objectives of the Recommendations.
However, Section 5145 does not have such a requirement.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 240
The Auditor’s Responsibilities Relating to
Fraud in an Audit of Financial Statements
Existing Handbook Section Replaced
The CAS replaces Section 5135, The Auditor’s Responsibility to Consider Fraud.
Difference(S) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Requirements in Section 5135 state that the auditor’s
communications with those charged with governance
should include fraud (whether caused by management or
other employees) that results, or may result, in a non-trivial
misstatement of the financial statements. In CAS 240, such
communication relates to material misstatements.
Also, in Section 5135, the auditor is required to
communicate to those charged with governance:
•
questions regarding the honesty and integrity
of management; and
•
matters that may cause future financial statements
to be materially misstated.
These matters are not specifically addressed in requirements in CAS 240.
Under Section 5135, the auditor is also required to communicate with a successor auditor when fraud or suspected
fraud was a factor in the existing auditor’s withdrawal from
the engagement. This matter is not addressed in CAS 240.
Other matter(s)
CAS 240 requires the auditor to communicate with those
charged with governance any other matters related to
fraud that are, in the auditor’s judgment, relevant to
their responsibilities. In existing Canadian standards,
this requirement is contained in Section 5751, and was
therefore not repeated in Section 5135.
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CAS 250
The Auditor’s Responsibilities Relating
to Laws and Regulations in an Audit of
Financial Statements
Existing Handbook Section Replaced
The CAS replaces Section 5136, Misstatements — Illegal
Acts.
Difference(s) in scope
None.
New concept(s)
Categories of Laws and Regulations
CAS 250 clearly distinguishes between the two categories
of laws and regulations as:
•
the provisions of those laws and regulations generally
recognized to have a direct effect on the determination of material amounts and disclosures in the
financial statements; and
•
other laws and regulations that do not have a direct
effect on the determination of the amounts and
disclosures in the financial statements, but compliance with which may be fundamental to the operating aspects of the business, to an entity’s ability to
continue its business or to avoid material penalties.
Change(s) to requirement(s)
Section 5136 contains three Recommendations (paragraphs 5136.11, .21 and .28) dealing respectively with
obtaining a knowledge of relevant acts and regulations,
obtaining representations from management regarding
illegal or possibly illegal acts, and communications with
those charged with governance regarding these matters.
CAS 250 covers much the same matters, but there are a
significant number of more specific requirements regarding matters that in Section 5136 are dealt with in application and other explanatory material. CAS 250 also deals in
more detail with actions that the auditor should take when
non-compliance is identified or suspected.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
The Auditor’s Consideration of Compliance with
Laws and Regulations
CAS 250 requires the auditor to:
•
obtain a general understanding of the applicable
legal and regulatory framework and how the entity
complies with that framework;
•
obtain sufficient appropriate audit evidence regarding compliance with the provisions of those laws and
regulations generally recognized to have an effect on
the determination of material amounts and disclosures in the financial statements;
•
perform further audit procedures to identify noncompliance with other laws and regulations that may
have a material effect on the financial statements,
specifically:
—— inquiring of management and/or those charged
with governance as to whether the entity is in
compliance; and
—— inspecting correspondence, if any, with relevant
licensing or regulatory bodies;
•
have sufficient understanding of the laws and regulations to consider when auditing relevant assertions
underlying the financial statements, and obtain sufficient appropriate audit evidence about compliance
with those laws;
•
be alert to the possibility that other audit procedures
performed may bring instances of possible noncompliance to the auditor’s attention.
Audit Procedures When Non-Compliance is Identified
or Suspected
CAS 250 requires that:
•
if the auditor becomes aware of a information concerning an instance of non-compliance or suspected
non-compliance with laws and regulations, obtain
an understanding of the nature of the act and the
circumstances in which it occurred; and if the auditor
becomes aware of further information to evaluate the
possible effect on the financial statements, including
the potential financial consequences, their disclosure
and effect on fair presentation of the financial statements;
•
if the auditor suspects there may be non-compliance,
discuss the matter with management and where
appropriate, those charged with governance;
•
the auditor considers the need for the auditor to
obtain legal advice regarding a suspected instance
of non-compliance;
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•
the auditor evaluates the implications of any noncompliance in relation to other aspects of the audit
including the auditor’s risk assessment and the reliability of written representations, and take appropriate action;
•
if sufficient information about suspected non-compliance cannot be obtained, the auditor evaluates the
lack of sufficient appropriate audit evidence on the
auditor’s report.
Reporting of Identified or Suspected Non-Compliance
CAS 250 requires the auditor to:
•
communicate to those charged with governance matters involving non-compliance with laws and regulations that come to the auditor’s attention during the
course of the audit, other than when the matters are
clearly inconsequential;
•
communicate as soon as practicable to those charged
with governance instances of non-compliance that
the auditor believes to be intentional and material;
•
if the auditor suspects that management or those
charged with governance are involved in non-compliance, communicate the matter to the next higher level
of authority at the entity, if that exists, and consider
the need to obtain legal advice;
•
if the auditor has identified or suspects non-compliance with laws and regulations, determine whether
the auditor has a responsibility to report the identified or suspected non-compliance to parties outside
the entity.
Documentation
CAS 250 requires the auditor to:
•
document instances of identified or suspected noncompliance and any related discussions with management, those charge with governance, or parties
outside the entity.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 260
Communications with those Charged
with Governance
Existing Handbook Section(S) Replaced
The CAS replaces Section 5751, Communications
with Those Having Oversight of the Financial
Reporting Process.
Difference(s) in scope
Required Communication of Independence Matters
Limited to Listed Entities
•
Under Section 5751, all auditors are required to
communicate matters related to their independence.
Under CAS 260, such communication is required only
of auditors of listed entities.
•
For matters other than independence, under Section
5751, auditors of entities without public accountability are required only to consider communicating
in accordance with the Recommendations in Section
5751. All auditors must follow all of the requirements
in CAS 260.
•
Under Section 5751, when communicating matters
relevant to their independence, auditors of entities
with public accountability are required to communicate fees charged during the last year, distinguishing between fees for audit and non-audit services.
Entities with public accountability include listed
entities along with regulated financial institutions,
rate-regulated enterprises, co-operative businesses,
not-for-profit organizations, pension plans and
governments and public sector entities. Under CAS
260, communications regarding fees for audit and
non-audit services is required only of auditors of
listed entities.
As a result of these changes, when CAS 260 becomes
effective, communications on independence and fees for
audit and non-audit services for entities other than listed
entities will be driven by the demand for such communication from audit committees or boards of directors.
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New concept(s)
Identification of Appropriate Persons with
Whom to Communicate
Section 5751 states that the auditor is to communicate
with the audit committee or equivalent. CAS 260 requires
the auditor to:
•
determine who are the appropriate person(s) with
whom to communicate; it also requires the auditor
to agree with the engaging party on the relevant
person(s) with whom to communicate if the appropriate person(s) are not clearly identifiable from the
engagement circumstances;
•
consider whether communication with a sub-group of
those charged with governance adequately fulfills the
auditor’s communication responsibilities; and
•
consider whether communications with those with
management responsibility adequately informs all
those charged with governance with whom the auditor would ordinarily communicate when all of those
charged with governance are involved in managing
the entity.
Change(s) to requirement(s)
Significant differences in requirements between Section
5751 and CAS 260 in addition to those noted above are
summarized below.
Establishing a Communications Process
CAS 260 requires the auditor to communicate with those
charged with governance the form, timing and expected
general content of communications. The auditor does
so to establish a mutually acceptable communications
process that would help achieve effective two-way communication. Existing Canadian standards do not include
a similar requirement.
Communications on a Timely Basis
CAS 260 requires the auditor to communicate with those
charged with governance on a timely basis. Existing
Canadian standards do not include a similar requirement
other than making the audit committee aware of material
weaknesses in the design, implementation or operating
effectiveness of internal control as soon as practicable.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Evaluating Adequacy of the Two-way Communication
CAS 260 requires the auditor evaluate whether the
two-way communication between the auditor and those
charged with governance was adequate for the purpose
of the audit. If the two-way communication has not been
adequate, the auditor is required to take appropriate
action to address the effectiveness of the communication process and to consider the effect on the auditor’s
assessment of the risks of material misstatements. Existing
Canadian standards do not include similar requirements.
Documentation of Communication
CAS 260 requires the auditor, if communicating orally, to
document how and to whom matters required to be communicated have been communicated. The auditor is also
required to retain copies of written communications about
matters that are required to be communicated. Canadian
standards do not include similar specific documentation
requirements of the auditor.
Other matter(s)
None identified.
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CAS 265
Communicating Deficiencies in Internal Control
Existing Handbook Section(S) Replaced
There is no single Section in the existing CICA Handbook
– Assurance that is comparable to CAS 265. Sections 5141,
Understanding the Entity and Its Environment and
Assessing the Risks of Material Misstatements, and
Section 5220, Weaknesses in Internal Control, deal with
overall concepts that are similar to the matters that are
covered by CAS 265.
Difference(s) in scope
As noted above, there is no single Section in the existing
Handbook comparable to CAS 265.
New concept(s)
None.
Change(s) to requirement(s)
Identification and Communication of Deficiencies
in Internal Control
CAS 265 has requirements dealing with:
•
the auditor’s determination of whether one or more
deficiencies in internal control have been identified
and if so whether any of these deficiencies constitute
significant deficiencies; and
•
the need for the auditor to communicate to management significant deficiencies in internal control that
the auditor has or intends to communicate to those
charged with governance and other deficiencies in
internal control that are of sufficient importance to
merit management’s attention.
Specific Matters to be Included
in the Written Communication
CAS 265 requires that specific matters be included in the
written communication of significant deficiencies to those
charged with governance and management.
Regarding communications with those charged with
governance, Section 5220 requires the auditor to communicate to the audit committee or equivalent significant
weaknesses in internal control that the auditor identified
during the course of the financial statement audit, but
does not have any requirements regarding the timing or
content of such communication or whether it needs to be
in writing.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Other matter(s)
Changes in Terminology
•
The two key terms defined in CAS 265 are “deficiency
in internal control” and “significant deficiency”. This
latter term denotes the type of deficiency in internal control that the auditor should report to those
charged with governance. The term “significant
deficiency” is used in all CASs rather than “material
weakness.”
•
The definition of “significant deficiency” in CAS 265
is aligned with that of the same term in Section 5925
and PCAOB’s Auditing Standard 5. Section 5925
provides an additional requirement to categorize the
significant deficiencies in the audit of internal control
over financial reporting that are more severe, as
“material weaknesses.” The term “material weakness”
is defined specifically for its use in Section 5925 and
accordingly will be retained.
•
The terms “deficiency in internal control” and “significant deficiency”, and their respective definitions,
represent a significant change from the terminology
and definitions used in the current CICA Handbook
– Assurance Sections other than Section 5925. For
example, in the various Sections of the Handbook the
terms “material weakness” and “significant weakness”
are used synonymously. As noted above, CAS 265
provides a definition for both a “deficiency in internal control” and a “significant deficiency in internal
control.” A “significant deficiency” is a deficiency
that, in the professional judgment of the auditor, is of
sufficient importance to merit the attention of those
charged with governance.
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CAS 300
Planning an Audit of Financial Statements
Existing Handbook Section(S) Replaced
The CAS replaces Section 5150, Planning.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
None.
Other matter(s)
Considerations Specific to Smaller Entities
CAS 300 refers, as an example, to the use of a brief memorandum as a basis for planning a small audit engagement.
This example is not included in Section 5150.
Reviewing the Previous Auditor’s Working Papers
The CAS contains application and other explanatory material that refers to reviewing the previous auditor’s working
papers in the case of an initial engagement. Section 5150
refers to discussions with the predecessor auditor since, in
Canada, the auditor will not necessarily be able to review
the predecessor auditor’s working papers.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 315
Identifying and Assessing the Risks of Material
Misstatement through Understanding the
Entity and its Environment
Existing Handbook Section(S) Replaced
The CAS replaces Section 5141, Understanding the Entity
and its Environment and Assessing the Risks of Material
Misstatement.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Information from the Client Acceptance or
Continuance Process
CAS 315 requires to auditor to consider whether information obtained from the auditor’s client acceptance or
continuance process is relevant to identifying risks of
material misstatement. Section 5141 uses similar wording,
but it is not a recommendation.
Written Representation from Management
Section 5141 contains a recommendation that the auditor obtain a written representation from management
that it acknowledges its responsibility for the design and
implementation of internal control to prevent and detect
error. This matter is not addressed in CAS 315. However,
CAS 580 contains a requirement for the auditor to request
management to provide a written representation that
it has fulfilled its responsibility for the preparation and
presentation of the financial statements as set out in
the terms of the audit engagement. This responsibility
includes the design, implementation and maintenance of
internal control relevant to the preparation and presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Internal Audit Function
CAS 315 requires the auditor when the entity has an
internal audit function, to obtain an understanding of the
nature of the internal audit function’s responsibilities,
how the internal audit function fits in the organization’s
structure and the activities performed by the internal audit
function, in order to determine whether the intended audit
function is likely to be relevant to the audit. This requirement is not included in Section 5141.
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Other matter(s)
Understanding the Entity and its Environment
and Assessing the Risks of Material Misstatement
Section 5141 deals with communication of material weaknesses in internal control that have come to the auditor’s
attention. This matter is dealt with in CAS 265.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 320 and CAS 450
Materiality in Planning and Performing an Audit,
and Evaluation of Misstatements Identified
during the Audit
Existing Handbook section(S) replaced
CASs 320 and 450 replace Section 5142, Materiality,
and Assurance and Related Services Guideline AuG-41,
Applying the Concept of Materiality.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Materiality in Planning and Performing the Audit
CAS 320 contains explicit requirements on determining
materiality at three separate levels:
•
materiality for the financial statements as a whole;
•
if applicable, the materiality level or levels
for particular classes of transactions, account balances or disclosures; and
•
performance materiality.
Section 5142 requires the auditor to make preliminary
decisions as to materiality when planning the engagement
and discusses the concept of materiality for the financial
statements as a whole in application and explanatory
material paragraph 5142.09. The concept of materiality
level or levels in evaluating detected misstatements is
briefly discussed in application and explanatory material
paragraph 5142.17 but there is no explicit definition or
explanation of this concept.
CAS 320 paragraph 14 requires that the audit documentation include the following amounts and the factors
considered in their determination:
•
materiality for the financial statements as a whole;
•
if applicable, the materiality level or levels
for particular classes of transactions, account balances or disclosures;
•
performance materiality; and
•
any revisions of the preceding three bullets
as the audit progressed.
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Section 5142 does not contain such requirements but
paragraph 14 of AuG-41 provides some application and
explanatory material. In the extant standards, documentation requirements are mostly centralized in Section 5145,
which contains broad requirements. The requirements in
paragraph 5145.04, covers the type of documentation as
stated above.
Evaluating Misstatements
•
Paragraph 5142.19 requires the auditor to estimate
the likely aggregate misstatements identified during
the audit by aggregating: (a) misstatements identified as a result of performing specific procedures on
other than representative samples; (b) projections of
misstatements; and (c) disagreements with accounting estimates. CAS 450 does not contain a requirement regarding aggregating misstatements by the
distinct types noted in paragraph 5142.19. However,
paragraph A3 of CAS 450 provides application and
explanatory material regarding this matter.
•
If, at the auditor’s request, management has examined a class of transactions, account balance or
disclosure and corrected misstatements that were
detected, CAS 450, paragraph 7 requires the auditor
to perform additional audit procedures to determine
whether misstatements remain. Section 5142 does not
contain such requirement but provides application
and explanatory material on this matter in paragraph
5142.18.
•
CAS 450 paragraph 8 requires the auditor to request
management to correct all the misstatements
accumulated during the audit in all cases, regardless
of whether the financial statements are materially
misstated. Paragraph 5142.22 requires the auditor to
request management to address the material misstatement. Paragraph 5142.23 provides application
and explanatory material suggesting that the auditor
encourage management to correct all non-trivial
misstatements.
•
If management refuses to correct some or all of
the misstatements communicated by the auditor,
CAS 450 paragraph 9 requires the auditor to obtain
an understanding of management’s reasons for not
making the corrections and take that understanding
into account when evaluating whether the financial
statements as a whole are free from material misstatements. Section 5142 does not contain such a
requirement.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
•
Prior to evaluating the effect of uncorrected misstatements, CAS 450 paragraph 10 requires the auditor to
reassess materiality determined in accordance with
CAS 320 to confirm whether it remains appropriate
in the context of the entity’s actual financial results.
Section 5142 does not contain an explicit requirement for the auditor to reassess materiality prior to
evaluating the effect of uncorrected misstatements,
but rather contains a more general requirement in
paragraph 5142.12. That paragraph states that if evidence obtained during the engagement indicates that
the preliminary materiality decisions initially made are
no longer appropriate, materiality should be revised
and the nature, timing and extent of the auditor’s
procedures should be reconsidered.
•
CAS 450 paragraph 11 requires the auditor to determine whether uncorrected misstatements are material, individually or in aggregate. In making this determination, the auditor is required to consider the size
and nature of the misstatements and the particular
circumstances of their occurrence. Section 5142 does
not contain such a requirement. However, AuG-41,
paragraphs .23-.25 provide application and explanatory material on this matter.
•
CAS 450 paragraph 12 requires the auditor to request
of those charged with governance that uncorrected
misstatements be corrected. Section 5142 and extant
standards dealing with communications with those
charged with governance do not contain such a
requirement.
•
CAS 450 paragraph 13 requires the auditor to communicate with those charged with governance the
effect of uncorrected misstatements related to
prior periods on the relevant classes of transactions, account balances or disclosures, and the
financial statements as a whole. Section 5142 and
extant standards dealing with communications with
those charged with governance do not contain such
requirement. However, paragraph 5751.27 contains an
all-encompassing requirement for the auditor to communicate with the audit committee matters arising
from the audit that, in the judgment of the auditor,
are important and relevant to the audit committee.
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•
CAS 450 requires that the audit documentation
include:
—— the amount below which misstatements would
be regarded as clearly trivial;
—— all misstatements accumulated during the audit
and whether they have been corrected; and
—— the auditor’s conclusion as to whether uncorrected misstatements are material, individually
or in aggregate, and the basis for that conclusion.
As noted above, Section 5142 does not contain such
requirements but paragraph 14 of AuG-41 provides some
application and explanatory material. In the extant standards, documentation requirements are mostly centralized
in Section 5145, which contains broad requirements. The
requirements in paragraph 5145.04, covers the type of
documentation as stated above.
Other Matter(s)
•
CAS 450 paragraph 8 requires the auditor to
communicate on a timely basis all misstatements
accumulated during the audit with the appropriate
level of management. This matter is covered in the
requirement and application and explanatory material
in paragraphs 5750.13-.14.
•
CAS 450 paragraph 12 requires the auditor to communicate with those charged with governance uncorrected misstatements. This matter is covered by the
requirement in paragraph 5751.18.
•
AuG-41 provides application and explanatory material
on the use of materiality on matters such as reduction of materiality level from one financial period
to another, multi location audits, and unverified
and minimum review items that are not covered in
CASs 320 and 450.
•
AuG-41 provides application and explanatory material on the use of materiality to consolidated entities.
Similar material is covered in the requirements and
application and explanatory material in CAS 600.
•
AuG-41 provides guidance on determining the
amount of misstatements to be aggregated with
respect to management’s estimate. Similar material
is covered in the application and explanatory material
in CAS 540.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 330
The Auditor’s Responses to Assessed Risks
Existing Handbook Section(s) Replaced
The CAS replaces Section 5143, The Auditor’s Procedures
in Response to Assessed Risks.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
CAS 330 requires the auditor to consider whether external
confirmation procedures are to be performed as substantive procedures. This requirement is not included
in Section 5143.
Other matter(s)
None.
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CAS 402
Audit Considerations Relating to an Entity
Using a Service Organization
Existing Handbook Section(S) Replaced
The CAS replaces Section 5310, Audit Evidence Considerations When an Entity Uses a Service Organization.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
The CAS 402 requirements noted below are not Recommendations in Section 5310 but are addressed in guidance
material in that Section.
Obtaining an Understanding of the Services Provided
by a Service Organization
CAS 402 requires the auditor to obtain an understanding
of the services provided by a service organization, including obtaining an understanding of how the user entity uses
a service organization in its operations that is sufficient to
be a basis for the identification and assessment of material
misstatement. If the user auditor is unable to obtain the
necessary understanding from the user entity alone, the
user auditor is then required to interact with the service
organization.
Audit Evidence Considerations Regarding Service
Organizations
CAS 402 requires the auditor, in responding to assessed
risks, to determine whether sufficient appropriate audit
evidence is available from the records held at the user
entity and if not, to obtain such evidence from the service
organization. This requirement relates to audit evidence
obtained from procedures that are substantive in nature.
Inquiries Related to Fraud, Non-compliance with Laws
and Regulations and Uncorrected Misstatements
CAS 402 requires the user auditor to inquire of management of the user entity whether the service organization
has reported any fraud, non-compliance with laws and
regulations and uncorrected misstatements that affect
the user entity and if so, determine the effect on the audit
procedures.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 402 also requires that when a user auditor includes
reference to the work of a service auditor to support
a modified opinion, the user auditor’s report will also
indicate that such reference does not diminish the user
auditor’s responsibility for that opinion.
Recommendations in Section 5310 That are Not
Requirements in CAS 402
The following Section 5310 recommendations are
addressed in application and other explanatory material
of CAS 402:
•
in the context of the use of a type 2 report as audit
evidence requirements regarding the:
—— determination of specific tests of controls and
results in the service auditor’s report that are
relevant (paragraph 5310.26);
—— evaluation of the results of tests of those specific
controls to support the auditor’s assessed level
of control risk (paragraph 5310.27);
—— evaluation of the adequacy of the time period
covered by the tests of controls and the time
elapsed since the performance of the tests of
controls (paragraphs 5310.28 and .29); and
—— user auditor’s assessment of a service auditor’s
report that contains a reservation of opinion
(paragraph 5310.36).
•
reporting of weaknesses in internal control (paragraph 5310.39). (Note: This matter is addressed by
requirements in CAS 265.)
Other matter(s)
Subservice Organizations
The requirements of CAS 402 are to be applied by the
auditor, with respect to services provided by a subservice
organization, if those services were excluded from a type 1
or type 2 report and they are relevant to the audit of the
user entity’s financial statements. The topic of subservice
organizations is not discussed in Section 5310, but rather
in AuG-42.
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Service Auditor’s Reports
CAS 402 permits the user auditor to use service auditor’s reports issued under standards developed in other
jurisdictions, provided the user auditor is satisfied that the
report provides sufficient and appropriate audit evidence.
For example, reports issued under Section 5970 as well
as those issued under ISAE 3402, “Assurance Reports on
Controls at a Service Organization,” may be used.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 500
Audit Evidence
Existing Handbook Section(s) Replaced
The CAS replaces Section 5300, Audit Evidence.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
CAS 500 contains requirements that are Recommendations in Section 5300 but are included as application
and explanatory material in that Section. The additional
requirements in CAS 500, include:
•
the auditor to design and perform audit procedures
that are appropriate in the circumstances for the
purposes of obtaining sufficient appropriate audit
evidence;
•
the auditor to consider the relevance and reliability
of information to be used as audit evidence;
•
if information to be used as audit evidence has been
prepared using the work of a management’s expert,
the auditor is required, to the extent necessary, having regard to the significance of that expert’s work for
the auditor’s purposes:
—— evaluate the competence, capabilities and objectivity of that expert;
—— obtain an understanding of the work of that
expert; and
—— evaluate the appropriateness of that expert’s
work as audit evidence for the relevant assertion;
•
when using information produced by the entity, evaluate whether the information is sufficiently reliable for
purposes of the audit, including as necessary in the
circumstances, the auditor to:
—— obtain audit evidence about the accuracy and
completeness of the information;
—— evaluate whether the information is sufficiently
precise and detailed for the purposes of the
audit;
•
when designing tests of controls and tests of details,
the auditor to determine means of selecting items for
testing that are effective in meeting the purpose of
the audit procedure;
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•
the auditor to determine, when there is an inconsistency in audit evidence obtained from different sources
or when the auditor has doubts about the reliability of
information to be used as audit evidence, what modifications or additions to audit procedures are necessary
to resolve the matter, and consider the effect of the
matter, if any, on other aspects of the audit.
The requirements noted above regarding use of the work
of an expert are covered in Section 5049, not Section 5300.
Other matter(s)
Section 5300 requires the auditor to use assertions underlying aspects of the financial statements in the assessment
of material misstatements and the design and performance
of further audit procedures. CAS 315 and CAS 330 deal
with use of assertions. However, CAS 500 does not have
such a requirement.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 501
Audit Evidence Regarding Specific Financial
Statement Account Balances and Disclosures
Existing Handbook Section(s) Replaced
The CAS replaces Sections 6030, Inventories, and
Section 6560, Communications with Law Firms.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Inventories
•
CAS 501 is designed to provide a list of required
procedures relating to the audit of the existence and
physical condition of inventories. For example, no
procedures regarding the valuation of inventory are
specified. The auditor designs and performs such procedures based on his or her professional judgment in
compliance with various CASs, including those dealing with assessing and responding to risks of material
misstatement. Section 6030 deals with existence,
ownership and condition of inventories and requires
the auditor to obtain evidence regarding the valuation
of inventory (but does not mandate the performance
of any particular procedures regarding valuation).
•
Both Section 6030 and CAS 501 require an auditor
to attend the physical inventory count unless it is
impracticable to do so. However, CAS 501 contains
application or other explanatory material that
indicates that attendance at the entity’s physical
inventory count may be impracticable due to factors
such as the nature and location of the inventory (for
example, when inventory is held in a location that
may pose threats to the safety or well-being of the
auditor). It states that the matter of general inconvenience to the auditor is not sufficient to support a
decision by the auditor that attendance is impracticable.
•
CAS 501 provides more explicit requirements
regarding the auditor’s responsibilities in light of the
physical count being conducted at a date other than
the date of the financial statements or the auditor
being unable to attend the count due to unforeseen
circumstances.
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•
CAS 501 also contains more explicit requirements
on the auditor’s responsibility when the inventory
is under the custody and control of a third party.
Litigation and Claims
•
CAS 501 specifically requires the auditor to perform
procedures to become aware of litigation and claims.
Section 6560 deals with such procedures in guidance
material.
•
CAS 501 does not state that routine matters of an
identified type or matters immaterial in the aggregate
can be excluded from the communications (but does
note that the matters that must be dealt with are only
those that give rise to a risk of material misstatement).
•
CAS 501 requires the auditor to send an inquiry letter
in those circumstances when litigation or claims have
been identified or the auditor believes they may exist.
Section 6560 requires the auditor to use an inquiry
letter that addresses outstanding or possible claims.
•
CAS 501 requires the auditor to seek direct communication with the entity’s legal counsel through a letter
of inquiry, while Section 6560 contains an explicit
requirement for the content of the inquiry letter.
CAS 501 contains application and explanatory material similar to Section 6560 with regard to the content
of a specific inquiry letter if the auditor considers
that the entity’s external legal counsel is unlikely to
respond to a letter of general inquiry.
•
CAS 501 contains requirements regarding situations when management refuses to give the auditor
permission to communicate or meet with the entity’s
legal counsel, or when the entity’s legal counsel
refuses to respond to the letter of inquiry. This
matter is not addressed in Section 6560.
•
Section 6560 has a requirement regarding meeting
with the entity’s legal counsel while this is addressed
in application or other explanatory material in
CAS 501.
•
Section 6560 contains a requirement, not contained
in CAS 501, that deals with a circumstance when, at
a conference to discuss the entity’s legal counsel’s
disagreement with the client’s evaluation, the disagreement is resolved. Section 6560 requires the
auditor to request that the entity’s legal counsel
confirm in writing to him or her the reasonableness
of the agreed evaluation.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
•
Section 6560 requires the auditor to consider the
effect of disagreements between an entity and legal
counsel on the evaluation of legal claims on the content of the auditor’s report. CAS 501 does not contain
such a requirement. However, this type of matter
would be dealt with as part of auditing accounting
estimates under CAS 540, and any misstatement
would be evaluated in accordance with CAS 540.
Segment Information
•
CAS 501 contains one requirement on segment
information, and application and other material is
provided relating to the requirement. The guidance in
AuG-26, is more extensive guidance than in CAS 501.
For example, AuG-26 contains guidance on:
—— the concept of the chief operating decision
maker;
—— obtaining management representations that the
operating segments are appropriately identified
and disclosed;
—— details on analytical procedures that can be
performed; and
—— steps the auditor could take if the composition
of reportable segments changes.
Other matter(s)
•
In Canada, the communications between law firms
and auditors is guided by the Joint Policy Statement
(JPS) between The Canadian Bar Association and the
Auditing and Assurance Standards Board contained
in the Appendix to Section 6560. The JPS has been
appended to CAS 501 as a Canadian amendment to
ISA501.
•
Both CAS 501 and Section 6560 contain similar guidance regarding the auditor’s responsibility to obtain
audit evidence about the status of litigation and claims
up to the date of the audit report. The determination
of the date of the auditor’s report has changed (see
CAS 700).
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CAS 505
External Confirmations
Existing Handbook Section(s) Replaced
The CAS replaces Section 5303, Confirmation.
Difference(s) in scope
None.
New concept(s)
CAS 505 includes various definitions that do not exist, or
may differ from those, in Section 5303. For example, CAS
505 defines “external confirmation” to be audit evidence
obtained as a direct written response to the auditor from
a third party, in paper form, or by electronic or other
medium. Section 5303 defines “confirmation” as a process
of obtaining and evaluating a direct communication from
a third party in response to a request for information.
Change(s) to requirement(s)
Management’s Refusal to Allow the Auditor to Send
a Confirmation Request
When management refuses to allow the auditor to send
a confirmation request, CAS 505 requires the auditor to:
•
inquire as to management’s reasons for the refusal,
and seek audit evidence as to their validity and
reasonableness;
•
evaluate the implications of management’s refusal
on the auditor’s assessment of the relevant risks of
material misstatement, including the risk of fraud,
and on the nature, timing and extent of other audit
procedures; and
•
perform alternative audit procedures designed to
obtain relevant and reliable audit evidence.
If the auditor concludes that management’s refusal to
allow the auditor to send a confirmation request is unreasonable, or the auditor is unable to obtain relevant and
reliable audit evidence from alternative audit procedures,
CAS 505 requires the auditor to communicate with those
charged with governance and determine the implications
for the audit and the auditor’s opinion in accordance with
CAS 705, “Modifications to the Opinion in the Independent
Auditor’s Report.”
Section 5303 does not contain any specific requirements
with respect to management requests not to confirm but
provides some guidance.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Reliability of Responses to Confirmation Requests
CAS 505 requires the auditor who has doubts about
the reliability of responses to confirmation requests to
perform procedures to resolve those doubts. If the auditor
determines that a response to a confirmation request is
not reliable, the auditor shall evaluate the implications on
the assessment of the relevant risks of material misstatement, including the risk of fraud, and on the related nature,
timing and extent of other audit procedures. Section 5303
does not contain any specific requirements with respect to
the reliability of responses but does provide some guidance.
Non-responses to Confirmation Requests
CAS 505 requires the auditor to perform alternative audit
procedures for non-responses to obtain relevant and reliable audit evidence.
When a Response to a Positive Confirmation Request
Is Necessary to Obtain Sufficient Appropriate Audit
Evidence.
When the auditor determines that a response to a positive confirmation request is necessary to obtain sufficient
appropriate audit evidence to respond to assessed risks
of material misstatement, and the auditor does not obtain
such confirmation, the auditor shall determine the implications for the audit and the auditor’s opinion. Section 5303
does not contain a specific requirement but does provide
some guidance.
Exceptions
CAS 505 requires the auditor to investigate exceptions to
determine whether or not they represent misstatements.
Section 5303 does not contain a specific requirement to
investigate exceptions.
Negative Confirmations
CAS 505 states that because negative confirmations
provide less persuasive audit evidence than positive
confirmations, the auditor shall not use negative confirmation requests as the sole substantive audit procedure to
address an assessed risk of material misstatement at the
assertion level unless all of the following are present:
•
The auditor has assessed the risk of material misstatement as low and has obtained sufficient appropriate
audit evidence regarding the operating effectiveness
of controls relevant to the assertion;
•
The population of items subject to negative confirmation procedures comprises a large number of small,
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homogeneous, account balances, transactions or
conditions;
•
A very low exception rate is expected; and
•
The auditor is not aware of circumstances or conditions that would cause recipients of negative confirmation requests to disregard such requests.
Section 5303 does not contain any specific requirements
concerning negative confirmations but indicates that
negative confirmation requests would be used only when
the auditor has no reason to believe that recipients would
disregard these requests.
Evaluating the Evidence Obtained
CAS 505 requires the auditor to evaluate whether the
results of the external confirmation procedures provide
relevant and reliable audit evidence, or whether performing further audit procedures is necessary. Section 5303
contains a similar requirement.
Mandating Confirmation Requests
CAS 505 does not require the use of confirmations to
address an assessed risk in any particular circumstance.
Section 5303 requires the auditor to use confirmation as
a means of obtaining audit evidence regarding accounts
receivable, except that its use would not be required in the
following circumstances:
•
the auditor has assessed the risk of material misstatement associated with the financial statement
assertions being audited as low and other substantive
audit procedures would provide sufficient appropriate evidence in these circumstances; or
•
confirmation would be ineffective in providing reliable
audit evidence, based on information considered by
the auditor in planning the audit.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 510
Initial Audit Engagements
— Opening Balances
Existing Handbook Section(s) Replaced
Sections 5150, Planning, 5510, Reservations in the Auditor’s Report and AuG-8, Auditor’s Report on Comparative
Financial Statements contain limited application and
explanatory material regarding opening balances. However, there is no Canadian extant standard equivalent to
CAS 510.
Difference(s) in scope
As noted above there is no Canadian extant standard
equivalent to CAS 510.
New concept(s)
None.
Change(s) to requirement(s)
CAS 510 has explicit requirements in the following areas,
which are not explicitly addressed in the extant Canadian
Standards:
Audit Procedures
Opening Balances
•
The auditor is required to read the most recent
financial statements, if any, and the predecessor auditor’s report thereon, if any, for information relevant to
opening balances, including disclosures.
•
The auditor is required to obtain sufficient appropriate audit evidence about whether the opening
balances contain misstatements that materially affect
the current period’s financial statements by:
—— determining whether the prior period’s closing
balances have been correctly brought forward
to the current period or, when appropriate, have
been restated;
—— determining whether the opening balances
reflect the application of appropriate accounting
policies; and
—— performing one or more of the following:
oo where the prior year financial statements
were audited, reviewing the predecessor
auditor’s working papers to obtain evidence
regarding the opening balances;
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oo
oo
•
evaluating whether audit procedures
performed in the current period provide
evidence relevant to the opening balances;
or
performing specific audit procedures to
obtain evidence regarding the opening
balances.
If the auditor obtains audit evidence that the opening
balances contain misstatements that could materially
affect the current period’s financial statements, the
auditor is required to perform such additional audit
procedures as are appropriate in the circumstances
to determine the effect on the current period’s financial statements. If the auditor concludes that such
misstatements exist in the current period’s financial
statements, the auditor is required to communicate
the misstatements with the appropriate level of
management and those charged with governance
in accordance with CAS 450.
Consistency of Accounting Policies
•
The auditor is required to obtain sufficient appropriate audit evidence about whether the accounting
policies reflected in the opening balances have been
consistently applied in the current period’s financial
statements, and whether changes in the accounting policies have been properly accounted for and
adequately presented and disclosed in accordance
with the applicable financial reporting framework.
Relevant Information in the Predecessor
Auditor’s Report
•
If the prior period’s financial statements were audited
by a predecessor auditor and there was a modification to the opinion, the auditor is required to evaluate
the effect of the matter giving rise to the modification
in assessing the risks of material misstatement in the
current period’s financial statements in accordance
with CAS 315.
Audit Conclusions and Reporting
Opening Balances
•
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances,
the auditor is required to express a qualified opinion
or a disclaimer of opinion, as appropriate, in accordance with CAS 705. If the auditor concludes that
the opening balances contain a misstatement that
materially affects the current period’s financial
statements, and the effect of the misstatement
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
is not properly accounted for or not adequately
presented or disclosed, the auditor is required to
express a qualified opinion or an adverse opinion,
as appropriate, in accordance with CAS 705.
Consistency of Accounting Policies
•
If the auditor concludes that:
—— the current period’s accounting policies are not
consistently applied in relation to opening balances in accordance with the applicable financial
reporting framework; or
—— a change in accounting policies is not properly
accounted for or not adequately presented or
disclosed in accordance with the applicable
financial reporting framework,
the auditor is required to express a qualified opinion
or an adverse opinion as appropriate in accordance
with CAS 705.
Modification to the Opinion in the Predecessor
Auditor’s Report
•
If the predecessor auditor’s opinion regarding the
prior period’s financial statements included a modification to the auditor’s opinion that remains relevant
and material to the current period’s financial statements, the auditor is required to modify the auditor’s
opinion on the current period’s financial statements
in accordance with CAS 705 and CAS 710.
Other matter(s)
CAS 510 does not deal with reporting of comparative
figures. CAS 710 deals with an auditor’s responsibilities
regarding comparatives.
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CAS 520
Analytical Procedures
Existing Handbook Section(s) Replaced
CAS 520 replaces Section 5301, Analysis.
Difference(s) in scope
Section 5301 deals with the use of analysis as risk assessment procedures, as substantive procedures, and as part
of the auditor’s overall review of the financial statements
at or near the end of the audit. CAS 520 does not include
requirements or guidance addressing the use of analysis
as risk assessment procedures. This topic is addressed in
CAS 315 and therefore has not been repeated in CAS 520.
New concept(s)
None.
Change(s) to requirement(s)
Investigating Results of Analytical Procedures
CAS 520 requires that when analytical procedures performed in accordance with the CAS identify fluctuations or
relationships that are inconsistent with other relevant information or that differ from expected value by a significant
amount, the auditor shall investigate such difference by:
(a) inquiring of management and obtaining appropriate
audit evidence relevant to management’s responses;
and
(b) performing other audit procedures as necessary in
the circumstances.
Section 5301 requires that the auditor obtain adequate
explanations in investigating results of analytical procedures but does not specifically require that the auditor
inquire of management. Making inquiries of management
is included as application and explanatory material in
paragraph 5301.23(b).
Further, Section 5301 does not contain the requirement stated in (b) above, but provides application and
explanatory material regarding this matter in paragraph
5301.24(b).
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 530
Audit Sampling
Existing Handbook section(s) replaced
Brief guidance on sampling and other means of selecting
items for testing is provided in Audit Evidence, paragraphs
5300.14-.17. However, there is currently no Canadian
standard equivalent to CAS 530, Audit Sampling, so
all the requirements in this CAS are new.
Difference(s) in scope
There is no equivalent to this CAS in the extant standards.
Change(s) to requirement(s)
CAS 530 does not require the use of audit sampling.
However, when the auditor chooses to use audit sampling
in performing audit procedures, this CAS provides requirements, and application and other explanatory material on:
•
designing an audit sample, determining a sample size,
and selecting items for the sample;
•
performing audit procedures on the items selected;
•
investigating the nature and cause of deviations and
misstatements;
•
projecting misstatements found in the sample to the
population;
•
evaluating the results of the sample and whether the
use of audit sampling has provided a reasonable basis
for conclusion about the population that has been
tested.
CAS 530, states that “This CAS complements CAS 500,
Audit Evidence.” CAS 500 contains requirements, and
application and other explanatory material that deal
with the auditor’s responsibility to design and perform
audit procedures to obtain sufficient appropriate audit
evidence, including the use of means of selecting items
for testing. Audit sampling is listed as one of the means
available to the auditor.
Other matter(s)
None.
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CAS 540
Auditing Accounting Estimates, including
Fair Value Accounting Estimates, and Related
Disclosures
Existing Handbook Section(S) Replaced
The CAS replaces Section 5305, Auditing Fair Value
Measurements and Disclosures.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
Documentation of Misstatements and Indicators
of Possible Management Bias
•
CAS 540 provides more requirements and application
material than is contained in Section 5305 on the auditor’s determination and documentation of misstatements and indicators of possible management bias
relating to individual accounting estimates.
Risk Assessment Procedures
•
CAS 540 introduces risk assessment procedures
that are not contained in Section 5305. For example,
CAS 540 requires the auditor to obtain an understanding how management makes the accounting
estimates and an understanding of the data on which
they are based. The requisite level of understanding
encompasses the method, including where applicable
the model, used in making the accounting estimate,
relevant controls, whether management has used an
expert and the assumptions underlying the estimates
and how management has assessed the effect of
estimation uncertainty.
•
CAS 540 also requires the auditor to review the
outcome of accounting estimates made in the prior
period financial statements. This is consistent with
Section 5135 but is not a requirement of Section 5305.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Estimation Uncertainty
•
CAS 540 defines estimation uncertainty as the
susceptibility of an accounting estimate and related
disclosures to an inherent lack of precision in its
measurement. This definition is not included in
Section 5305.
•
CAS 540 focuses the auditor’s work effort not only on
accounting estimates that have a risk of material misstatement, but in particular on those that have high
estimation uncertainty. This approach recognizes that
some accounting estimates, are highly sensitive to
changes in assumptions such that the use of different
reasonable assumptions could materially affect the
accounting estimate recognized in an entity’s financial statements. CAS 540 requires the auditor to use
the information gathered from the risk assessment
procedures to determine which accounting estimates
have high estimation uncertainty and may therefore
be significant risks that require special audit consideration.
Substantive Procedures to Respond to Estimation
Uncertainty
•
Where the auditor has determined that an accounting estimate gives rise to a significant risk, CAS 540
requires the auditor to evaluate whether the significant assumptions made by management provide a
reasonable basis for the accounting estimate, whether
and how management has considered alternative assumptions or outcomes, and why they have
rejected them. Such a requirement does not exist
in Section 5305.
Development of a Range of Outcomes
•
If management has not adequately addressed the
effects of estimation uncertainty on the accounting
estimates that give rise to significant risk, CAS 540
requires the auditor, if considered necessary, to
develop a reasonable range of outcomes with which
to evaluate the reasonableness of management’s
estimate. Such a requirement does not exist in
Section 5305. CAS 540 also provides application
and explanatory material regarding the process for
determining a reasonable range of outcomes such
that the range is sufficiently narrow to be useful as
an evaluation tool.
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Evaluating the Disclosure of Estimation Uncertainty
•
For accounting estimates that give rise to significant
risks, CAS 540 requires the auditor to evaluate the
adequacy of management’s disclosure in the financial
statements in the context of the requirements of the
applicable financial reporting framework relevant to
the accounting estimate. This requirement does not
exist in Section 5305. However, Section 5143 contains
a requirement to evaluate the adequacy of the overall
presentation of the financial statements, including
the related disclosures, and Section 5306 contains a
requirement to evaluate disclosures about fair values
made by the entity.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 550
Related Parties
Existing Handbook Section(S) Replaced
The CAS replaces Section 6010, Audit of Related Party
Transactions.
Difference(s) in scope
None.
New concept(s)
Financial Reporting Framework
CAS 550, like other CASs, is designed to enable the auditor to report on any acceptable financial reporting framework, not just Canadian GAAP. Irrespective of whether
the applicable financial reporting framework establishes
related party requirements, CAS 550 requires the auditor
to obtain an understanding of related party relationships
and transactions sufficient to be able to conclude whether
the financial statements, insofar as they are affected by
those relationships and transactions: (a) achieve fair presentation (for fair presentation frameworks); or (b) are not
misleading (for compliance frameworks). The concepts of
“fair presentation framework” and “compliance framework”
are defined in CAS 200 and used throughout the CASs.
Paragraphs 6010.23-.25 deal with obtaining sufficient
appropriate audit evidence regarding whether identified
related party transactions have been measured in accordance with Canadian GAAP. Section 3840 sets Canadian
generally accepted accounting principles (GAAP) for the
measurement and disclosure of related party transactions
for profit-oriented enterprises. Because, as noted above,
CAS 500 is not tied to any particular financial reporting
framework, including Canadian GAAP, CAS 550 does not
contain paragraphs equivalent to 6010.23-.25.
Change(s) to requirement(s)
Section 6010 contains five Recommendations (Requirements) — paragraphs 6010.09, 6010.15, 6010.20, 6010.27
and 6010.29 — with supporting material for each. CAS 550
is consistent with the overall thrust of Section 6010 but is
more explicit in what is required of the auditor. In addition
to what is required by Section 6010, CAS 550 requires the
following:
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Additional Requirements Regarding Risk Assessment
Procedures and Related Activities
•
Discuss with the engagement team specific consideration of the susceptibility of the financial statements
to material misstatement due to fraud or error that
could result from the entity’s related party relationships and transactions, and share relevant information
obtained about related party relationships with the
engagement team.
•
Obtain an understanding of the controls, if any, that
management has established to identify, account for
and disclose related party transactions, authorize and
approve significant transactions and arrangements
with related parties, and authorize and approve
significant transactions and arrangements outside
the normal course of business.
•
Inspect bank and legal confirmations obtained as
part of the auditor’s procedures; minutes of meetings
of shareholders and those charged with governance;
and such other records or documents as the auditor
considers necessary in the circumstances of the entity.
•
Consider any identified fraud risk factors (including
circumstances relating to the existence of a related
party with dominant influence) in relation to related
parties in assessing the risk of material misstatement
due to fraud.
•
Treat identified significant related party transactions
outside the entity’s normal course of business as giving rise to significant risks.
Additional Requirements Regarding Responses to
the Risks of Material Misstatement Associated with
Related Party Relationships and Transactions
•
If the auditor identifies related parties or significant
related party transactions that management has not
previously identified or disclosed to the auditor, the
auditor:
—— promptly communicates the relevant information
to other members of the engagement team;
—— requests management to identify all transactions
with the newly identified related parties for the
auditor’s further evaluation;
—— inquires as to why the entity’s controls over
related party relationships and transactions
failed to enable the identification or disclosure of
the related party relationships or transactions;
—— performs appropriate substantive audit procedures relating to such newly identified related
parties or significant related party transactions;
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
——
——
reconsiders the risks that other related parties or
significant related party transactions may exist
that management has not previously identified
or disclosed to the auditor, and perform additional audit procedures as necessary; and
evaluates the implications for the audit if
the non-disclosure by management appears
intentional (and therefore indicative of a risk
of material misstatement due to fraud.
•
For identified significant related party transactions
outside the normal course of business, the auditor
would obtain evidence that the transactions have
been authorized and approved and would evaluate
the business rationale and inspect underlying contracts and agreements and evaluate:
—— whether the business rationale (or lack thereof)
of the transactions suggests that they may
have been entered into to engage in fraudulent
financial reporting or to conceal misappropriation of assets;
—— whether the terms of the transactions are consistent with management’s explanations; and
—— whether the transactions have been appropriately
accounted for and disclosed in accordance with
the applicable financial reporting framework.
•
Obtain sufficient appropriate audit evidence to support any assertion by management that related party
transactions were conducted on terms equivalent
or similar to arm’s length or under normal market
conditions.
Additional Requirement Regarding Evaluation of the
Accounting for and Disclosure of Identified Related
Party Relationships and Transactions
•
Evaluate whether related party relationships and
transactions could cause the financial statements
to fail to achieve fair presentation.
Additional Requirement Regarding Documentation
•
Include in the audit documentation the names of
identified related parties and nature of the related
party relationships.
Other matter(s)
None.
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CAS 560
Subsequent Events
Existing Handbook Section(s) Replaced
CAS 560 replaces Section 6550, Subsequent Events,
and Section 5405, Date of the Auditor’s Report.
Difference(s) in scope
None.
New concept(s)
Date of the Auditor’s Report
Section 5405 requires the date of substantial completion
of examination to be used as the date of the auditor’s
report. This date is described as the date by which the
auditor has identified and sought all the audit evidence
he/she requires to support the audit opinion, and has
obtained and examined substantially all such evidence.
CAS 700, Forming an Opinion and Reporting on Financial
Statements, requires that the auditor’s report be dated no
earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence on which to base the
auditor’s opinion on the financial statements, including
evidence that:
(a) all the statements that comprise the financial statements, including the related notes, have been prepared; and
(b) those with the recognized authority have asserted
that they have taken responsibility for those financial
statements.
Like Section 6550, CAS 560 requires subsequent event
audit procedures to cover the period from the date of the
financial statements up to the date of the auditor’s report,
or as near as practicable thereto. Under Section 5405 the
auditor’s report often would be dated before the date on
which those with recognized authority (e.g., the Board
of Directors) approved the financial statements. Under
CAS 700, this is not permitted. It should be noted that the
approach under CAS 700 is already applied effectively
in many jurisdictions for audits of all types of entities.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Change(s) to requirement(s)
The requirements in CAS 560 are grouped to focus on
three key matters:
(a) events occurring between the date of the financial
statements and the date of the auditor’s report;
(b) facts which become known to the auditor after the
date of the auditor’s report but before the date the
financial statements are issued; and
(c) facts which become known to the auditor after the
financial statements have been issued.
CAS 560 notes that a time period may elapse due to
administrative issues between the date of the auditor’s
report and the date the auditor’s report is provided to the
entity. CAS 560 does not focus specifically on that time
period, but notes that since audited financial statements
cannot be issued without an auditor’s report, the date that
the audited financial statements are issued must not only
be at or later than the date of the auditor’s report, but
must also be at or later than the date the auditor’s report
is provided to the entity.
Section 6550 focuses on item (a) above.
With respect to item (b) above, Section 5405 focuses
on the period between the auditor’s report date and the
release date of the auditor’s report. Under Section 5405,
the auditor’s report has been “released” when the auditor
grants permission to use the auditor’s report in connection with the issuance of the client’s financial statements.
With respect to (c) above, Section 5405 focuses on the
period after the auditor’s report has been released.
Regarding the relevant dates in the respective standards,
if there was a significant period of time between the date
of release of the auditor’s report and the date the financial
statements are issued, this could result in a different work
effort between CAS 560 and Sections 5405 and 6550.
CAS 560 requires that the audit procedures include:
(a) obtaining an understanding of any procedures management has established to ensure that subsequent
events are identified;
(b) inquiring of management and where appropriate,
those charged with governance, as to whether any
subsequent events have occurred which might affect
the financial statements;
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(c) reading minutes, if any, of the meetings of the entity’s
owners, management and those charged with governance, that have been held after the date of the
financial statements and inquiring about matters
discussed at any such meetings for which minutes
are not yet available;
(d) reading the entity’s latest subsequent interim financial statements, if any.
Section 6550 does not contain such requirements but
provides similar application and explanatory material
in sub-paragraphs 6550.04(a)-(d).
CAS 560 requires the auditor to request that management
and, where appropriate, those charged with governance,
provide a written representation that all events occurring
subsequent to the date of the financial statements and
for which the applicable financial reporting framework
requires adjustment or disclosure have been adjusted or
disclosed. Section 6550 does not contain such a requirement but Section 5370 provides similar application
and explanatory material in its Appendix, Example
of a Management Representation Letter.
CAS 560 requires that when a fact becomes known to
the auditor after the date of the auditor’s report that, had
it been known to the auditor at the date of the auditor’s
report, may have caused the auditor to amend the auditor’s report, the auditor shall:
(a) discuss the matter with management and, where
appropriate, those charged with governance;
(b) determine whether the financial statements need
amendment and, if so;
(c) inquire how management intends to address the
matter in the financial statements.
Paragraph 5405.02 (not a recommendation) states “the
auditor does, however, have a responsibility to respond
when, following the date of his report, facts or events
come to his attention that may affect the financial statements or his opinion.” Section 5405 contains a similar
requirement as stated in item (a) above in paragraph
5405.13 and as stated in item (b) above in paragraph
5405.17. These paragraphs apply after the date of the
release of the auditor’s report. Section 5405 does not
contain a requirement similar to item (c) above.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 560 requires that when management does not
amend the financial statements in circumstances where
the auditor believes they need to be amended, then:
•
if the auditor’s report has not yet been provided to
the entity, the auditor shall modify the opinion as
required by ISA 705, Modifications to the Opinion in
the Independent Auditor’s Report, and then provide
the auditor’s report; or
•
if the auditor’s report has already been provided
to the entity, the auditor shall notify management
and, unless all of those charged with governance are
involved in managing the entity, those charged with
governance, not to issue the financial statements to
third parties before the necessary amendments have
been made. If the financial statements are nevertheless subsequently issued without the necessary
amendments, the auditor shall take appropriate
action to seek to prevent reliance on the auditor’s
report.
Section 5405 does not contain such requirements as it
has been written on the assumption that management and
the auditor are in agreement as to how the misstatement
should be dealt with. However, Section 5405 contains
some guidance on this matter is paragraph 5405.18.
CAS 560 requires that if management amends the financial statements after the financial statements have been
issued, the auditor shall include in the new or amended
auditor’s report an Emphasis of Matter paragraph or Other
Matter(s) paragraph referring to a note to the financial
statements that more extensively discusses the reason for
the amendment of the previously-issued financial statements and to the earlier report provided by the auditor.
Section 5405 contains a similar requirement in paragraph
5405.17; however, it requires that such paragraph be
included in the auditor’s report if the financial statements
are revised after the release of the auditor’s report, which
is earlier than the date the financial statements are issued
to third parties as required under this CAS.
CAS 560 requires that if management amends the
financial statements after the financial statements have
been issued, the auditor shall review the steps taken
by management to ensure that anyone in receipt of the
previously-issued financial statements together with
the auditor’s report thereon is informed of the situation.
Section 5405 does not contain such requirement.
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CAS 560 requires that if management does not take the
necessary steps to ensure that anyone in receipt of the
previously-issued financial statements is informed of the
situation and does not amend the financial statements in
circumstances where the auditor believes they need to be
amended, the auditor shall notify management and, unless
all of those charged with governance are involved in managing the entity, those charged with governance, that the
auditor will seek to prevent future reliance on the auditor’s
report. If, despite such notification, management or those
charged with governance do not take these necessary
steps, the auditor shall take appropriate action to seek
to prevent reliance on the auditor’s report.
Section 5405 does not contain such requirements but provides some guidance on this matter in paragraph 5405.18.
Other Matter(s)
•
Dual Dating : CAS 560 provides the auditor with an
option to dual date the auditor’s report which is not
available under Section 5405. Subparagraph 12(b)
allows the report to be single dated with a statement
included in an Emphasis of Matter Paragraph or Other
Matter(s) paragraph that conveys that the auditor’s
procedures on subsequent events are restricted
solely to the amendment of the financial statements
as described in the relevant note to the financial
statements. This option accommodates the practice
of dual dating in other jurisdictions, which can be
considerably different from that followed in Canada.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 570
Going Concern
Existing Handbook Section(S) Replaced
Section 5510, Reservations in the Auditor’s Report in
paragraphs 5510.51 to 5510.53, contains application and
explanatory material on matters related to going concern.
Difference(s) in scope
The existing Handbook has no standard equivalent to
CAS 570.
New concept(s)
None.
Change(s) to requirement(s)
All the requirements in CAS 570 are new. They cover matters that include, for example:
•
the auditor’s risk assessment procedures, including
consideration of whether there are events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern;
•
the auditor’s responses to risk assessment procedures, including evaluating management’s assessment of the entity’s ability to continue as a going
concern (that should cover a period of at least
12 months from the date of the financial statements)
and inquiring of management of they are aware of
any matters beyond the period of its assessment that
may cast doubt on the entity’s ability to continue as
a going concern;
•
when events or conditions have been identified that
may cast significant doubt on the entity’s ability to
continue as a going concern, performing audit procedures to obtain sufficient appropriate audit evidence
to determine whether or not a material uncertainty
exists;
•
based on the audit evidence obtained, concluding
whether, in the auditor’s judgment, a material uncertainty exists related to events or conditions that,
individually or collectively, may cast significant doubt
on the entity’s ability to continue as a going concern
and reporting appropriately based on whether the
financial statements appropriately disclose any material uncertainty that exists;
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•
communicating with those charged with governance
events or conditions identified that may cast significant doubt on the entity’s ability to continue as
a going concern (unless all those charged with
governance are involved in managing the entity).
Other Matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 580
Written Representations
Existing Handbook section(s) replaced
CAS 580 replaces Section 5370, Management Representations.
Difference(s) in scope
Section 5370 applies to all representations provided by
management, whether written or oral, explicit or implied,
solicited or unsolicited. CAS 580 applies only to written
representations that have been provided in response to
the auditor’s request.
New concept(s)
None.
Change(s) to requirement(s)
•
CAS 580 paragraph 9 requires that the auditor
request written representations from management
with appropriate responsibilities for the financial
statements and knowledge of the matters concerned.
Section 5370 does not contain such requirement
but provides similar guidance in sub-paragraph
5370.06(a) and paragraph 5370.26.
•
CAS 580 paragraph 10 requires that the auditor
request that management provide a written representation that management’s has fulfilled its responsibility for the preparation of the financial statements in
accordance with the applicable financial reporting
framework as agreed in the terms of the audit
engagement. Section 5370 requires that the representation letter include management’s acknowledgement of its responsibility for the fair presentation
of the financial statements and its belief that the
financial statements are presented fairly.
•
CAS 580 paragraph 12 requires that management’s
responsibility be described in the written representation in the same manner as described in the terms of
the audit engagement. Section 5370 does not contain
such a requirement.
•
CAS 580 paragraph 15 acknowledges that management may be required by law or regulation to make
written public statements about some or all of its
responsibilities relating to the preparation of the
financial statements (covered in paragraph 10 of
the CAS) and information provided to the auditor
(covered in paragraph 11 of the CAS). In such cases,
CAS 580 allows the auditor to exclude from the
representation letter the relevant matters covered
by management’s public statement. Section 5370
does not contain such a requirement.
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•
If the auditor has concerns about the competence,
integrity, ethical values or diligence of management, or about its commitment to or enforcement of
these, CAS 580 paragraph 16 requires the auditor to
determine the effect that such concerns may have on
the reliability of representations and audit evidence
in general. Section 5370 does not contain such a
requirement. However, Audit of Financial Statements, paragraph 5090.07, provides similar application material on this matter.
•
If the reliability of written representations is in doubt
due to inconsistency with other audit evidence and
the matter cannot be resolved, CAS 580 paragraph 17
requires the auditor to reconsider the assessment of
the competence, integrity, ethical values or diligence
of management, or about its commitment to or
enforcement of these and to determine the effect that
this may have on the reliability of representations and
audit evidence in general.
•
Paragraph 5370.08 requires that if a representation
from management is contradicted by other audit
evidence, the auditor is to determine whether reliance
on management’s other representations is appropriate and justified. However, Section 5370 does not
contain a requirement for the auditor to carry out
actions required by CAS 580 paragraph 17. Paragraph
5370.09 contains application material on this matter.
•
If the auditor concludes that any other written
representations are unreliable, CAS 580 paragraph
18 requires the auditor to take appropriate action,
including determining the possible effect on the
opinion in the auditor’s report. Section 5370 does
not contain such a requirement but paragraph 5370.11
provides application material discussing the auditor’s
use of judgment to determine whether such representation provides appropriate audit evidence for the
auditor to be able to draw conclusions on which to
base the audit opinion.
•
If management does not provide the written representations requested by the auditor, CAS 580
paragraph 19 requires the auditor to discuss the
matter with management, and reevaluate the integrity
of management and evaluate the effect that this may
have on the reliability of representations and audit
evidence in general. Paragraph 5370.29 requires the
auditor to issue either a qualified opinion or a disclaimer of opinion if management refuses to provide
any representation requested by the auditor, on the
basis that this would constitute a scope limitation.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
•
If management does not provide the written representations required about the fulfillment of its
responsibilities, CAS 580 paragraph 20 requires the
auditor to disclaim an opinion on the financial statements. Paragraph 5370.29 requires the auditor to
issue a qualified opinion or a disclaimer, but does not
specify the circumstances when a disclaimer would
be required.
•
Paragraph 5370.16 requires the auditor to obtain written representations for matters that are material to
the financial statements, matters that are significant
to the engagement, and matters relevant to management’s judgments and estimates that are material to
the financial statements. CAS 580 does not require
the auditor to obtain written representations from
management regarding specific assertions embedded
in the financial statements. However, Appendix 1 to
CAS 580 identifies requirements in other CASs dealing with subject-matter-specific representations.
•
Understanding the Entity and its Environment and
Assessing the Risks of Material Misstatments, paragraph 5141.100 requires the auditor to obtain a written
representation from management that it acknowledges its responsibility for the design and implementation of internal control to prevent and detect error.
Paragraph 5370.16 requires the auditor to obtain such
representation as part of the evidence gathered to be
able to draw reasonable conclusions on which to base
the audit opinion. CAS 210, Agreeing the Terms of
the Audit Engagements, paragraph 6(b) requires the
auditor to obtain the agreement of management that
it acknowledges and understands its responsibility
for such internal control as management determines
is necessary to enable the preparation of the financial
statements that are free of material misstatement
whether due to fraud or error. Accordingly, under the
CASs, management’s agreement on this matter is a
precondition that must be present for an auditor to
accept the audit engagement.
Other Matter(s)
None.
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CAS 600
Special Considerations — Audits of Group
Financial Statements (Including the Work
of Component Auditors)
Existing Handbook Section(s) Replaced
The CAS replaces Section 6930, Reliance on Another
Auditor.
Difference(s) in scope
None.
New concept(s)
A Component May Be a Business Activity
CAS 600 introduces the concept that a component may
be an entity or a business activity. For example, components may organize their financial reporting system by
function, process, product or service (or by groups of
products or services), or geographical locations. In these
cases, the entity or business activity for which group or
component management prepares financial information
that is included in the group financial statements may be
a function, process, product or service (or group of products or services), or geographical location.
Primary Auditors May Be the Partner or
the Engagement Team
Section 6930 defines the “primary auditor”. CAS 600
contains a similar concept but distinguishes between the
group engagement partner and group engagement team.
Certain requirements in CAS 600 are to be performed by
the group engagement partner versus the group engagement team. The terms are defined as follows:
•
Group engagement partner — The partner or other
person in the firm who is responsible for the group
audit engagement and its performance, and for the
auditor’s report on the group financial statements
that is issued on behalf of the firm.
•
Group engagement team — Partners, including the
group engagement partner, and staff who establish
the overall group audit strategy, communicate with
component auditors, perform work on the consolidation process, and evaluate the conclusions drawn
from the audit evidence as the basis for forming
an opinion on the group financial statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Change(s) to requirement(s)
Acceptance and Continuance
CAS 600 requires the group engagement partner not to
accept an engagement, or to resign from the engagement,
if he or she concludes that it will not be possible for the
group engagement team to obtain sufficient appropriate
audit evidence due to restrictions imposed by group management and the possible effects of this inability will result
in a disclaimer of opinion on the group financial statements. Section 6930 discusses such situations but only
requires that the auditor express a reservation of opinion.
Materiality
CAS 600 contains requirements for the auditor to determine four levels of materiality:
•
materiality level for the group financial statements
as a whole when establishing the overall group audit
strategy;
•
if applicable, materiality level for particular classes of
transactions, account balances or disclosures in the
group financial statements;
•
component materiality; and
•
threshold above which misstatements cannot be
regarded as clearly trivial.
Nature, Timing and Extent of Procedures to Be
Performed
CAS 600 contains more extensive and specific requirements than Section 6930 regarding the nature, timing and
extent of procedures to be performed in the context of the
group audit:
•
The group engagement team is required to establish
an overall group audit strategy and develop a group
audit plan which will be reviewed by the group
engagement partner.
•
The group engagement team is required to obtain an
understanding of the group, its components and their
environments.
•
Both CAS 600 and Section 6930 require the group
engagement team to obtain an understanding of
the component auditors. However, the requirements
under CAS 600 are more extensive. For example,
CAS 600 requires the group engagement team to
obtain an understanding whether it will be able to
be involved in the work of the component auditor to
the extent necessary to obtain sufficient appropriate
audit evidence as well as whether the component
auditor operates in a regulatory environment that
actively oversees auditors.
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•
CAS 600 contains requirements that reflect different
work efforts depending on whether the component is
considered to be significant or not significant.
•
CAS 600 contains explicit requirements regarding the
consolidation process and subsequent events.
•
CAS 600 contains requirements regarding communications with the component auditor which are more
extensive than those in Section 6930. For example,
the group engagement team is required to communicate ethical requirements relevant to the group audit,
such as independence requirements.
•
CAS 600 contains requirements dealing with communications with group management and those charged
with governance of the group as well as documentation requirements.
Reporting
CAS 600 does not permit the auditor’s report on the
group financial statements to refer to a component
auditor unless required by law or regulation. However,
application and other explanatory material acknowledges
when the group audit opinion is modified because the
group engagement team was unable to obtain sufficient
appropriate audit evidence in relation to the financial
information of one or more components, there may be a
need to refer to the component auditor’s report to provide
an adequate explanation of the circumstances.
Section 6930 does not permit such references except
in the case of a modified opinion if the disclosure of the
component auditor helps to explain the reason for the
modification.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 610
USING THE WORK OF INTERNAL AUDITORS
Existing Handbook Section(S) Replaced
CAS 610 replaces Section 5050, Using the Work
of Internal Audit.
Difference(s) in scope
Consistent with ISA 610, CAS 610 applies to audits of
financial statements and may be adapted as necessary
for audits of other historical financial information. Section
5050, on the other hand, applies to all assurance engagements, and therefore has a broader scope. The AASB
concluded that Section 5050 will be carried forward in the
Handbook in its current format and will apply to assurance
engagements other than audits of financial statements
and other historical financial information.
Further, Section 5050 addresses the practitioner’s use of
internal auditor staff to provide direct assistance, under
the practitioner’s supervision. This matter is outside the
scope of CAS 610.
New concept(s)
None.
Change(s) to requirement(s)
Understanding of Internal Audit Function
and its Activities
CAS 315 contains a requirement that if the entity has
an internal audit function, the auditor shall obtain an
understanding of the nature of the internal audit function’s responsibilities, how the internal audit function fits
in the entity’s organizational structure, and the activities
performed, or to be performed, by the internal audit function. The auditor shall obtain this understanding in order
to determine whether the internal audit function is likely to
be relevant to the audit. When the auditor determines that
the internal audit function is likely to be relevant to the
audit, CAS 610 applies.
Section 5050 does not contain such a requirement but
provides guidance on this matter in paragraph 5050.05.
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Determining Whether to Use the Work
of the Internal Auditors
CAS 610 requires that when the auditor determines whether
the work of the internal auditors is likely to be adequate for
purposes of the audit, the auditor shall evaluate:
•
the objectivity of the internal audit function;
•
the technical competence of the internal auditors;
•
whether the work of the internal auditors is likely
to be carried out with due professional care; and
•
whether there is likely to be effective communication between the internal auditors and the external
auditors.
Section 5050 does not contain such requirements but provides similar guidance in paragraphs 5050.10 and 5050.14.
Determining to What Extent to Use the Work
of the Internal Auditors
CAS 610 requires that if the work of the internal auditors
is likely to be adequate for purposes of the audit, the
auditor shall determine the planned effect of the work
of the internal auditors on the nature, timing or extent of
the external auditor’s procedures. Section 5050 does not
contain such requirement but provides similar guidance in
paragraph 5050.09.
In addition, CAS 610 requires that when determining the
planned effect of the work of the internal auditors on the
nature, timing or extent of the external auditor’s procedures, the external auditor shall consider:
•
the nature and scope of specific work performed, or
to be performed, by the internal auditors;
•
the assessed risks of material misstatement at the
assertion level for particular classes of transactions,
account balances, and disclosures; and
•
the degree of subjectivity involved in the evaluation
of the audit evidence gathered by the internal auditors in support of the relevant assertions.
Section 5050 does not contain a requirement or guidance
on such considerations.
Using Specific Work of the Internal Auditors
CAS 610 requires that when the auditor determines the
adequacy of specific work performed by the internal
auditors for the external auditor’s purposes, the external
auditor shall evaluate whether:
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
(a) the work was performed by internal auditors having
adequate technical training and proficiency;
(b) the work was properly supervised, reviewed and
documented;
(c) adequate audit evidence has been obtained to enable
the internal auditors to draw reasonable conclusions;
(d) conclusions reached are appropriate in the circumstances and any reports prepared by the internal
auditors are consistent with the results of the work
performed; and
(e) any exceptions or unusual matters disclosed by the
internal auditors are properly resolved.
Section 5050 does not contain such requirements but
provides similar guidance in paragraphs 5050.17, with the
exception of new requirement (e) above where this matter
is not addressed in Section 5050.
Documentation
CAS 610 requires that the auditor document conclusions
regarding the evaluation of the adequacy of the work of
the internal auditors, and the audit procedures performed
by the external auditor on that work. Section 5050 does
not contain such requirements but provides similar guidance in paragraphs 5050.13 and 5050.20.
Auditor’s Report
Section 5050 requires that the auditor’s report not refer
to the use of internal audit work. CAS 610 is silent on this
issue.
Other matter(s)
CAS 315 and CAS 610 include guidance that states that the
entity’s internal audit function is likely to be relevant to the
audit if:
•
the nature of the internal audit function’s responsibilities and activities are related to the entity’s financial
reporting; and
•
the auditor expects to use the work of the internal
auditors to modify the nature or timing, or reduce the
extent, of audit procedures to be performed.
Section 5050 uses similar terminology, “relevant to the
engagement”, in paragraphs 5050.08 and 5050.09, but
does not provide a definition.
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CAS 620
Using the Work of an Auditor’s Expert
Existing Handbook Section(S) Replaced
The CAS replaces Section 5049, Use of Specialists in
Assurance Engagements.
Difference(s) in scope
Limited to Audits of Financial Statements
CAS 620 will apply only to audits of financial statements
(adapted as necessary for audits of other historical financial information).
Section 5049 applies to all assurance engagements. An
updated Section 5049 will be retained in the CICA Handbook – Assurance to deal with use of experts in assurance
engagements other than financial statement audits.
Limited to Auditor’s Expert
CAS 620 deals only with the use of the work of the auditor’s expert. Issues related to the auditor’s consideration of
the work performed by management’s experts in helping
management to prepare the entity’s financial statements
are addressed in CAS 500.
Section 5049 deals with both the use of the work of
auditor’s experts and the auditor’s use of work performed
by management’s experts (i.e., specialists employed or
engaged by the accountable party).
Excluding Expertise in the Field of Accounting
and Auditing
CAS 620 defines an auditor’s expert as “an individual or
organization possessing expertise in a field other than
accounting or auditing whose work in that field is used
by the auditor to assist the auditor in obtaining sufficient
appropriate audit evidence.”
Section 5049 does not exclude expertise particular to
accounting or auditing matters from its scope.
New concept(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Change(s) to requirement(s)
•
As indicated above in the “Changes in scope” section,
CAS 620 has a narrower scope compared to Section 5049. Accordingly, CAS 620 does not contain
requirements that are in Section 5049 dealing with
matters such as:
—— the relevance of the expert’s work to the objective of an assurance engagement;
—— considering whether the practitioner has a sufficient understanding of, and involvement in, the
subject matter of the engagement;
—— long form reports; and
—— avoiding restrictions on what the expert can
communicate to the practitioner.
•
The requirement in CAS 620 dealing with determining
the need for an auditor’s expert is more explicit than
the related requirement in Section 5049.
•
Under CAS 620, the auditor is required to evaluate
the competence, capabilities, and objectivity of
the expert. In situations when an auditor’s external
expert is used, there is an additional requirement to
enquire of the external expert regarding interests and
relationships that may create a threat to that expert’s
objectivity. The related requirement in Section 5049
refers to the expert’s expertise, competence, integrity, objectivity and appropriate degree of independence. There is no distinction between an auditor’s
external and internal expert in Section 5049.
•
The requirements in CAS 620 dealing with obtaining
an understanding of the field of expertise of the auditor’s expert, providing direction to, and communicating with that expert are more explicit than related
requirements in Section 5049. Also, CAS 620 requires
the agreement with the auditor’s expert to be in
writing when appropriate. There is no requirement
in Section 5049 regarding an agreement between
the auditor and expert being in writing. The requirement in Section 5049 refers to the practitioner being
satisfied that there is an appropriate understanding
between the practitioner of their respective roles and
responsibilities.
•
Under CAS 620, the auditor is required to consider
certain matters that impact the nature, timing and
extent of the auditor’s procedures when an expert is
used. Section 5049 lists such matters as factors for
the practitioner to consider.
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•
The requirements in both CAS 620 and Section
5049 state that the auditor’s standard report should
not refer to the work of the expert. However, the
requirement in CAS 620 contains the caveat that such
reference would not be made unless required by law
or regulation. Both CAS 620 and Section 5049 permit
reference to the work of the expert when the opinion
is modified. However, under CAS 620, when such a
reference is made, the auditor’s report must clearly
indicate that the reference does not diminish the
auditor’s responsibility for the report.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 700
Forming an Opinion and Reporting
on Financial Statements
Existing Handbook Section(s) Replaced
The CAS replaces the following Section and Assurance
and Related Services Guidelines:
•
Section 5400, The Auditor’s Standard Report;
•
AuG-21, Canada-United States Reporting Differences;
•
AuG-40, Auditor’s Report on the Financial Statements of Federally Regulated Financial Institutions;
and
•
AuG-45, Legislative Auditor’s Report on Financial
Statements of a Federal, Provincial or Territorial
Government.
Difference(s) in scope
None.
New concept(s)
Types of Applicable Financial Reporting Framework
The auditor may report under CAS 700 on financial statements prepared using a financial reporting framework that
is a fair presentation framework or a compliance framework.
As set out in CAS 200, the term “fair presentation framework” is used to refer to a financial reporting framework
that requires compliance with the requirements of the
framework and:
(a) acknowledges explicitly or implicitly that, to achieve
fair presentation of the financial statements, it may
be necessary for management to provide disclosures
beyond those specifically required by the framework;
or
(b) acknowledges explicitly that it may be necessary for
management to depart from a requirement of the
framework to achieve fair presentation of the financial
statements. Such departures are expected to be
necessary only in extremely rare circumstances.
The term “compliance framework” is used to refer to a
financial reporting framework that requires compliance
with the requirements of the framework, but does not
contain the acknowledgements in (a) or (b) above.
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Date of the Auditor’s Report
CAS 700 requires that the auditor’s report be dated no
earlier than the date on which the auditor has obtained
sufficient appropriate audit evidence on which to base the
opinion on the financial statements. Sufficient appropriate audit evidence is defined to include evidence that the
entity’s complete set of financial statements has been
prepared and that those with the recognized authority
have asserted that they have taken responsibility for them.
For this purpose, the date of approval of the financial
statements is defined as the date on which those with the
recognized authority assert that they have prepared the
entity’s complete set of financial statements, including the
related notes, and that they have taken responsibility for
them.
In practical terms, this means that the date of the auditor’s
report will be no earlier than the date of approval of the
financial statements in final form by the board of directors
or other similar body. This represents a significant change
from current standards, under which the date of substantial completion of the auditor’s examination is used as the
date of the auditor’s report.
Reporting on Financial Statements Prepared Using
Differential Reporting Options
Section 5400 provides guidance on the auditor’s report
on financial statements prepared using differential reporting options. The reporting model underlying CAS 700
is designed to enable the auditor to report on financial
statements prepared in accordance with any acceptable
financial reporting framework. CAS 700 therefore does
not specifically address financial statements using differential reporting. The AASB has concluded that under the
new audit reporting model, financial statements prepared
using differential reporting options would receive the
same form of report as other financial statements prepared in accordance with Canadian GAAP.
Change(s) to requirement(s)
Auditor’s Report
CAS 700 contains requirements for the structure and
form of the auditor’s report that are different from
Section 5400:
•
The auditor’s report shall be in writing.
•
The auditor’s report shall have a title that clearly indicates that it is the report of an independent auditor.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
•
The introductory paragraph in the auditor’s report
shall:
—— identify the entity whose financial statements
have been audited;
—— state that the financial statements have been
audited;
—— identify the title of each statement that comprises the financial statements;
—— refer to the summary of significant accounting
policies and other explanatory information; and
—— specify the date or period covered by each
financial statement comprising the financial
statements.
•
The management responsibility section of the auditor’s report describes the responsibilities of those in
the organization that are responsible for the preparation of the financial statements. The auditor’s report
need not refer specifically to “management,” but shall
use the term that is appropriate in the context of the
legal framework in the particular jurisdiction. In some
jurisdictions, the appropriate reference may be to
those charged with governance.
•
The auditor’s report shall include a section with the
heading “Management’s [or other appropriate term]
Responsibility for the Financial Statements.”
•
The auditor’s report shall describe management’s
responsibility for the preparation of the financial
statements. The description shall include an explanation that management is responsible for the preparation of the financial statements in accordance with
the applicable financial reporting framework, and for
such internal control as it determines is necessary to
enable the preparation of financial statements that
are free from material misstatement, whether due
to fraud or error.
•
Where the financial statements are prepared in accordance with fair presentation framework, the explanation of management’s responsibility for the financial
statements in the auditor’s report shall refer to “the
preparation and fair presentation of these financial
statements” or “the preparation of financial statements that give a true and fair view,” as appropriate
in the circumstances.
•
The auditor’s report shall include a section with the
heading “Auditor’s Responsibility.”
•
The auditor’s report shall state that the audit was
conducted in accordance with Canadian generally
accepted auditing standards. The auditor’s report
shall also explain that those standards require that
the auditor comply with ethical requirements and
that the auditor plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free from material misstatement.
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•
The auditor’s report shall describe an audit by stating
that:
—— an audit involves performing procedures to
obtain audit evidence about the amounts and
disclosures in the financial statements;
—— the procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial
statements, whether due to fraud or error. In
making those risk assessments, the auditor
considers internal control relevant to the entity’s
preparation of the financial statements in order
to design audit procedures that are appropriate
in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the
entity’s internal control. In circumstances when
the auditor also has a responsibility to express an
opinion on the effectiveness of internal control in
conjunction with the audit of the financial statements, the auditor shall omit the phrase that the
auditor’s consideration of internal control is not
for the purpose of expressing an opinion on the
effectiveness of internal control; and
—— an audit also includes evaluating the appropriateness of the accounting policies used and the
reasonableness of accounting estimates made by
management, as well as the overall presentation
of the financial statements.
•
Where the financial statements are prepared in
accordance with a fair presentation framework, the
description of the audit in the auditor’s report shall
refer to “the entity’s preparation and fair presentation
of the financial statements” or “the entity’s preparation of financial statements that give a true and fair
view,” as appropriate in the circumstances.
•
The auditor’s report shall state whether the auditor believes that the audit evidence the auditor has
obtained is sufficient and appropriate to provide a
basis for the auditor’s opinion.
•
The auditor’s report shall include a section with the
heading “Opinion.”
•
When expressing an unmodified opinion on financial statements prepared in accordance with a fair
presentation framework, the auditor’s opinion shall,
unless otherwise required by law or regulation, use
one of the following phrases, which are regarded as
being equivalent:
(a) the financial statements present fairly, in all
material respects, … in accordance with [the
applicable financial reporting framework]; or
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
(b) the financial statements give a true and fair view
of … in accordance with [the applicable financial
reporting framework].
Under Section 5400, the auditor’s opinion is required
to use the wording in (a) above.
•
When expressing an unmodified opinion on financial
statements prepared in accordance with a compliance framework, the auditor’s opinion shall be that
the financial statements are prepared, in all material
respects, in accordance with [the applicable financial
reporting framework].
•
If the reference to the applicable financial reporting
framework in the auditor’s opinion is not to International Financial Reporting Standards issued by the
International Accounting Standards Board or International Public Sector Accounting Standards issued by
the International Public Sector Accounting Standards
Board, the auditor’s opinion shall identify the jurisdiction of origin of the framework.
•
If the auditor addresses other reporting responsibilities in the auditor’s report on the financial statements
that are in addition to the auditor’s responsibility
under the CASs to report on the financial statements, these other reporting responsibilities shall be
addressed in a separate section in the auditor’s report
that shall be sub-titled “Report on Other Legal and
Regulatory Requirements,” or otherwise as appropriate to the content of the section.
•
If the auditor’s report contains a separate section on
other reporting responsibilities, the headings, statements and explanations referred to above shall be
under the sub-title “Report on the Financial Statements.” The “Report on Other Legal and Regulatory Requirements” shall follow the “Report on the
Financial Statements.”
•
The auditor’s report shall be signed.
Auditor’s Report Prescribed by Law or Regulation
•
CAS 700 includes requirements when the auditor’s
report is prescribed by law or regulation. Section
5400 does not contain such requirements. If the
auditor is required by law or regulation of a specific
jurisdiction to use a specific layout or wording of
the auditor’s report, CAS 700 requires the auditor’s
report to refer to Canadian generally accepted auditing standards only if the auditor’s report includes, at
a minimum, each of the following elements:
—— a title;
—— an addressee, as required by the circumstances
of the engagement;
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——
——
——
——
——
——
——
an introductory paragraph that identifies the
financial statements audited;
a description of the responsibility of management (or other appropriate term, see paragraph 24) of CAS 700 for the preparation
of the financial statements;
a description of the auditor’s responsibility to
express an opinion on the financial statements
and the scope of the audit, that includes:
oo a reference to Canadian generally accepted
auditing standards and the law or regulation; and
oo a description of an audit in accordance with
those standards;
an opinion paragraph containing an expression
of opinion on the financial statements and a
reference to the applicable financial reporting
framework used to prepare the financial statements (including identifying the jurisdiction of
origin of the financial reporting framework that
is not International Financial Reporting Standards or International Public Sector Accounting
Standards);
the auditor’s signature;
the date of the auditor’s report; and
the auditor’s address.
Auditor’s Report for Audits Conducted in Accordance
with Both Auditing Standards of a Specific Jurisdiction
and Canadian Auditing Standards
•
CAS 700 includes requirements when the auditor
conducts the audit in accordance with both auditing
standards of a specific jurisdiction and the CASs.
Section 5400 does not include such requirements.
An auditor may be required to conduct an audit in
accordance with the auditing standards of a specific
jurisdiction (the “national auditing standards”, but
may additionally have complied with the CASs in the
conduct of the audit. If this is the case, the auditor’s
report may refer to Canadian generally accepted
auditing standards in addition to the national auditing
standards, but the auditor shall do so only if:
—— there is no conflict between the requirements
in the national auditing standards and those in
CASs that would lead the auditor (i) to form a
different opinion, or (ii) not to include an Emphasis of Matter paragraph that, in the particular
circumstances, is required by CASs; and
—— the auditor’s report includes, as a minimum, each
of the elements set out in paragraph 43(a)–(i)
of CAS 700 when the auditor uses the layout
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
or wording specified by the national auditing
standards. Reference to law or regulation in
paragraph 43(e) of CAS 700 shall be read as
reference to the national auditing standards.
The auditor’s report shall thereby identify such
national auditing standards.
•
When the auditor’s report refers to both the national
auditing standards and Canadian generally accepted
auditing standards, the auditor’s report shall identify
the jurisdiction of origin of the national auditing
standards.
Other matter(s)
None.
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CAS 705
Modifications to the Opinion in the
Independent Auditor’s Report
Existing Handbook Section(s) Replaced
The CAS replaces Section 5510, Reservations in the Auditor’s Report.
Difference(s) in scope
None.
New concept(s)
None.
Change(s) to requirement(s)
CAS 705 takes an approach with Section 5510 regarding
the types of modified opinions and the circumstances
when a modification to the auditor’s opinion is required.
The following are the significant changes to current
standards resulting from CAS 705:
•
CAS 705 provides more detailed requirements with
respect to the consequences when management
imposes a limitation after the auditor has accepted
the engagement.
•
CAS 705 requires that if the auditor is unable to
obtain sufficient appropriate audit evidence, the auditor shall determine the implications as follows:
—— if the auditor concludes that the possible effects
on the financial statements of undetected
misstatements, if any, could be material but not
pervasive, the auditor shall qualify the opinion; or
—— if the auditor concludes that the possible effects
on the financial statements of undetected misstatements, if any, could be both material and
pervasive so that a qualification of the opinion
would be inadequate to communicate the gravity
of the situation, the auditor shall: (Ref: Para.
A13-A14)
oo resign from the audit, where practicable
and not prohibited by law or regulation; or
oo if resignation from the audit before issuing
the auditor’s report is not practicable or
possible, disclaim an opinion on the financial
statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Section 5510 requires that the auditor express a qualified opinion when there is a limitation in the scope
of his or her examination that prevents him or her
from obtaining sufficient appropriate audit evidence,
unless the limitation in the scope of his or her examination is such that, in his or her opinion, the effect on
the financial statements of possible departures from
generally accepted accounting principles could be
so pervasive or significant that he or she has no basis
for an opinion on the financial statements taken as
a whole. In the latter case he or she would deny an
opinion.
•
CAS 705 requires that when the auditor includes
a paragraph in the auditor’s report that provides a
description of the matter giving rise to the modification the auditor shall use the heading “Basis for Qualified Opinion,” Basis for Adverse Opinion,” or “Basis
for Disclaimer of Opinion,” as appropriate. CAS 705
requires that when the auditor modifies the audit
opinion, the auditor shall use the heading “Qualified Opinion,” “Adverse Opinion,” or “Disclaimer of
Opinion,” as appropriate, for the opinion paragraph.
Section 5510 does not require paragraph headings.
•
CAS 705 requires that when the auditor expresses
a qualified opinion due to a material misstatement
in the financial statements, the auditor shall state in
the opinion paragraph that, in the auditor’s opinion,
except for the effects of the matter(s) described in
the Basis for Qualified Opinion paragraph:
—— the financial statements present fairly, in all
material respects, in accordance with the
applicable financial reporting framework when
reporting in accordance with a fair presentation
framework; or
—— the financial statements have been prepared,
in all material respects, in accordance with the
applicable financial framework when reporting
in accordance with a compliance framework.
Paragraph 5510.30 requires similar wording be used.
When the modification arises from an inability to
obtain sufficient appropriate audit evidence, the auditor shall use the corresponding phrase “except for the
possible effects of the matter(s) ...” for the modified
opinion. Paragraph 5510.30 requires that the auditor
not use wording that bases the qualification on the
limitation itself, for example, “In my opinion, except
for the above-mentioned limitation on the scope of
my examination.”
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•
CAS 705 requires that when the auditor expresses an
adverse opinion, the auditor shall state in the opinion
paragraph that, in the auditor’s opinion, because of
the significance of the matter(s) described in the
Basis for Adverse Opinion paragraph:
—— the financial statements do not present fairly in
accordance with the applicable financial reporting framework when reporting in accordance
with a fair presentation framework; or
—— the financial statements have not been prepared,
in all material respects, in accordance with the
applicable financial reporting framework when
reporting in accordance with a compliance
framework.
Section 5510 does not contain such a requirement
but provides similar guidance in paragraph 5510.15.
•
CAS 705 requires that when the auditor disclaims
an opinion due to an inability to obtain sufficient
appropriate audit evidence, the auditor shall state in
the opinion paragraph that:
—— because of the significance of the matter(s)
described in the Basis for Disclaimer of Opinion
paragraph, the auditor has not been able to obtain
sufficient appropriate audit evidence to provide a
basis for an audit opinion; and, accordingly,
—— the auditor does not express an opinion on the
financial statements.
Section 5510 does not contain such a requirement but
provides similar guidance in paragraph 5510.15.
•
CAS 705 requires that when the auditor expresses a
qualified or adverse opinion, the auditor shall amend
the description of the auditor’s responsibility to state
that the auditor believes that the audit evidence the
auditor has obtained is sufficient and appropriate to
provide a basis for the auditor’s modified audit opinion. Section 5510 does not require such a statement.
•
CAS 705 requires that when the auditor disclaims
an opinion the auditor shall amend the introductory
paragraph of the auditor’s report to state that the
auditor was engaged to audit the financial statements. The auditor shall also amend the description
of the auditor’s responsibility and the description
of the scope of the audit to state only the following:
“Our responsibility is to express an opinion on the
financial statements based on conducting the audit in
accordance with Canadian generally accepted auditing standards. Because of the matter(s) described
in the Basis for Disclaimer of Opinion paragraph,
however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit
opinion.” Section 5510 does not require such changes.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
•
CAS 705 requires that when the auditor expects to
modify the opinion in the auditor’s report, the auditor
shall communicate with those charged with governance the circumstances that lead to the expected
modification and the proposed wording of the modification. Section 5751, Communications with those
Having Oversight Responsibility for the Financial
Reporting Process, contains similar guidance, but
not a requirement.
•
CAS 705 requires the auditor to disclaim an opinion
on the financial statements as a whole when, in
extremely rare circumstances involving multiple
uncertainties, the auditor concludes it is not possible
to form an opinion on the financial statements as a
whole due to the interaction of the uncertainties and
their possible cumulative effect on the financial statements. Section 5510 would not permit the auditor to
express a reservation of opinion in this circumstance.
•
CAS 705 requires that when the auditor considers it
necessary to express an adverse opinion or disclaim
an opinion on the financial statements as a whole, the
auditor’s report shall not also include an unmodified
opinion with respect to the same financial reporting framework on a single financial statement or
one or more specific elements, accounts or items
of a financial statement. Section 5510 requires that
a piecemeal opinion not be issued. Section 5510
describes a piecemeal opinion as when the auditor
expresses an adverse opinion or denied an opinion
on financial statements and also includes in his or her
report a supplementary opinion that certain specific
items within the financial statements are presented
fairly in accordance with generally accepted accounting principles.
•
Section 5510 requires that when denying an opinion,
the auditor should not indicate the specific procedures performed as this may tend to overshadow the
denial. This is not addressed in CAS 705.
•
Section 5510 requires that if the auditor has obtained
sufficient appropriate audit evidence to determine
that, in his or her opinion, the accounting treatment,
disclosure and presentation of a contingency are
in accordance with generally accepted accounting
principles, he or she should not express a reservation
of opinion nor otherwise refer to the contingency in
his or her report. CAS 706, “Emphasis of Matter and
Other Matter(s) Paragraphs in the Independent Auditor’s Report,” would permit the auditor to include an
emphasis of matter paragraph in this circumstance.
Other matter(s)
None.
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CAS 706
Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent
Auditor’s Report
Existing Handbook Section(s) Replaced
The CAS replaces Section 5701, Other Reporting
Matters.
Difference(s) in scope
None.
New concept(s)
CAS 706 provides guidance on the use of Emphasis of
Matters and Other Matter paragraphs in the auditor’s
report. Section 5701 does not separately distinguish
between these two types of paragraph in its guidance
on additional explanations in the auditor’s report. An
Emphasis of Matter paragraph in the auditor’s report may
be used to draw the attention of users to a matter presented or disclosed in the financial statements that, in the
judgment of the auditor, is of such importance that they
are fundamental to users’ understanding of the financial
statements. An Other Matter paragraph in the auditor’s
report may be used to communicate information relating
to a matter other than one that is presented or disclosed in
the financial statements that, in the auditor’s judgment, is
relevant to users’ understanding of the audit, the auditor’s
responsibilities or the auditor’s report.
Change(s) to requirement(s)
Emphasis of Matter Paragraphs and Other Matter
Paragraphs
•
If the auditor considers it necessary to draw users’
attention to a matter presented or disclosed in the
financial statements that, in the auditor’s judgment,
is of such importance that it is fundamental to users’
understanding of the financial statements, the auditor
shall include an Emphasis of Matter paragraph in the
auditor’s report provided the auditor has obtained
sufficient appropriate audit evidence that the matter
is not materially misstated in the financial statements.
Such a paragraph shall refer only to information
presented or disclosed in the financial statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
When the auditor includes an Emphasis of Matter
paragraph in the auditor’s report, the auditor shall:
—— include it immediately after the Opinion paragraph in the auditor’s report;
—— use the heading “Emphasis of Matter” or other
appropriate heading;
—— include in the paragraph a clear reference to the
matter being emphasized and to where relevant
disclosures that fully describe the matter can be
found in the financial statements; and
—— indicate that the auditor’s opinion is not modified
in respect of the matter emphasized.
•
If the auditor considers it necessary to communicate
a matter other than those that are presented or
disclosed in the financial statements that, in the auditor’s judgment, is relevant to users’ understanding of
the audit, the auditor’s responsibilities or the auditor’s
report and this is not prohibited by law or regulation,
the auditor shall do so in a paragraph in the auditor’s
report, with the heading “Other Matter” or other
appropriate heading. The auditor shall include this
paragraph immediately after the Opinion paragraph
and any Emphasis of Matter paragraph, or elsewhere
in the auditor’s report if the content of the Other
Matter paragraph is relevant to the Other Reporting
Responsibilities section.
Section 5701 requires that if the auditor expands his
formal report to include information and explanations neither required by statute nor intended as a
reservation of opinion, the opinion paragraph should
precede that containing additional information and
explanations.
Communications with Those Charged with Governance
•
If the auditor expects to include an Emphasis of
Matter or an Other Matter paragraph in the auditor’s
report, the auditor shall communicate with those
charged with governance regarding this expectation
and the proposed wording of this paragraph.
The CICA Handbook – Assurance does not contain such
specific requirement.
Other matter(s)
None.
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CAS 710
Comparative Information — Corresponding
Figures and Comparative Financial Statements
Existing Handbook Section(s) Replaced
The CAS replaces Section 5701, Other Reporting Matters
and AuG-8 Auditor’s Report on Comparative Financial
Statements.
Difference(s) in scope
Two Approaches to Comparative Information
CAS 710 specifically recognizes that there are two different approaches to comparative information in financial
reporting frameworks: corresponding figures and comparative financial statements. These approaches are defined
in the CAS. The distinction between the two approaches
affects the reporting requirements.
Under the corresponding figures approach the auditor’s
report refers only to the financial statements of the current
period. This is the norm in Canada for the auditor’s report
on financial statements of non-listed entities. Under the
comparative financial statements approach, the auditor’s
report refers to each period for which the financial statements are presented. This approach is used, for example,
for auditor’s reports on annual financial statements filed
with securities regulators. Due to the significantly different
reporting requirements under the two approaches, they
are dealt with separately in CAS 710.
Differences in Nature and Extent of Requirements
Section 5701 deals with auditor’s reports under the corresponding figures approach. AuG-8 “Auditor’s Report
on Comparative Financial Statements” provides limited
guidance for circumstances when the auditor’s report is
extended to cover the financial statements presented as
comparative financial statements.
Section 5701 contains only two recommendations
(requirements) dealing with comparative figures. These
are contained in paragraphs 5701.10 and .11 dealing respectively with disclosures when comparative figures are
unaudited and when comparative figures are based upon
financial statements reported on by other auditors. CAS
710 contains significantly more requirements about the
auditor’s responsibilities for corresponding figures or comparative financial statements under each approach, and
when the prior period financial statements were audited
by another auditor or were not audited. Accordingly, most
of the requirements in this CAS are new.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
New concept(s)
None.
Change(s) to requirement(s)
•
The auditor may encounter circumstances when there
was a reservation of the auditor’s report on the prior
period’s financial statements, and the matters that
gave rise to that reservation have not been resolved
and affect the comparability of current and comparative figures. Guidance in paragraph 5701.09 suggests
that in such circumstances it may be appropriate to
refer, in the auditor’s report for the current period,
to the reservation in the auditor’s report in the prior
period, and that such a reference would be made
in a separate paragraph following the opinion paragraph. On the other hand, the requirement in CAS
710 paragraph 11 states that if matters that gave rise
to a reservation in the auditor’s report on the prior
period continue to affect the corresponding figures,
the auditor’s report on the current period’s financial
statements shall be modified. This position reflects
the importance of the comparability of the current
period figures with those of the prior period.
•
The auditor may encounter circumstances when the
prior period financial statements were not audited.
Recommendation paragraph 5701.10 (dealing with the
corresponding figures approach) requires, only that
if the comparative figures are not marked as unaudited or the notes to the financial statements do not
disclose this fact, the auditor to state this fact in the
auditor’s report. CAS 710 requires the auditor to state
the fact, that the prior period financial statements
were not audited, in the auditor’s report in all cases.
•
The auditor may encounter circumstances when
another auditor has reported on the prior period
financial statements. Recommendation paragraph
5701.11 (dealing with the corresponding figures
approach) requires the auditor to state this fact in
the auditor’s report following the opinion paragraph
where management has not disclosed this fact in the
notes to the financial statements. The requirement in
CAS 710 paragraph 13, requires the auditor to provide
such information including the date of the predecessor auditor’s report, the type of opinion expressed
by the predecessor auditor, and if that opinion was
modified, the reasons thereof in an Other Matter
paragraph in the auditor’s report.
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Other matter(s)
Initial Engagements
•
CAS 710 does not deal with an auditor’s responsibility
on auditing of opening balances in an initial engagement. CAS 510 addresses such matters.
Compliance with Securities Legislation
•
Under the comparative financial statements
approach, when the financial statements of the prior
period were audited by a predecessor auditor, CAS
710 permits the auditor to either refer to the predecessor auditor’s report or to include the predecessor
auditor’s re-issued report on the prior period’s financial statements. Under the Canadian securities regulatory environment, financial statements are required
to be accompanied by an auditor’s report that refers
to the predecessor auditor’s reports on the comparative periods if the issuer or registrant has changed its
auditor and one or more of the comparative periods
presented in the financial statements were audited by
a predecessor auditor. Accordingly, the auditor must
refer to the predecessor auditor in the Other Matter
paragraph whether or not the predecessor auditor
re-issued his or her report to comply with Canadian
securities regulation. CAS 710 does not prohibit references to the predecessor auditor when the predecessor auditor’s re-issued auditor’s report on the prior
period is included with the financial statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 720
The Auditor’s Responsibility in Relation to
Other Information in Documents Containing
Audited Financial Statements
Existing Handbook Section(s) Replaced
The CAS replaces Section 7500, Auditor Association with
Annual Reports, Interim Reports and Other Public Documents, to the extent that Section 7500 covers aspects of
the audit of financial statements. Section 7500 is being
revised to eliminate overlap with CAS 720 and is being
carried forward in the CICA Handbook – Assurance as an
association standard that deals with the auditor’s responsibilities arising subsequent to the audit when the auditor
consents to the use of the auditor’s report in connection
with certain documents.
Difference(s) in scope
Limited to Documents Containing Audited Financial
Statements
The scope of CAS 720 is significantly narrower than that of
Section 7500, which sets out the auditor’s responsibility in
relation to a wide variety of other documents with which
the auditor is associated in addition to those containing audited financial statements. Such other documents
include those containing financial statements that the
auditor has reviewed or with which the auditor is otherwise associated, as well as the entity’s Annual Information
Form, and Management’s Discussion and Analysis (MD&A)
for periods for which the auditor has audited or reviewed
the financial statements. In addition to the procedures
set out in CAS 720, Section 7500 requires the auditor to
read the financial statements and, if applicable, the report
of the auditor, to obtain satisfaction that they have been
accurately reproduced or appropriately summarized in
the document. Further, material dealing with the auditor’s responsibilities for other information in documents
containing summary financial statements is included in
CAS 810 and not in CAS 720.
New concept(s)
Incorporate by Reference
Section 7500 states that information “in”, “included in”
or “contained in” a document include information incorporated by reference in the document. CAS 720 does not
discuss the concept of “incorporated by reference.”
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Change(s) to requirement(s)
Requirements in Section 7500 Not Carried Forward
in CAS 720
Section 7500 contains certain requirements that are not in
CAS 720:
(a) Section 7500 requires the auditor to determine
whether the financial statements and, when applicable, the report of the auditor thereon, are accurately
reproduced or appropriately summarized in a designated public document;
(b) Section 7500 prohibits the auditor from expressing
any assurance on the other information in any public
document (unless he or she has audited or reviewed
the information in accordance with assurance standards) or on the document as a whole; and
(c) Section 7500 contains requirements and guidance
dealing with the auditor’s responsibilities with respect
to translated material.
With respect to (b), paragraph 1 of CAS 720 states that
the auditor’s opinion does not cover other information.
With respect to (c), the material dealing with the auditor’s responsibilities for translated material will be carried
forward in Section 5020, Association.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 800
Special Considerations — Audits of Financial
Statements Prepared in Accordance with
Special Purpose Frameworks
Existing Handbook Section(S) Replaced
The CAS replaces Section 5600, Auditor’s Report on
Financial Statements Prepared Using a Basis of Accounting other than Generally Accepted Accounting Principles.
Difference(s) in scope
There is no Canadian auditing standard that addresses the
auditor’s report on special purpose financial statements.
Section 5600 provides criteria that prescribe when the
auditor may report under that Section on financial statements that have not been prepared in accordance with
Canadian GAAP. CAS 800 permits the auditor to report
under CAS 800 in the same circumstances as Section
5600 but also expands the scope of possible acceptable
financial reporting frameworks that differ from GAAP
on which an auditor can report without modification.
New concept(s)
CAS 800 permits the auditor to accept an engagement
to report on special purpose financial statements if the
auditor has determined that the applicable financial reporting framework is acceptable in the circumstances of the
engagement, using the criteria set out in CAS 210.
The structure and wording of the auditor’s report is different from the Canadian auditor’s report. The wording of
the auditor’s report depends on whether the applicable
financial reporting framework is a “fair presentation” or a
“compliance” framework. These frameworks are defined
in CAS 200.
Change(s) to requirement(s)
•
When forming an opinion and reporting on special
purpose financial statements, CAS 800 requires
the auditor to apply the standards and guidance
in CAS 700.
•
CAS 800 requires the reference to the applicable
financial reporting framework in the statement of
management’s responsibility for the financial statements to make clear the purpose for which the
financial statements are prepared and, if necessary,
the intended users, or refer to a note in the special
purpose financial statements that contains that information. This is not contained in Section 5600.
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•
When management has a choice of financial reporting frameworks, CAS 800 requires the reference to
the applicable financial reporting framework in the
statement of management’s responsibility for the
financial statements to be expanded to include the
responsibility for determining that the applicable
financial reporting framework is acceptable in the circumstances of the engagement. This is not contained
in Section 5600.
•
CAS 800 requires the auditor’s report on special
purpose financial statements to include an Emphasis
of Matter paragraph alerting users of the auditor’s
report that the financial statements are prepared in
accordance with a special purpose framework and
that, as a result, the financial statements may not be
suitable for another purpose. The auditor shall include
this paragraph under an appropriate heading. Section
5600 requires a paragraph after the opinion paragraph in the auditor’s report to include similar wording to CAS 800. However, in addition, Section 5600
requires this paragraph to indicate the following:
—— The financial statements have not been prepared
and were not intended to be prepared in accordance with GAAP. CAS 800 does not require
this.
—— The financial statements are intended solely for
the intended users. This is an option in CAS 800.
—— The financial statements are not to be used by
other users. This is an option in CAS 800.
•
Section 5600 requires that the financial statements
appropriately describe the purpose of the financial
statements and the material differences between the
basis of accounting and generally accepted accounting principles, which need not be quantified. This is
not required by CAS 800.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 805
Special Considerations — Audits of Single
Financial Statements and Specific Elements,
Accounts or Items of a Financial Statement
Existing Handbook Section(S) Replaced
The CAS replaces Section 5805, Special Reports
— Audit Reports on Financial Information other than
Financial Statements.
Difference(s) in scope
Section 5805 provides guidance to an auditor engaged
to express an opinion on financial information (other than
financial statements). CAS 805 deals with special considerations relevant to an audit of single financial statements
and a specific element, account or item of a financial statement (referred to as “element” in this document).
The CASs in the 100-700 series apply to an audit of financial statements and are to be adapted as necessary in the
circumstances when applied to audits of other historical
financial information. CAS 805 deals with special considerations in the application of those CASs to an audit of
an element. The element may be prepared in accordance
with a general or special purpose framework. If prepared
in accordance with a special purpose framework, CAS 800
also applies to the audit.
New concept(s)
None.
Change(s) to requirement(s)
•
When the auditor is not also engaged to audit the
entity’s financial statements, CAS 805 requires the
auditor to determine whether an audit of the element
in accordance with CASs is practicable. This is not
contained in Section 5805.
•
When the auditor undertakes an engagement to
report on an element in conjunction with an engagement to audit the entity’s financial statements,
CAS 805 requires the auditor to express a separate
opinion for each engagement. This is not a requirement in Section 5805.
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•
CAS 210 requires the auditor to determine the acceptability of the financial reporting framework applied
in the preparation of the financial statements. In the
case of an audit of an element, CAS 805 requires that
this shall include whether application of the financial
reporting framework will result in a presentation that
provides adequate disclosures to enable the intended
users to understand the information conveyed in the
financial statement or the element, and the effect of
material transactions and events on the information
conveyed in the financial statement or the element.
Section 5805 does not contain a requirement on this
matter but provides similar guidance.
•
CAS 210 requires that the agreed terms of the audit
engagement include the expected form of any
reports to be issued by the auditor. In the case of an
audit of an element, CAS 805 requires that the auditor consider whether the expected form of opinion is
appropriate in the circumstances. Section 5805 does
not contain this requirement.
•
An audited single financial statement or an audited
specific element of a financial statement may be published together with the entity’s audited complete set
of financial statements. If the auditor concludes that
the presentation of the element does not differentiate
it sufficiently from the complete set of financial statements, CAS 805 requires the auditor to ask management to rectify the situation. Subject to paragraphs 15
and 16 of CAS 805, the auditor shall also differentiate
the opinion on the single financial statement or on
the specific element of a financial statement from the
opinion on the complete set of financial statements.
The auditor shall not issue the auditor’s report containing the opinion on the single financial statement
or on the specific element of a financial statement
until satisfied with the differentiation. These requirements are not contained in Section 5805.
Modified Opinion, Emphasis of Matter Paragraph or
Other Matter Paragraph in the Auditor’s Report on the
Entity’s Complete Set of Financial Statements
•
CAS 805 contains the following requirements relating
to the circumstances when the auditor’s report on the
entity’s complete set of financial statements contains
a modified opinion, emphasis of matter paragraph or
other matter paragraph:
—— If the opinion in the auditor’s report on an
entity’s complete set of financial statements is
modified, or that report includes an Emphasis of
Matter paragraph or an Other Matter paragraph,
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
——
——
——
the auditor shall determine the effect that this
may have on the auditor’s report on a single
financial statement or on a specific element
of those financial statements. When deemed
appropriate, the auditor shall modify the opinion
on the single financial statement or on the specific element of a financial statement, or include
an Emphasis of Matter paragraph or an Other
Matter paragraph in the auditor’s report, accordingly. (Ref: Para. A17)
If the auditor concludes that it is necessary to
express an adverse opinion or disclaim an opinion on the entity’s complete set of financial statements as a whole, CAS 705 does not permit the
auditor to include in the same auditor’s report an
unmodified opinion on a single financial statement that forms part of those financial statements or on a specific element that forms part
of those financial statements.1 This is because
such an unmodified opinion would contradict the
adverse opinion or disclaimer of opinion on the
entity’s complete set of financial statements as
a whole. (Ref: Para. A18)
If the auditor concludes that it is necessary
to express an adverse opinion or disclaim an
opinion on the entity’s complete set of financial statements as a whole but, in the context
of a separate audit of a specific element that
is included in those financial statements, the
auditor nevertheless considers it appropriate to
express an unmodified opinion on that element,
the auditor shall only do so if:
oo the auditor is not prohibited by law or
regulation from doing so;
oo that opinion is expressed in an auditor’s
report that is not published together with
the auditor’s report containing the adverse
opinion or disclaimer of opinion; and
oo the specific element does not constitute a
major portion of the entity’s complete set
of financial statements.
The auditor shall not express an unmodified
opinion on a single financial statement of a
complete set of financial statements if the
auditor has expressed an adverse opinion or
disclaimed an opinion on the complete set of
financial statements as a whole. This is the case
even if the auditor’s report on the single financial
statement is not published together with the
1 CAS 705, “Modification to the Opinion in the Independent
Auditor’s Report,” paragraph 15.
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The CICA’s Guide to New CASs in Canada
auditor’s report containing the adverse opinion
or disclaimer of opinion. This is because a single
financial statement is deemed to constitute a
major portion of those financial statements.
Section 5805 does not contain such requirements.
Significant Interpretations
•
Section 5805 requires the auditor to disclose in the
auditor’s report significant interpretations, if any, of
an agreement, statute or regulation made by management of the entity. CAS 805 does not contain such a
requirement.
Other matter(s)
None.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 810
Engagements to Report on Summary Financial
Statements
EXISTING HANDBOOK GUIDELINE(S) REPLACED
The CAS replaces Assurance and Related Services
Guideline AuG-25, Auditor’s Report on Summary Financial
Statements.
Difference(s) in scope
CAS 810 deals with an auditor’s report on summary financial statements prepared from general purpose financial
statements and also from special purpose financial statements. AuG-25 only deals with the former.
Under CAS 810, if the auditor concludes that the applied
criteria are unacceptable or is unable to obtain the agreement of management as to its responsibilities, the auditor
is required to not accept the engagement to report on the
summary financial statements, unless required by law or
regulation to do so. An engagement conducted in accordance with such law or regulation does not comply with
CAS 810. Accordingly, the auditor’s report on the summary
financial statements shall not indicate that the engagement was conducted in accordance with CAS 810. Under
AuG-25 the auditor could accept such an engagement.
New concept(s)
Form of Opinion
When the auditor has concluded that an unmodified opinion on the summary financial statements is appropriate,
CAS 810 requires the auditor’s opinion to, unless otherwise
required by law or regulation, use one of the following
phrases:
•
The summary financial statements are consistent, in
all material respects, with the audited financial statements, in accordance with [the applied criteria]; or
•
The summary financial statements are a fair summary
of the audited financial statements, in accordance
with [the applied criteria].
In AuG-25 the auditor expresses an opinion whether the
summarized financial statements, in all material respects,
fairly summarize the related complete financial statements
in accordance with the criteria.
If law or regulation prescribes the wording of the opinion
on summary financial statements in terms that are different from those described in paragraph 9 of CAS 810, CAS
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810 requires the auditor to:
(a) apply the procedures described in the CAS and any
further procedures necessary to enable the auditor
to express the prescribed opinion; and
(b) evaluate whether users of the summary financial
statements might misunderstand the auditor’s opinion on the summary financial statements and, if so,
whether additional explanation in the auditor’s report
on the summary financial statements can mitigate
possible misunderstanding.
If, in the case of paragraph (b) above, the auditor concludes that additional explanation in the auditor’s report
on the summary financial statements cannot mitigate
possible misunderstanding, CAS 810 requires the auditor
to not accept the engagement, unless required by law or
regulation to do so. An engagement conducted in accordance with such law or regulation does not comply with
CAS 810. Accordingly, the auditor’s report on the summary
financial statements shall not indicate that the engagement was conducted in accordance with the CAS.
Subsequent Events and Date of the Auditor’s Report
on Summary Financial Statements
Under CAS 810, the auditor’s report on the summary
financial statements may be dated later than the date of
the auditor’s report on the audited financial statements. In
such cases, CAS 810 requires the auditor’s report on the
summary financial statements to state that the summary
financial statements and audited financial statements do
not reflect the effects of events that occurred subsequent
to the date of the auditor’s report on the audited financial
statements that may require adjustment of, or disclosure
in, the audited financial statements. An auditor’s report
under AuG-25 does not include such a statement.
CAS 810 requires the auditor to date the report on the
summary financial statements no earlier than the date
on which the auditor has obtained sufficient appropriate
evidence on which to base the opinion and the date of
the auditor’s report on the audited financial statements.
Sufficient appropriate evidence shall include evidence that
the summary financial statements have been prepared and
that management has asserted that it has taken responsibility for them. AuG-25 indicates that the date of the
auditor’s report on the summarized financial statements
would be the same date as the auditor’s report on the
related complete financial statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
CAS 810 addresses the situation when the auditor may
become aware of facts that existed at the date of the
auditor’s report on the audited financial statements but
of which the auditor previously was unaware. CAS 810
requires the auditor to not issue the auditor’s report on the
summary financial statements until the auditor’s consideration of such facts in relation to the audited financial statements in accordance with CAS 560 has been completed.
AuG-25 does not address this situation.
Change(s) to requirement(s)
Caution to Readers
•
The auditor’s report under AuG-25 contains a caution
to readers that the summary financial statements may
not be appropriate for their purposes. The auditor’s
opinion indicates that the summary financial statements fairly summarize, in all material respects, the
related complete financial statements. The auditor’s
report under CAS 810 does not contain such a caution.
Modifications to the Opinion, Emphasis of Matter
Paragraph or Other Matter Paragraph in the Auditor’s
Report on the Audited Financial Statements
•
When the auditor’s report on the audited financial
statements contains an Emphasis of Matter paragraph, or an Other Matter paragraph, but the auditor
is satisfied that the summary financial statements
are consistent, in all material respects, with or are
a fair summary of the audited financial statements,
in accordance with the applied criteria, CAS 810
requires the auditor’s report on the summary financial
statements to:
—— state that the auditor’s report on the audited
financial statements contains a qualified opinion,
an Emphasis of Matter paragraph, or an Other
Matter paragraph; and
—— describe:
oo the basis for the qualified opinion on the
audited financial statements, and that qualified opinion; or the Emphasis of Matter or
the Other Matter paragraph in the auditor’s
report on the audited financial statements;
and
oo the effect thereof on the summary financial
statements, if any.
The auditor’s report under AuG-25 refers only to the
auditor’s opinion on the audited financial statements.
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The CICA’s Guide to New CASs in Canada
•
When the auditor’s report on the audited financial
statements contains an adverse opinion or a disclaimer of opinion, the auditor’s report on the summary financial statements under CAS 810 shall:
—— state that the auditor’s report on the audited
financial statements contains an adverse opinion
or disclaimer of opinion;
—— describe the basis for that adverse opinion or
disclaimer of opinion; and
—— state that, as a result of the adverse opinion
or disclaimer of opinion, it is inappropriate to
express an opinion on the summary financial
statements.
AuG-25 does not prevent the auditor from issuing an
opinion on the summary financial statements in such
cases.
Modified Opinion on the Summary Financial Statements
•
If the summary financial statements are not consistent, in all material respects with, or are not a fair
summary of the audited financial statements, in
accordance with the applied criteria, and management does not agree to make the necessary changes,
CAS 810 requires the auditor to express an adverse
opinion on the summary financial statements.
Under AuG-25, the auditor would withdraw from the
engagement to report on the summarized financial
statements and would not agree to be associated
with the summarized financial statements. If the auditor cannot withdraw from the engagement because
of a requirement to report by law or regulation, the
auditor would issue an adverse opinion on the summarized financial statements.
Restriction on Distribution or Use, or Alerting Readers
to the Basis of Accounting
•
When distribution or use of the auditor’s report on
the audited financial statements is restricted, or the
auditor’s report on the audited financial statements
alerts readers that the audited financial statements
are prepared in accordance with a special purpose
framework, CAS 810 requires the auditor to include
a similar restriction or alert in the auditor’s report on
the summary financial statements.
Overview and Comparisons
The Existing CICA Handbook – Assurance — CASs and CSQC 1
Other Requirements
•
CAS 810 contains requirements on the following topics that are not addressed in AuG-25:
—— auditor association;
—— unaudited supplementary information presented
with summary financial statements; and
—— other information in documents containing summary financial statements.
Other matter(s)
None.
133
Provincial Institutes/Ordre
The Institute of Chartered
Accountants of Bermuda
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(441) 292-7479
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Accountants of Nova Scotia
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(902) 425-3291
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The New Brunswick Institute
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Accountants of Prince Edward
Island
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e
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1 888 942-8248
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The Canadian Institute of Chartered Accountants
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© The Canadian Institute of Chartered Accountants NIEDU049
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1 800 232-9406
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Accountants of British
Columbia
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If you are in the Yukon,
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