Implementation Considerations for New Auditor Reporting Standards

Transcription

1 Implementation Considerations for New Auditor Reporting Standards Darrell Jensen, CPA, CA, Vice Chair, AASB Fred Pries, CPA, CA, Member, AASB Bill Mandelman, CPA, CA, MBA, Principal, Auditing and Assurance Standards, Chartered Professional Accountants of Canada Presented live on October 6, 2015

2 Agenda 1. Objectives of this webinar 2. Key features of new and revised auditor reporting standards issued by IAASB 3. Key implementation challenges for Canada outlined in Invitation to Comment (ITC) issued by the AASB 4. Providing input 5. Questions and comments

3 Objectives of This Webinar Provide details about new and revised Auditor Reporting standards Inform you about the implementation challenges identified in the ITC Encourage you to comment on the ITC

4 New and Revised Auditor Reporting Standards Key Features

5 Effective Date of ISAs New and revised ISAs on Auditor Reporting are effective for periods ending on or after December 15, 2016

6 Key Audit Matters (KAM) KAM are defined as those matters that, in the auditor s professional judgment, were of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated with those charged with governance. A Key Audit Matters section is required in the auditor s report for audits of financial statements of listed entities in accordance with new ISA 701; may be required by law or regulation, or auditor may provide voluntarily, for other entities.

7 The Decision-making Framework for KAM

8 KAM Delivering Entity-specific Information to Users

9 Illustrative KAM Goodwill Under IFRSs, the Group is required to annually test the amount of goodwill for impairment. This annual impairment test was significant to our audit because the balance of XX as of December 31, 20X1 is material to the financial statements. In addition, management s assessment process is complex and highly judgmental and is based on assumptions, specifically [describe certain assumptions], which are affected by expected future market or economic conditions, particularly those in [name of country or geographic area]. Our audit procedures included, among others, using a valuation expert to assist us in evaluating the assumptions and methodologies used by the Group, in particular those relating to the forecasted revenue growth and profit margins for [name of business line]. We also focused on the adequacy of the Group s disclosures about those assumptions to which the outcome of the impairment test is most sensitive, that is, those that have the most significant effect on the determination of the recoverable amount of goodwill.

10 AASB Perspective on Final ISAs Strong support by Canadian stakeholders for the AASB to adopt the ISAs as CASs but with concerns with certain IAASB auditor reporting proposals AASB raised concerns, which were largely addressed by the IAASB However, there are a number of challenges that may influence the ability of Canada to implement the standards effectively by the IAASB effective date

11 Implementation Challenges Identified Large number of Canadian listed entities Need time for auditors, management and audit committees to understand and implement Large number of Canadian listed entities also listed in the United States Uncertainty re direction of PCAOB auditor reporting standards Determining which Canadian entities will fall within the scope of KAM reporting requirements

12 AASB Tentative Implementation Schedule All entities, other than KAM reporting: Periods ending on or after December 15, 2017 KAM reporting: TSX: implement for periods ending on or after December 15, 2017 Everyone else: one year later Early adoption permitted

13 AASB Invitation to Comment Questions 1. Do the effective dates provide enough time for stakeholders to implement the new auditor reporting standards? 2. Will the staged implementation of CAS 701 address concerns about the ability for auditors, preparers and audit committees of listed entities to implement key audit matters reporting appropriately? 3. Do you agree that TSX-listed entities are the appropriate cut off point for the staged implementation?

14 AASB Invitation to Comment Questions (Continued) 4. Are there any types of entities not listed on a recognized stock exchange that you believe should be considered to be listed entities within the definition in the new Auditor Reporting standards? 5. Are there any unintended consequences of the AASB s interpretation of the definition of listed entity?

15 Providing Input Read ITC: Respond to ITC by : October 30, 2015

16 Questions & Comments