In April of 2017 the Auditing and Assurance Standards Board (AASB) approved certain new and revised auditor reporting standards. The Canadian Auditing Standards (CAS) 700 Forming an Opinion and Reporting on Financial Statements and CAS 701 Communicating Key Audit Matters in the Independent Auditor’s Report, as well as a couple others, brought about big changes to the look and feel of the auditor’s reports we have been used to in Canada. The new and revised standards are effective for audits of financial statements for periods ending on or after December 15, 2018, thus catching all 2018 calendar year entities, and are similar to standards implemented for December 15, 2016 period ends in countries that follow the International Standards on Auditing (ISA). While there are a number of things that are changing, the changes mandated by CAS 701 require much more attention by your auditor compared to the changes to the other standards. This article focuses on the required changes by new and revised standards other than CAS 701. The CAS 701 impact, as well as its interaction with the new going concern paragraph, will be further discussed in a future Spark article. In addition, any changes applicable only to listed entities are not included below.

The changes required to be made to the auditor’s report, other than CAS 701, are largely boilerplate and not all that different from what we are used to currently, although, now contain loquacious descriptions of selected audit terms. Certain paragraphs have moved or are under different headers and most of the ones that are added are largely explicit statements that were previously implied rather than being unaccounted for.

Paragraphs moved and re-headed

• The Opinion paragraph has been moved from the end of the report to now being the first paragraph of the report.
• Where applicable, going concern related wording currently found under the “Emphasis of Matter” header will instead be headed by “Material Uncertainty Related to Going Concern”.
• Management’s Responsibility for the Financial Statement is changed to Responsibilities of Management and Those Charged with Governance (TCWG) for the Financial Statements and includes new paragraphs as noted below.
• Auditor’s Responsibility is changed to Auditor’s Responsibilities for the Audit of the Financial Statements and includes new paragraphs as noted below.

Added required explicit statements in separate paragraphs

• The added Basis for Opinion paragraph discusses auditor independence and ethics.
• Other Information (OI) paragraphs are likely to be rare for non-listed entities, where mandatory for listed entities. In case non-listed entities publish financial or non-financial information which is considered OI under CAS 720, such a paragraph is required even for non-listed entities. This paragraph notes:
  • management’s responsibility for the OI;
  • that the auditor’s report does not cover the OI; and
  • that the auditor has not found material misstatement of this OI, or that the auditor will communicate with TCWG when the OI is available should it not be available at the report date.
• The information included in Responsibilities of Management and TCWG for the Financial Statements has been expanded to state management’s responsibility for going concern assessment and for the use of the going concern basis being appropriate, as well as to identify TCWG and their responsibility.
• Auditor’s Responsibilities for the Audit of the Financial Statements now includes bulleted paragraphs that contain similar content compared to before but have been expanded greatly to include detailed descriptions of audit related terms as well as inclusion of additional terms. Further, it contains new paragraphs with descriptions on:
  • management’s use of the going concern basis;
  • responsibilities in group audits; and
  • communications with TCWG.

Click on this link to view a sample report annotated with the changes.