Comment Letter to Auditing and Assurance Standards Board on Changes to the Audit Report

Feb 05, 2016
 
Introduction

In overseeing the financial reporting process, including the work of the external auditor, audit committees play a vital and integral role in the financial reporting of public companies. As the organization that represents the interests of those directors on Canada’s audit committees, the Institute of Corporate Directors (ICD) thanks the Auditing and Assurance Standards Board (AASB) for the opportunity to comment on the proposal to adopt as Canadian Auditing Standards (CASs), the recent changes to auditor reporting standards issued by the International Auditing and Assurance Standards Board (IAASB).

The ICD is a not-for-profit, member-based association with more than 10,000 members and eleven chapters across Canada. We are the pre-eminent organization in Canada for directors in the for-profit, not-for-profit and Crown Corporation sectors. 

The specific requests for comment regard only the timing and process of implementation in Canada of the IAASB changes. Given that this is the first opportunity many stakeholders will have had to comment on these changes, we have broadened our submission to offer our views on the merits of the proposal. These views are informed by feedback received from hundreds of directors, audit committee members and other interested capital markets stakeholders at cross-country consultations over the past four months. As well, we offer commentary on other avenues that the AASB and collaborators in this space may wish to explore to improve financial reporting.
 

The ICD Position

Background

In fulfillment of our mission to foster excellence in directors to strengthen the governance and performance of Canadian corporations and organizations, the ICD organized a series of cross-Canada town hall events in collaboration with the Chartered Professional Accountants of Canada (CPA Canada) and the Canadian Public Accountability Board (CPAB) to gain the perspective of our members on a number of emerging audit committee issues, including the IAASB’s changes to the auditor report proposed for implementation in Canada.

Between October 2015 and January 2016, we hosted seven events that educated our members on these changes and solicited their feedback and guidance. It is these insights from Canada’s corporate director community – including many audit committee members of listed companies - that largely inform our comments below.

Process

Following an introduction to and overview of the proposed changes, as well as a panel discussion with CPA Canada, CPAB, and a leading audit committee member from a major issuer, participants at our events were asked to work in groups of 8-10 to deliberate over the following questions:
  1. Has your impression been that changes are required to Auditor Reporting in Canada? Why?
  2. What are your reactions to the proposed changes? Are there opportunities or challenges that you would highlight?
  3. If Canada implements the proposed changes, how could it be done effectively?
One scribe per table was assigned to capture key takeaways from the conversations. We also asked participants to complete a multiple choice survey at the end of each event.
 
Based on the feedback we received at these events, as well as further dialogue with some of Canada’s leading audit committee members, the ICD questions the value of these proposed changes in the Canadian context. Further, we believe the concerns identified by the stakeholders we consulted outweigh the purported benefits.
 
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