Friday, February 10, 2012
[Opinion] Canadian Auditing Standards
1. Having not touched that "stuff" for many years, I have the occasion recently to review some of the current Canadian Auditing Standards (CASs).
I am very happy to find that there are many significant improvements in the current Canadian Auditing Standards compare to those I were used to as an accounting student.
I think the profession has learned some lessons from the Enron affair and the demise of Arthur Andersen, LLP.
2. It used to be that the main source of GAAS (Generally Accepted Auditing Standards) in Canada was the CICA Handbook.
"CICA" being the Canadian Institute of Chartered Accountants, the senior of the three main professional accountant associations in Canada.
(And needless to say, the acronym "GAAS" was the subject of a lot of funny jokes!)
But according to CICA's website:
"The Canadian Auditing and Assurance Standards Board (AASB) has adopted International Standards on Auditing (ISAs) as Canadian Auditing Standards (CASs) for the audits of financial statements. The CASs now constitute Canadian generally accepted auditing standards (GAAS) for financial statement audits.
The CASs came into effect for audits of financial statements for periods ending on or after December 14, 2010."
3. One thing I learned as an auditing student that has carried with me all these years is "professional skepticism".
CICA Handbook section 5090 requires the auditor to perform an audit with an attitude of professional skepticism.
I am happy that CAS 200 has the same requirement in paragraph 15.
There is a reason why accountants and auditors are not trusting people: the profession requires them to be skeptical!
4. It used to be that the Auditor's Report Date indicated the date on which the auditor has completed the most important auditing procedures in the field.
CICA Handbook section 5405 refers to "substantial completion of examination".
But what is "substantial completion of examination"?
There are a lot of rooms for interpretations.
The new CASs is a definite improvement:
"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."
I think the profession has learned a lesson from the Enron affair and the demise of Arthur Andersen, LLP.
5. I noticed many more improvements in the new CASs and I am happy for the profession for them.