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Frequently Asked Questions

For convenience, the frequently asked questions have been sorted into the following categories

  1. Tell me specifically about
  2. More Q&As for sole practitioners and small firms

  3. Questions on October 2010 changes to partner rotation

  4. Questions on March 2011 changes to independence communication
 

These FAQs have been prepared to assist members and firms in understanding and applying the updated independence standard. Members must read the updated standard to determine how it will apply to their own specific circumstances. In doing so, discussion with a professional colleague or a representative of the institute may be of assistance and is encouraged.

 
     

 


 

All Assurance Engagements

  1. Q: What are the key elements of the updated Independence Standard?

    The updated Independence Standard more clearly articulates the rules CAs already follow to ensure independence between themselves and the clients they serve. The standard expands upon the values of integrity and sound judgment that are already at the very foundation of our profession.

    In short, the new Standard:

    • Helps CAs identify potential threats to their independence and objectivity;
    • Outlines possible safeguards to protect CAs and the public against those threats to objectivity;
    • Prohibits the performance of assurance engagements in specified circumstances; and
    • Presents new requirements to document how you are preserving your professional independence.
       
  2. Q: What are these new documentation requirements?

    The new requirements ask you to:

    1. Consider independence at the inception and throughout each assurance engagement;
    2. Document whether any threats to independence exist;
    3. When a significant threat exists, document the safeguards identified to eliminate the threat, or reduce it to an acceptable level; and
    4. Document how those safeguards, in your professional judgment, will address the threat to your independence and objectivity.

    Under the new Independence Standard, CAs must document their client's circumstances and the scope of the service to be provided. Members will need to identify any threats to independence, and provide an explanation of safeguards applied to eliminate significant threats, or reduce it to an acceptable level.

    This documentation won't take long to prepare and templates are included in the Professional Engagement Manual to assist you.

  3. Q: Won't this new documentation requirement mean a lot of new paperwork?

    It will mean a small - but by no means onerous - amount of new paperwork. We believe that the lion's share of the work will be in the first year, as you set up your templates and systems for documenting threats and safeguards with your long-time and ongoing clients. You can then update this documentation, rather than creating it "from scratch" each year.

    Having said that, your independence documentation needs more than a "rubber stamp" each year. You will need to critically analyze your documentation and account for any changes in your or your client's circumstances that could threaten your independence, or the perception of your independence, in any engagement.

  4. Q: 'Threats' and 'safeguards' are new terms for CAs. What do mean by them?

    While words like 'threats' and 'safeguards' are new for CAs, the concepts upon which they are based are not. Threats to independence include:

    • Self-interest - when practitioners could benefit from a financial interest in a client;
    • Self-review - when practitioners audit their own work;
    • Advocacy - when practitioners promote a client's position or opinion;
    • Familiarity - when practitioners becomes too sympathetic to a client's interests; and,
    • Intimidation - when practitioners are deterred from acting objectively, by actual or perceived threats from a client.
       
  5. Q: What's a 'self-interest' threat?

    A self- interest threat is when a firm or a person on the engagement team could benefit from a financial interest in, or other self-interest conflict, with the client.

  6. Q: What's a 'self-review' threat?

    A self-review threat is when any product or judgment from a previous engagement needs to be evaluated to reach conclusions on the current engagement, or a similar circumstance in which a member - in effect - is reviewing his or her own work.

  7. Q: What's an 'advocacy' threat?

    An advocacy threat is when a member has actively promoted a client's position or opinion. Advocacy could pose a serious threat to the appearance of objectivity or independence.

  8. Q: What's a 'familiarity' threat?

    A familiarity threat is when, by virtue of a close or long-term relationship with a client, its directors, officers or employees, the firm or person on an engagement team may become too sympathetic to the client's interests.

  9. Q: What's an 'intimidation' threat?

    An intimidation threat is when a person on the engagement team may be deterred from acting objectively and exercising professional skepticism by threats - actual or perceived - from the directors, officers or employees of an assurance client.

  10. Q: What are appropriate safeguards you'd recommend CAs use to protect themselves against these threats?

    CAs will need to use their professional judgment in determining what the appropriate safeguard(s) for a given circumstance should be.

    Safeguards are factors in a member or firm's environment that serve to eliminate threats to independence or reduce them to an acceptable level, and fall into the following broad categories:

    • Those within the profession, legislation or regulation;
    • Those within the assurance client; and
    • Those within a CA firm's own systems and procedures.

    Safeguards within the profession, legislation and regulation operate in the background by discouraging a lack of independence by such measures as the Institute's disciplinary and practice review processes, professional advisory services, and participation by members of the public in the oversight and governance of the profession.

    The assurance client can help to eliminate or reduce threats to independence by emphasizing its internal commitment to fair financial reporting and establishing an audit committee to provide appropriate oversight and communications regarding the CA firm's services

    Safeguards within the CA firm itself fall into two broad subsets:

    • Firm wide safeguards, such as policies and procedures promoting a high degree of awareness and compliance with requirements for independence; and
    • Engagement specific safeguards, which include third party consultations, rotation of senior personnel, discussions with audit committees, etc.

    Additional examples of safeguards are set out in the council interpretations.

  11. Q: What are prohibitions in the updated Independence Standard?

    Rule 204.4 describes circumstances and activities, which members and firms must avoid when performing an assurance engagement because adequate safeguards do not exist that will, in the view of a reasonable observer, eliminate a threat or reduce it to an acceptable level. The requirements to avoid these circumstances and activities are referred to as "prohibitions".

    Prohibitions are not new per se. The council interpretation to the prior Rule 204.1 contains numerous examples of circumstances where a member was not permitted to perform an assurance engagement. The prohibitions are now listed in the Rules of Professional Conduct (Rule 204.4). Members will find further guidance and examples with respect to the prohibitions in the Council Interpretation that follows the rules.

    Some prohibitions will apply to all assurance clients while others will only apply to audits of public companies. Many of the prohibitions applicable to all assurance clients were addressed in the earlier council interpretation. The new prohibitions applicable to audits of listed entities were developed having regard to the current expectations of securities regulators and investor groups.

    Members and firms will need an in-depth understanding of all prohibitions, and are strongly urged to carefully review Rules 204.4(1) - (38) and the related Council interpretations for a complete list of prohibitions and guidance on their application.

  12. Q: Which prohibitions apply to ALL assurance engagement clients?

    In summary, there are prohibitions against:

    • Holding a financial interest (as defined) in an assurance client or a related entity;
    • Having a loan, or a loan guarantee, to or from an assurance client or a related entity (limited exception for bank clients);
    • Having a close business relationship with an assurance client, unless it is immaterial and insignificant to all involved;
    • Having an immediate family member of an engagement team member in a position within the client, where that person is able to influence the subject matter of the engagement;
    • Recent service by a member of the engagement team as an officer, director or employee of the client;
    • Performing management functions (as described) for the client;
    • Making journal entries or accounting classifications without client management approval;
    • Provision of legal services;
    • Providing specified corporate finance services;
    • Billing for services at a level that is significantly lower that market ("low ball") unless it can be demonstrated that all professional standards have been met in performing the service; and
    • Accepting a gift or hospitality that is other than clearly insignificant.

    Members and firms will need an in-depth understanding of all prohibitions, and are strongly urged to carefully review Rules 204.4(1) - (38) and the related Council interpretations for a complete list of prohibitions and guidance on their application.

  13. Q: What's the definition of a listed entity?

    A listed entity is defined as an entity that has either market capitalization or total assets over $10 million with respect to a particular fiscal year. Once an entity is considered to be a listed entity, it remains classified as such unless or until it ceases to have its shares or debt quoted, listed or marketed in connection with a recognized stock exchange or the entity has stayed under the threshold for a period of two years.

 


 

Public Companies

  1. Q: What are the prohibitions related only to Public Companies?

    Public companies are referred to in the standard as "listed entities". A listed entity is defined in the standard to be an entity whose shares or debt are quoted or listed on a recognized stock exchange, other than an entity that has market capitalization and book value of total assets that are both less than $10 million.

    An entity that meets the definition will be considered to be a listed entity until:

    • Its securities cease to be quoted or listed, or
    • Its market capitalization and total assets have fallen below the $10 million threshold for two years.

    The specific prohibitions are:

    1. A former member of the audit team may not take a senior financial position with the client until one year has passed.
       
    2. Audit partners must take leave of the audit team in accordance with the rotation requirements described in Rule 204.4 (20).
       
    3. The client audit committee must pre-approve all services provided by the firm to the client.
       
    4. Audit partners may not be directly compensated by the firm for selling non-assurance services to their audit clients.
       
    5. Members and firms may not provide:
      • Bookkeeping and accounting services;
      • Financial information systems design and implementation;
      • Actuarial services;
      • Valuation services; and
      • Internal audit services
    6. unless it is reasonable to conclude that the results of the services will not be subject to audit procedures.

    7. Members and firms may not provide the following services, even if not subject to audit:
      • Expert services including litigation support;
      • Legal services;
      • Management functions;
      • Human resources services; and
      • Corporate financial services.

    Members and firms will need an in-depth understanding of all prohibitions, and are strongly urged to carefully review Rules 204.4(1) - (38) and the related Council interpretations for a complete list of prohibitions and guidance on their application.

  2. Q: I worked on an audit engagement team for a public company client that is now offering me a job. Under the new independence standards, can I take the job?

    Nothing in the standard prevents a member from accepting employment, although there may be significant impacts on both the client and the audit firm in specified circumstances.

    If, within one year of the filing with a regulator of the financial statements where you were on the audit team, you accept a position with the client in a financial reporting oversight role, the audit firm may not perform an audit engagement for the client. Council Interpretation 105 discusses this further.

 


 

Smaller Clients, Including Review Engagements

  1. Q: I have many small clients who have difficulty with their bookkeeping and I am required to make many adjusting entries as part of my year-end review. Am I still able to do that?

    The preparation of journal entries creates a self-review threat because the practitioner will be in a position of reviewing his or her own work.

    However, if the journal entries are simple in nature - for example to record depreciation, accounts receivable, accounts payable and taxes - the self review threat would be clearly insignificant. None of these entries require the application of complex accounting standards. Consequently, no safeguards would be necessary.

    If the client had a transaction during the year for which the accounting was complex, involved significant judgment and the practitioner had not previously encountered this type of transaction, the self-review threat created would be significant. The practitioner would have to apply safeguards to eliminate the threat or reduce it to an acceptable level. One way to achieve this would be to consult with another professional accountant to confirm the accounting treatment proposed. If, based on the discussions with the other professional accountant, the practitioner is satisfied that the accounting treatment adopted is appropriate, the self-review threat will have been reduced to an acceptable level.

    The sole practicioner should always review the adjusting entries or the financial statements with the client and obtain the client's approval.

  2. Q: I'm a sole practitioner, and many of my clients are owner-managed enterprises who rely on me to help them record complicated accounting transactions, like foreign currencies and leases. Can I still do that?

    It is Council's view that providing technical assistance to clients is an appropriate method of promoting fair presentation of the financial statements. However, if the member is required to prepare a journal entry to record a material complex transaction, the client's lack of accounting knowledge may mean that simply reviewing the journal entry with the client is not sufficient to reduce the self-review threat to an acceptable level. Unless the sole practitioner consults with another CA, such as a member of another firm or an Institute practice advisor, on the accounting for the complex transaction, the member will not be able to perform the assurance engagement for this client. Members are urged to review Paragraphs 141 to 143 of the Council Interpretation for additional guidance.

  3. Q: I practice in Small Town, Canada, where I often socialize with my clients. Is this a familiarity threat to my independence, as you've defined it?

    There is no simple answer to this question as threats to independence are often about perception as well as actual impairment. Socializing with clients is usually not a problem unless the practitioner is seen together with the client so often that the rest of the community may view the member as becoming too close to the client and the relationship as no longer being on just a professional level.

 


 

Members Working in Industry

  1. Q: How does the Independence Standard affect those of us who are currently working in industry? I'm not sure it applies to us.

    There will not be a direct effect in members working in industry, as there is no requirement for independence for such members.

    The new standard may however have an indirect impact on industry members - particularly those working in public companies - where the company has in the past retained the audit firm for various consulting assignments. As well, it is not uncommon for a busy CFO or controller to have the audit firm draft the financial statements.

    For public companies, the prohibitions state that members and firms may not provide:

    • Bookkeeping and accounting services;
    • Financial information systems design and implementation;
    • Actuarial services;
    • Valuation services;
    • Internal audit services

    unless it is reasonable to conclude that the results of the services will not be subject to audit procedures.

    The above prohibitions do not apply to private companies; however, provision of those types of services to private company clients will often trigger a threat to independence. Such a threat may - or may not - -be able to be eliminated or reduced to an acceptable level through the application of safeguards.

    A second area of indirect impact is in the area of staff recruitment. Should your company wish to hire a member of the audit engagement team for a financial reporting oversight role within one year of the filing with securities regulators of the financial statements they audited, the public company prohibitions will prevent the audit firm from providing assurance services to your company.

    This will not however hamper the hiring of such persons for more junior roles within the company. Council interpretations 104 to 104 discuss this area in more detail.

 


 

More Q&As for sole practitioners and small firms

  1. Q: Why aren't review engagements exempted from this updated independence standard?

    Review engagements are subject to the current rules on objectivity and should continue to be so since CICA Handbook 8100.15 requires an objective state of mind as part of the standards for a review engagement. This is necessary since practitioners are providing negative assurance to the users of the financial information.

    Many of the all-client prohibitions being proposed were covered by the previous Rule 204.1 and the related council interpretations. The new all-client prohibitions are:

    • Providing legal services to an audit or review client;
    • Providing corporate finance and similar activities to an audit or review client; and
    • Not accepting gifts and hospitality from an assurance client unless they are clearly insignificant.
       
  2. Q: Most of us don't audit big public companies, why aren't there exemptions for the work we do for our smaller clients?

    Other than the all-client prohibitions - most of which are not new - practitioners are not restricted in their services to their small business, private company, or small audit clients, as long as they are mindful of the threats to their independence and the safeguards to reduce those threats to an acceptable level. The Institute has developed a short checklist to help members consider threats and document their conclusions.

  3. Q: Will the updated standard apply to all types of engagement?

    The updated standard will apply to all assurance engagements. They do not apply to compilation engagements. However, members and firms are reminded where you are not independent on a compilation engagement, you are required to disclose the nature and extent of any activity, interest, or relationship that impairs your objectivity. This requirement was in the previous Rule 204.3 and is not changed in the updated standard.

  4. Q: My small clients rely on me to enter their transactons into an accounting program (sometimes including the coding) and then prepare necessary journal entries. Can I still provide these services?

    Members can certainly continue to provide those types of services for their non-listed entity clients. The prohibition in Rule 204.3(23) applies only when the coding and journal entries are prepared without the approval of the client. This should not be problematic for practitioners since the required approval is easily obtained by thoroughly discussing the results of your work with your clients. We believe most practitioners are already doing that.

  5. Q: In the council interpretations, there is a lot of discussion about safeguards within firms and within client. But I have a small practice with very few staff and my clients are small businesspeople, how can I implement those safeguards?

    The discussions about safeguards within the council interpretations are meant to give members some examples of the safeguards possible to help you reduce threats. They can almost be viewed as a menu of possible choices. They may not all be available depending on the size of your practice and your clients' business.

    The nature of the threats members may encounter will often vary with the size and complexity of the client. Therefore, you are not being asked to implement any particular safeguard. You are being asked to identify and, where applicable, employ safeguards that fit your circumstances based on the size of your practice and nature of your clientele. Apply your professional judgement to implement the safeguards that will work for you and your clients-just make sure you document the process.

  6. Q: In the council interpretations, there is a lot of discussion about audit committees. But my clients are small private businesses, how can we discuss anything with audit committees when they don't exist?

    The discussions about meeting with the client's audit committee is just one of many examples of possible safeguards in reducing a threat. If your client doesn't have an audit committee, meet and discuss the issue with the board of directors or with management of the entity. Discussion with audit committees is not a mandated requirement. You can use your professional judgement to determine who should be consulted.

  7. Q: Is it true that I can't provide accounting and bookkeeping services to my review clients?

    This is not true. The prohibition on providing accounting and bookkeeping services is for listed entities. Members may provide accounting and bookkeeping services to non-listed entities if the self-review threat is reduced to an acceptable level. There is a full discussion in the council interpretations (CI/52, 141 and 142) as to what constitutes reasonable safeguards. Basically, you need a detailed discussion about the results of your work with the client and have them approve the results, which would effectively include the journal entries. This is probably what you do already and should not be an added burden.

  8. Q: As a sole practitioner, how can I manage the self-review threat to an acceptable level when I provide accounting and bookkeeping services to my small business clients?

    We recognise that practitioners with small clients have to manage the threat of providing bookkeeping services in a practical manner. CI/52 states that explaining the results and obtaining client approval is an appropriate way to reduce the threat to an acceptable level. This is simple to do since practitioners already do it now.

    Another safeguard is to ensure that only the client prepares source documents such as purchase orders, time cards, invoices (Rule 204.4(23)). This is quite easy since public practice CAs are normally not involved in creating these documents. It should be noted that trial balances and account reconciliations are not considered source documents, so it is not problematic to create these documents as a part of your service.

    Furthermore, it is suggested that members consider having another professional review complex transactions when they arise (CI/143). This is a prudent practice that many members already follow since it's in their clients' best interest, and their own reputation, to ensure they comply with current accounting standards. What is considered complex by one practitioner is not necessarily so considered by another practitioner. It all depends on your experience, so use your professional judgement.

  9. Q: Why are the same rules for big firms auditing big public companies being applied to the small firms reviewing private companies?

    The rules related specifically to audits of large public companies (market capitalization or total assets over $10m) do not apply to private companies or small public companies. Other than prohibitions with respect to financial interests and family relationships, the only prohibitions for reviews and audits of small listed companies are:

    • Not making management decisions or performing management functions;
    • Obtaining client approval for journal entries etc;
    • Not providing legal services;
    • Not providing corporate finance services such as promoting a client's shares;
    • Not providing a service for a low-ball fee without ensuring that all professional standards have been met; and
    • Not accepting gifts and hospitality, unless the value is insignificant.

    These prohibitions are reasonable and will not be unduly burdensome for small practitioners.

  10. Q: Shouldn't the updated independence rules contain much more details about the updated standard, as opposed to the extensive council interpretations? In the event of a legal challenge to a member's independence, wouldn't the Courts look to the rules, as opposed to the council interpretations?

    The Institute has used council interpretations for many years to provide guidance to members on the interpretation of the rules, including those related to the existing Rule 204.1 concerning the objectivity of members, as well as previous versions of these rules. The Courts have never questioned that practice, which is aimed at providing helpful assistance to members in understanding and complying with their professional responsibilities under the rules.

    It should also be noted that the Institute's rules and council interpretations are based on harmonized rules and interpretations that have been adopted by provincial institutes across Canada. In particular, the changes proposed for the Special General Meeting are part of a national strategy aimed at enhancing the expectations and standards of independence applicable to the chartered accounting profession.

 


 

Questions on October 2010 changes to partner rotation

The CA profession adopted the new “seven/five” partner rotation requirements within the independence rules in late 2010. Below are the answers to several frequently asked questions to provide clarification on the transition to the new requirements.

  1. Q: After five years as lead engagement partner for a reporting issuer client, I rotated-off for a year.  Can I resume the role of either lead engagement partner or engagement quality control reviewer under the new rules?

    Yes, while Rule 204 doesn’t specifically define “rotations on or off”, it clearly defines the length of time a member may serve in either the lead engagement partner or engagement quality control reviewer role as a total number of years, which is now seven.  This means if a member serves less than a total of seven years in either role, he or she may take a break and resume either role as long the cumulative total does not exceed seven. 
    In this case, you have already served five years so you may serve two more years for a total of seven.  At the end of the second additional year, you must rotate off and not resume either role of lead engagement partner or engagement quality control reviewer until a further five years have elapsed.

  2. Q: I have been the lead engagement partner on a public company client since 2004 and it became a reporting issuer in 2008.  Can I stay on to complete the audit for the 2010 fiscal year-end?

    Yes.  According to Council Interpretation paragraph 122, the length of time the lead engagement partner has served in that capacity should be considered in determining when the partner must be replaced at the time a client becomes a reporting issuer.  If the lead engagement partner has served in that capacity for five or more years, he or she may continue for two more fiscal years. 
    In this case, you haven’t served five or more years in the lead engagement partner role by 2008 so you count the number of years you have been in the lead engagement partner role.  Accordingly, 2004 is year one, 2005 year two, with 2010 as year seven and the last year you can serve as lead engagement partner. 
    A variation of this scenario is if the client became a reporting issuer in 2009.  At that time, you would have been the lead engagement partner for five or more years and you are permitted to continue for two more fiscal years.  You would count 2009 as year one and 2010 as year two.  The premise here is that the lead engagement partner or the engagement quality control reviewer would have at least seven years in total in either role and then not resume either role until a further five years have elapsed.

  3. Q: My reporting issuer client has a 31 March year-end and 2010 was year five for partner rotation.  Can I continue for two more years under the new rules adopted in late 2010?

    Yes.  Although the current independence rules became effective 1 January 2004 with a “five/five” rotation requirement for the lead engagement partner and the engagement quality control reviewer, the most recent changes to the independence rules in late 2010 are intended to be applied as if Rule 204.4 (20) Long association of senior personnel with a reporting issuer audit client and the related council interpretations always had a “seven/five” rotation period. 

    Accordingly, you may continue in the role of lead engagement partner for two more fiscal years.

 


 

Questions on March 2011 changes to independence communication

The new Canadian Auditing Standards (CASs) came into effect for audits of financial statements for periods ended on or after 14 December 2010.  The CA profession has been assessing how the introduction of the CASs affect references in the rules and council interpretations to current CICA Handbook standards, and also whether the CASs also affect the application of the rules. 

Council has approved amendments to the council interpretations to Rule 204 Independence to clarify requirements in respect of the annual communication of independence matters on all audit engagements.  Paragraphs 48 and 49 have been updated to reflect the changes to CASs with respect to annual communication of independence matters with audit committees (or similar oversight bodies). The requirements in the CASs prevail; that is, such annual communications are required for audits of listed entities only, and are not a requirement for other audits or assurance engagements, such as review engagements. However, annual independence communications are a still a safeguard, and practitioners should still review whether they are appropriate for other assurance engagements.

The following answers have been prepared to address some of the questions from members in respect of the implementation of the CASs and how they affect the interpretation of the rules.

  1. Q: When would communications about matters relating to independence be appropriate for audits of unlisted entities, review engagements, other assurance engagements, or engagements reporting the results of applying specified auditing procedures?

    Depending on the circumstances of the engagement, practitioners should consider communicating various matters in respect of independence to those charged with governance, such as when there has been a change in a relationship within the firm, or between the firm and the client, or when it would be appropriate in assisting those charged with governance fulfill their responsibilities for oversight of the financial reporting process.

    Ongoing communications might also be useful in the case of non-listed public interest entities that have a wide range of stakeholders, where management is less directly involved with those charged with governance.

  2. Q: If an auditor (other than an auditor of a listed entity) decides to communicate matters relating to independence, does this need to be in writing?

    There are no requirements for an auditor of unlisted entities to provide independence communications in writing or otherwise; however, if an auditor (other than an auditor of a listed entity client) choses to communicate independence matters, written documentation is the best evidence of these communications.

  3. Q: Are auditors of listed entities required to specifically state in their written communications when the auditor is not aware of any matters that, in the auditor’s professional judgment, might reasonably be brought to bear on independence?

    While there is a requirement for auditors of listed entities to communicate an assessment of their independence in writing (as described in more detail below), in situations where the auditor is not aware of any relationships that may be reasonably thought to bear on independence, there is no specific requirement to put that statement in writing.. Current practice is, however, to include a positive statement to this effect in the independence letter, for example, “I am not aware of any relationships between the Company and me that, in my professional judgment, may reasonably be thought to bear on my independence, that have occurred from [Date] to [Date].”

    Note that paragraph 17 ofCAS 260 Communication with Those Charged with Governance requires auditors of listed entities to communicate an assessment of their independence; more specifically, a statement “that the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence”. Per paragraph 20 of CAS 260, this communication shall be in writing.

    Also, communication is required to allow those charged with governance to make their own assessment of auditor independence. As outlined by paragraph 20, “this shall include total fees charged during the period covered by the financial statements for audit and non-audit services provided by the firm and network firms to the entity and components controlled by the entity. These fees shall be allocated to categories that are appropriate to assist those charged with governance in assessing the effect of services on the independence of the auditor.

  4. Q: Why is it necessary to send out a separate letter to the listed entity client when the auditor is not aware of any matters that might reasonably be thought to bear on independence that need to be communicated? Is this not sufficiently addressed by the new wording in the independent auditor’s report, which states “We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements…”?  

    CAS 260 Communication with Those Charged with Governance specifically requires the auditor of a listed entity to make “a statement that the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence”. The wording in the audit report does not cover this in sufficient detail, and also does not cover the requirement to communicate fees. As well, CAS 260 outlines the requirement for the auditor to communicate with those charged with governance (who might or might not be shareholders) on a timely basis; delaying this communication until the release of audit report would not be timely.

 

 

 

 

 

 

 

 

 

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