QUESTIONS & ANSWERS ON OTHER REPORTING MATTERS

Q&A 2(a) Comparative Information and Its Effect on the
Auditor’s Report

Q&A 2(a)(i) What is the difference between “comparative financial
statements” and “corresponding figures” under the CASs?
1. CAS 710, Comparative Information — Corresponding Figures and
Comparative Financial Statements, defines the terms “comparative
information”, “corresponding figures” and “comparative financial
statements” as follows:
(a) Comparative information — The amounts and disclosures
included in the financial statements in respect of one or more
prior periods in accordance with the applicable financial
reporting framework.
(b) Corresponding figures — Comparative information where
amounts and other disclosures for the prior period are included
as an integral part of the current period financial statements,
and are intended to be read only in relation to the amounts and
other disclosures relating to the current period (referred to as
"current period figures"). The level of detail presented in the
corresponding amounts and disclosures is dictated primarily by
its relevance to the current period figures.
(c) Comparative financial statements — Comparative information
where amounts and other disclosures for the prior period are
included for comparison with the financial statements of the
current period but, if audited, are referred to in the auditor's
opinion. The level of information included in those comparative
financial statements is comparable with that of the financial
statements of the current period.
2. Most financial reporting frameworks require that comparative
information be presented. However, a financial reporting framework
may not indicate whether the comparative information should
be in the form of corresponding figures or comparative financial
statements.
3. The following example illustrates the difference between
corresponding figures and comparative financial statements with
respect to property, plant and equipment presented in accordance
with Canadian accounting standards for private enterprises.
Property, Plant & Equipment, paragraph 3061.24 in Part II of the
CPA Canada Handbook – Accounting states that for each major
category of property, plant and equipment there should be
disclosure of the cost and accumulated amortization, including the
amount of any write-down.
(a) When the comparative information is corresponding figures,
the relevant information for the comparative period may only
include the net book value for each major category of property,
plant and equipment.
(b) When the comparative information is comparative financial
statements, the relevant information for the comparative
period would include all the information required by the prechangeover
accounting standards (for example, the cost and
accumulated depreciation including the amount of any writedowns,
as well as net book value for each major category of
property, plant and equipment).
4. There are two different audit reporting approaches in respect of
comparative information:
(a) For corresponding figures, the auditor's opinion on the financial
statements refers to the current period only.
(b) For comparative financial statements, the auditor's opinion
refers to each period for which financial statements are
presented.
5. Paragraph 2 of CAS 710 explains that the approach to be adopted
is often specified by law or regulation but may also be specified
in terms of engagement. In Canada, securities regulators have
specified that for reporting issuers the auditor’s opinion must
refer to each period for which financial statements are presented.
Therefore, the comparative information should be in the form of
comparative financial statements. For most other entities, the
auditor’s opinion on the financial statements refers to the current
period only and the comparative information provided is in the
form of corresponding figures, unless the auditor is otherwise
specifically engaged to report on each period for which financial
statements are presented.
6. Paragraphs 7-9 of CAS 710 require the auditor to perform the
same audit procedures for both approaches (for example,
to determine whether the financial statements include the
comparative information required by the applicable financial
reporting framework and whether such information is appropriately
classified.)
Q&A 2(a)(ii) What are the reporting implications when the
financial reporting framework is not prescriptive as to the required
comparative information?
7. A financial reporting framework may not be prescriptive as to
the required comparative information. For example, General
Standards of Financial Statement Presentation, paragraph 1400.12
in Part II of the CPA Canada Handbook – Accounting requires
financial statements to be prepared on a comparative basis,
unless comparative information is not meaningful or the standards
set out in Part II of the CPA Canada Handbook – Accounting
permit otherwise. Accordingly, in preparing financial statements
in accordance with the financial reporting framework, the entity
will use professional judgment in determining the comparative
information to include with respect to specific amounts or items in
the financial statements.
8. In the circumstance where the financial reporting framework is not
prescriptive as to the required comparative information, the auditor
needs to consider whether the nature and extent of comparative
information, even though it is in accordance with the financial
reporting framework, meet the respective definition of comparative
information in CAS 710 for the audit reporting approach adopted
in the terms of the engagement. For example, for the comparative
financial statements approach, the auditor would consider whether
the comparative information that the entity includes in the
financial statements would be comparable with that of the financial
statements of the current period.
9. Accordingly, where the financial reporting framework is not
prescriptive as to the required comparative information, it is
possible that the financial statements of two identical entities,
prepared in accordance with the same financial reporting
frameworks, could include different comparative information
depending on the audit reporting approach adopted.
Q&A 2(a)(iii) How does the auditor report on comparative financial
statements prepared in accordance with a financial reporting
framework that permits certain information to be included for the
current period only and does not require it to be included in the
comparative information?
10. In some circumstances, an applicable financial reporting framework
may permit an entity not to provide comparative information.
For example, paragraph 84 of IAS 37 Provisions, Contingent
Liabilities and Contingent Assets states that an entity is not
required to include comparative information relating to disclosures
that paragraph requires for each class of provision. Further,
paragraph 40C of IAS 1 Presentation of Financial Statements states
that: “When an entity is required to present an additional statement
of financial position in accordance with paragraph 40A of IAS 1,
it must disclose the information required by paragraphs 41‑44
of IAS 1 and IAS 8 [Accounting Policies, Changes in Accounting
Estimates and Errors]. However, it need not present the related
notes to the opening statement of financial position as at the
beginning of the preceding period.”
11. The definition of comparative financial statements in
paragraph 6(c) of CAS 710 is premised on the definition of
“comparative information” in paragraph 6(a), which states that
comparative information is “the amounts and disclosures included
in the financial statements in respect of one or more periods in
accordance with the applicable financial reporting framework.”
Accordingly, if financial statements are prepared in accordance
with an applicable financial reporting framework and do not
contain comparative information because of permissions in the
financial reporting framework to omit that information, the auditor
may nevertheless be able to report on all periods presented
without modification to the opinion.
Q&A 2(a)(iv) What are the reporting implications when reporting on
financial statements prepared in accordance with a financial reporting
framework that permits or requires the adoption of the financial
reporting framework or a change in accounting policy to be applied
prospectively?
12. In some circumstances, an applicable financial reporting
framework may permit or require adoption of the financial
reporting framework or a change an accounting policy to be
applied prospectively. For example, when an entity that is not
transitioning from another basis of GAAP adopts Canadian public
sector accounting standards for the first time, Accounting Changes,
paragraph PS 2120.13 in the CPA Canada Public Sector Accounting
Handbook permits the new accounting standards to be applied
retroactively or prospectively. Similarly, the transition requirement
in, Financial Instruments, paragraph PS 3450.099 in the CPA
Canada Public Sector Accounting Handbook requires prospective
application of the measurement provisions of Section PS 3450.
When an entity applies a requirement prospectively in preparing
its financial statements, comparative information is not adjusted to
achieve comparability with the current period.
13. Paragraph 6 of CAS 706, Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s Report, requires
that, if the auditor considers it necessary to draw users’ attention to
a matter presented or disclosed in the financial statements that, in
the auditor’s judgment, is of such importance that it is fundamental
to users’ understanding of the financial statements, the auditor
shall include an Emphasis of Matter paragraph in the auditor’s
report provided the auditor has obtained sufficient appropriate
audit evidence that the matter is not materially misstated in the
financial statements. Paragraph A2 of CAS 706 indicates that a
widespread use of Emphasis of Matter paragraphs diminishes the
effectiveness of the auditor’s communication of such matters. It is a
matter of professional judgment whether an auditor would include
an Emphasis of Matter paragraph in the auditor’s report to draw
users’ attention to a lack of comparability between the current
period’s figures and the comparative information arising from
prospective application of requirements of a financial reporting
framework. In certain cases, a lack of comparability arising from
prospective application of a requirement will not be fundamental
to users’ understanding of the financial statements. However, in
other cases, for example when the lack of comparability has a
pervasive or material effect on the financial statements, the auditor
may consider it necessary to draw users’ attention to it.

Q&A 2(b) Alerting Readers that the Financial Statements
Are Prepared in Accordance with a Special Purpose
Framework

How should the auditor’s report alert readers that the financial
statements are prepared in accordance with a special purpose
framework?
Background
1. CAS 800, Special Considerations — Audits of Financial Statements
Prepared in Accordance with Special Purpose Frameworks,
deals with special considerations in the application of CASs in
the 100-700 series to an audit of financial statements prepared
in accordance with a special purpose framework. A special
purpose framework is a financial reporting framework designed
to meet the financial information needs of specific users. Special
purpose financial statements are financial statements prepared in
accordance with a special purpose framework.
2. Paragraph A14 of CAS 800 indicates that special purpose financial
statements may be used for purposes other than those for which
they are intended. To avoid misunderstandings, paragraph 14 of
CAS 800 requires the auditor to alert users of the auditor’s report
that the financial statements are prepared in accordance with a
special purpose framework and, therefore, may not be suitable for
another purpose. This alert is included in an Emphasis of Matter
paragraph under an appropriate heading.
3. Paragraph A15 of CAS 800 indicates that, in addition to the alert
required by paragraph 14 of CAS 800, the auditor may consider it
appropriate to indicate that the auditor’s report is intended solely
for the specific users. This may be achieved by restricting the
distribution or use of the auditor’s report.
4. Therefore, there are four possible types of paragraph that the
auditor may use to alert readers under CAS 800. The following are
examples of the different types of possible wording (underlining
has been used to identify differences in the wording ):
(a) When the auditor does not consider it necessary to restrict
either distribution or use:
Basis of Accounting
Without modifying our opinion, we draw attention to Note
X to the financial statements, which describes the basis
of accounting. The financial statements are prepared to
assist ABC Company to comply with the financial reporting
provisions of the contract between ABC Company and DEF
Company. As a result, the financial statements may not be
suitable for another purpose.
(b) When the auditor considers it necessary to restrict use:
Basis of Accounting and Restriction on Use
Without modifying our opinion, we draw attention to Note X
to the financial statements, which describes the basis of
accounting. The financial statements are prepared to assist
ABC Company to comply with the financial reporting
provisions of the contract between ABC Company and DEF
Company. As a result, the financial statements may not be
suitable for another purpose. Our report is intended solely for
ABC Company and DEF Company and should not be used by
parties other than ABC Company or DEF Company.
(c) When the auditor considers it necessary to restrict distribution:
Basis of Accounting and Restriction on Distribution
Without modifying our opinion, we draw attention to Note X
to the financial statements, which describes the basis of
accounting. The financial statements are prepared to assist
ABC Company to comply with the financial reporting provisions
of the contract between ABC Company and DEF Company.
As a result, the financial statements may not be suitable
for another purpose. Our report is intended solely for ABC
Company and DEF Company and should not be distributed to
parties other than ABC Company or DEF Company.
(d) When the auditor considers it appropriate to restrict both
distribution and use:
Basis of Accounting and Restriction on Distribution and Use
Without modifying our opinion, we draw attention to Note X
to the financial statements, which describes the basis of
accounting. The financial statements are prepared to assist
ABC Company to comply with the financial reporting
provisions of the contract between ABC Company and DEF
Company. As a result, the financial statements may not be
suitable for another purpose. Our report is intended solely
for ABC Company and DEF Company, and should not be
distributed to or used by parties other than ABC Company or
DEF Company.
5. The Illustrative Reports on special purpose financial statements in
this Guide include an Emphasis of Matter paragraph that restricts
the use of the auditor’s report (example (b) above).

Q&A 2(c) The Form of Auditor’s Report on Financial
Statements Prepared in Accordance with Different
General Purpose Frameworks

What is the form and content of the auditor’s report on financial
statements that are prepared using a different general purpose
financial reporting framework?
Background
1. This Q&A addresses the form of the auditor’s report with respect
to the following circumstances where financial statements are
prepared in accordance with a general purpose financial reporting
framework:
(a) financial statements prepared in accordance with a general
purpose financial reporting framework other than a financial
reporting framework in the CPA Canada Handbook –
Accounting or the CPA Canada Public Sector Accounting
Handbook;
(b) financial statements prepared in accordance with a financial
reporting framework in the CPA Canada Handbook –
Accounting that is not designed for that type of entity;
(c) financial statements for a specific purpose prepared in
accordance with a general purpose financial reporting
framework;
(d) consolidated and non-consolidated financial statements
prepared in accordance with a financial reporting framework
that permits both such statements to be prepared for general
purposes;
(e) two sets of financial statements prepared in accordance with
different accounting policy choices within the same financial
reporting framework (including consolidated and nonconsolidated
financial statements prepared in accordance with
a financial reporting framework that does not expressly permit
both such statements to be prepared for general purposes).
2. In the discussion of each circumstance in this Q&A, it has
been assumed that the auditor has determined the applied
financial reporting framework to be acceptable in accordance
with paragraph 6(a) of CAS 210, Agreeing the Terms of Audit
Engagements, unless otherwise indicated.
3. Reference is also made in this Q&A to the following paragraphs
in CAS 706, Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report:
(a) paragraph A8, which indicates that the auditor may include an
Other Matter paragraph in the auditor’s report, referring to the
fact that another set of financial statements has been prepared
by the same entity in accordance with another general purpose
financial reporting framework and that the auditor has issued a
report on those financial statements; and
(b) paragraph A9, which indicates that in circumstances where
financial statements are prepared for a specific purpose
using a general purpose framework, since the auditor’s report
is intended for specific users, the auditor may consider it
necessary in the circumstances to include an Other Matter
paragraph stating that the auditor’s report is intended solely
for the intended users, and should not be distributed to or used
by other parties. Therefore, the auditor may add such an Other
Matter paragraph to the auditor’s report. Financial statements
prepared for a specific purpose are distinguished from special
purpose financial statements that, as defined in paragraph
6(a) of CAS 800, Special Considerations — Audits of Financial
Statements Prepared in Accordance with Special Purpose
Frameworks, are financial statements prepared in accordance
with a special purpose framework.
4. In the circumstances where the entity prepares special purpose
financial statements, and management has a choice of financial
reporting frameworks in the preparation of such financial
statements, paragraph 13(b) of CAS 800, requires that the
explanation in the auditor’s report of management’s responsibility
for the financial statements also make reference to its responsibility
for determining that the applicable financial reporting framework is
acceptable in the circumstances.
5. In the circumstances where the auditor is requested to report
on financial statements prepared in accordance with a financial
reporting framework other than the framework required by the
entity’s incorporating or other governing legislation, the auditor
may discuss the matter with management and, where appropriate,
those charged with governance, as required by paragraph 19 of
CAS 250, Consideration of Laws and Regulations in an Audit of
Financial Statements. For example, the auditor may indicate that:
(a) the financial statements do not comply with and will not satisfy
the entity’s incorporating or other governing legislation;
(b) those charged with governance should consider the financial
and other implications of such non-compliance and may wish
to obtain legal advice; and
(c) the auditor accepts no responsibility for any implications of
potential non-compliance with the incorporating or other
governing legislation.
Reporting on financial statements prepared in accordance with a
general purpose financial reporting framework other than a financial
reporting framework in the CPA Canada Handbook – Accounting
or the CPA Canada Public Sector Accounting Handbook
6. In Canada, the accounting standards promulgated by the
Accounting Standards Board and the Public Sector Accounting
Board are generally accepted and often are prescribed in
incorporating or other governing legislation as the applicable
financial reporting framework. They are considered to be general
purpose financial reporting frameworks for the type of entity for
which the framework was designed.
7. A financial reporting framework other than the financial reporting
frameworks in the CPA Canada Handbook – Accounting or the CPA
Canada Public Sector Accounting Handbook may be acceptable
in certain circumstances, however. Examples where a financial
reporting framework other than the financial reporting frameworks
in the CPA Canada Handbook – Accounting or the CPA Canada
Public Sector Accounting Handbook may be acceptable for
general purpose financial statements would be when legislation or
regulation permits an entity to report in accordance with US GAAP.
In these circumstances, the form of the auditor’s report would be in
accordance with CAS 700, Forming an Opinion and Reporting on
Financial Statements.
8. It is possible that such an entity may prepare two sets of financial
statements for general purposes, one prepared in accordance with
a financial reporting framework in the CPA Canada Handbook
– Accounting or the CPA Canada Public Sector Accounting
Handbook and one set prepared in accordance with a different
financial reporting framework. In this case, the auditor may
consider adding the Other Matter paragraph referencing the other
set of financial statements prepared by the same entity, referred to
in paragraph 3(a) of this Q&A.
9. In determining whether the applicable financial reporting
framework is acceptable for the engagement under CAS 210,
Agreeing the Terms of Audit Engagements, the auditor may
determine that the financial statements are prepared for a specific
purpose. In addition, the auditor may consider adding an Other
Matter paragraph to the auditor’s report stating that the auditor’s
report is intended solely for the intended users, and should not be
distributed to or used by other parties, as discussed in paragraph
3(b) of this Q&A.
Reporting on financial statements prepared in accordance with
a financial reporting framework in the CPA Canada Handbook
– Accounting that is not designed for that type of entity
10. As discussed in paragraph 6 of this Q&A, the accounting standards
promulgated by the Accounting Standards Board and the Public
Sector Accounting Board are considered to be general purpose
financial reporting frameworks for the type of entity for which
the framework was designed. The Preface to the CPA Canada
Handbook – Accounting provides guidance on determining which
financial reporting framework applies to a reporting entity. All
types of entities may apply International Financial Reporting
Standards. However, the financial reporting frameworks in Parts
II to IV of the CPA Canada Handbook – Accounting may only be
applied by entities that meet the definitions of entities for which
these financial reporting frameworks have been designed.
11. In some circumstances, an entity may request an auditor to report
on financial statements prepared in accordance with a financial
reporting framework that is not designed for that type of entity.
For example, a publicly accountable enterprise may prepare
financial statements in accordance with Canadian accounting
standards for private enterprises. In determining whether the
applicable financial reporting framework is acceptable for the
engagement under CAS 210, the auditor would identify the purpose
of the financial statements, the intended users and the steps
taken by management to determine that the applicable financial
reporting framework is acceptable. If the financial statements
prepared in accordance with such a framework are intended as the
entity’s general purpose financial statements, the auditor would
not accept an engagement to report on such financial statements
because such a financial reporting framework is not an acceptable
framework for general purpose financial statements for that type
of entity. However, if such financial statements are prepared for a
specific purpose (for example, to meet the needs of a particular
stakeholder), such a financial reporting framework may be an
acceptable special purpose framework. In this case, the auditor
would report in accordance with CAS 800.
Reporting on financial statements prepared for a specific
purpose in accordance with a general purpose financial
reporting framework designed for that type of entity
12. An entity may prepare financial statements for a specific
purpose in accordance with a general purpose financial reporting
framework designed for that type of entity. For example, a private
enterprise may prepare non-consolidated financial statements
in accordance with Canadian accounting standards for private
enterprises (as permitted by Subsidiaries, paragraph 1590.15 in
Part II of the CPA Canada Handbook – Accounting) to meet the
expressed needs of a bank and the income tax authorities.
13. CAS 800 defines a special purpose framework as a financial
reporting framework designed to meet the financial information
needs of specific users. Special purpose financial statements are
financial statements prepared in accordance with a special purpose
framework. When financial statements are prepared for a specific
purpose in accordance with a general purpose framework, the
financial statements do not meet the definition of special purpose
financial statements in CAS 800.
14. Although the financial statements are prepared for a specific
purpose, the auditor would report on such financial statements in
accordance with CAS 700 as the financial reporting framework is a
general purpose framework. The auditor may consider adding the
Other Matter paragraph stating that the auditor’s report is intended
solely for the intended users, and should not be distributed to or
used by other parties referred to in paragraph 3(b) of this Q&A.
15. See Illustrative Report 3(e) in this Guide for an example of an
auditor’s report on financial statements prepared for a specific
purpose in accordance with a general purpose financial reporting
framework.
Reporting on consolidated and non-consolidated financial statements in
accordance with a general purpose financial reporting framework that
permits both such statements to be prepared for general purposes
16. Some general purpose financial reporting frameworks permit
an entity to prepare both consolidated financial statements and
non-consolidated financial statements for general purposes
and indicate that they have been prepared in accordance with
the financial reporting framework. See, for example, IAS 27
Consolidated and Separate Financial Statements in Part I of the
CPA Canada Handbook – Accounting
17. In this circumstance, the auditor would report on each set of
financial statements in accordance with CAS 700. The financial
statements would be labelled in the auditor’s report in the same
manner in which they are required to be labelled by the financial
reporting framework. Where the financial reporting framework
does not contain specific labelling requirements, the auditor would
generally describe the financial statements as being “consolidated”
financial statements and “non-consolidated” financial statements
(or a similar term), respectively.
18. The auditor may consider adding the Other Matter paragraph
referencing the other set of financial statements prepared by
the same entity referred to in paragraph 3(a) of this Q&A to
the auditor’s report on each set of financial statements, if this
is practicable. The following is example wording of an Other
Matter paragraph that may be included in the auditor’s report on
consolidated (separate) financial statements when an entity also
prepares separate (consolidated) financial statements under IAS 27
Consolidated and Separate Financial Statements:
Other Matter
ABC Company has prepared a non-consolidated (consolidated)
set of financial statements for the year ended December 31, 2011
in accordance with International Financial Reporting Standards on
which we issued an auditor’s report to the shareholders of ABC
Company dated March 31, 2012.
Reporting on two sets of financial statements prepared
in accordance with different accounting policy choices
within the same financial reporting framework (including
consolidated and non-consolidated financial statements)
19. General purpose financial reporting frameworks generally
contemplate an entity preparing only one set of general purpose
financial statements in accordance with that financial reporting
framework. Therefore, an entity would select only one set of
accounting policies in any particular period for purposes of
preparing such general purpose financial statements.
20. In some circumstances, an entity may prepare additional sets of
financial statements using alternative accounting policies that are
also in accordance with a particular financial reporting framework.
For example, the entity may prepare:
(a) one set of financial statements making an accounting policy
choice to prepare financial statements on a consolidated basis
as permitted by Subsidiaries, paragraph 1590.15(a) in Part II
of the CPA Canada Handbook – Accounting; and one set of
financial statements making an accounting policy choice to
prepare financial statements on a non-consolidated basis as
permitted by paragraph 1590.15(b); or
(b) one set of financial statements making an accounting policy
choice to account for income taxes using the taxes payable
method, as permitted by Income Taxes, paragraph 3465.03(a)
in Part II of the CPA Canada Handbook – Accounting; and
another set of financial statements making an accounting
policy choice to account for income taxes using the future
income taxes method, as permitted by paragraph 3465.03(b).
21. In accepting an engagement to report on two sets of financial
statements prepared in accordance with different accounting
policy choices within the same financial reporting framework, the
auditor would request the entity to designate one set of financial
statements as being its general purpose financial statements for
a broad range of users and the other set as being for a specific
purpose. Generally, the general purpose set of financial statements
would be the set of financial statements that provides the most
reliable and relevant information about the effects of transactions,
other events or conditions on the entity’s financial position,
financial performance or cash flows. The auditor would report
on these financial statements in accordance with CAS 700. The
auditor would report on additional sets of financial statements
prepared in accordance with the same financial reporting
framework in accordance with paragraphs 12-15 of this Q&A on
the basis that the financial statements are prepared for a specific
purpose in accordance with a general purpose framework. The
auditor may consider adding either or both of the Other Matter
paragraphs referred to in paragraphs 3 of this Q&A.

Q&A 2(d) Fair Presentation versus Compliance Financial
Reporting Frameworks

Q&A 2(d)(i) How does the auditor determine whether a financial
reporting framework is a fair presentation or a compliance
framework?
Background
1. Paragraph 13(a) of CAS 200, Overall Objectives of the Independent
Auditor and the Conduct of an Audit in Accordance with Canadian
Auditing Standards, defines a fair presentation framework as a
financial reporting framework that requires compliance with the
requirements of the framework and:
(a) acknowledges explicitly or implicitly that, to achieve fair
presentation of the financial statements, it may be necessary
for management to provide disclosures beyond those
specifically required by the framework; or
(b) acknowledges explicitly that it may be necessary for
management to depart from a requirement of the framework
to achieve fair presentation of the financial statements. Such
departures are expected to be necessary only in extremely rare
circumstances.6
2. Paragraph 13(a) of CAS 200 indicates that a compliance framework
is a financial reporting framework that requires compliance with
the requirements of the framework, but does not contain the
acknowledgments in paragraph 1(a) or (b) of this Q&A.
3. While the definition of a fair presentation framework in CAS 200
may appear straightforward, in certain circumstances, the auditor
may have to use professional judgment in deciding when a financial
reporting framework should be considered a fair presentation
framework.
4. The distinction between a fair presentation framework and a
compliance framework is important, for example:
(a) Paragraph 14 of CAS 700, Forming an Opinion and Reporting
on Financial Statements, states that when financial statements
are prepared in accordance with a fair presentation framework,
the evaluation required in paragraphs 12-13 of CAS 700 shall
also include whether the financial statements achieve fair
presentation. The auditor’s evaluation as to whether the
financial statements achieve fair presentation shall include
consideration of:
(i) the overall presentation, structure and content of the
financial statements; and
(ii) whether the financial statements, including the related
notes, represent the underlying transactions and events in
a manner that achieves fair presentation.
(b) Paragraph 19 of CAS 700 states that when the financial
statements are prepared in accordance with a compliance
framework, the auditor is not required to evaluate whether the
financial statements achieve fair presentation.
(c) Paragraph 27 of CAS 700 states that where the financial
statements are prepared in accordance with a fair presentation
framework, the explanation of management’s responsibility
for the financial statements in the auditor’s report shall refer
to “the preparation and fair presentation of these financial
statements” or “the preparation of financial statements that
give a true and fair view,” as appropriate in the circumstances.
(d) Paragraph 32 of CAS 700 states that where the financial
statements are prepared in accordance with a fair presentation
framework, the description of the audit in the auditor’s report
shall refer to “the entity’s preparation and fair presentation
of the financial statements” or “the entity’s preparation
of financial statements that give a true and fair view”, as
appropriate in the circumstances.
(e) Paragraph 35 of CAS 700 states that when expressing an
unmodified opinion on financial statements prepared in
accordance with a fair presentation framework, the auditor’s
opinion shall, unless otherwise required by law or regulation,
use one of the following phrases, which are regarded as being
equivalent:
(i) the financial statements present fairly, in all material
respects, … in accordance with [the applicable financial
reporting framework]; or
(ii) the financial statements give a true and fair view of …
in accordance with [the applicable financial reporting
framework].
(f) Paragraph 36 of CAS 700 states that when expressing an
unmodified opinion on financial statements prepared in
accordance with a compliance framework, the auditor’s opinion
shall be that the financial statements are prepared, in all
material respects, in accordance with [the applicable financial
reporting framework].
Other CASs may also identify different consequences for the
auditor and the auditor’s report depending on whether the
financial reporting framework is a fair presentation framework or a
compliance framework.
Factors to consider in deciding whether a financial reporting
framework is a fair presentation or compliance framework
5. Financial reporting frameworks that encompass the financial
reporting standards established by an organization that is
authorized or recognized to promulgate standards to be used by
entities for preparing general purpose financial statements are
often designed to achieve fair presentation. Financial reporting
frameworks designed to achieve fair presentation include those
set out in the CPA Canada Handbook – Accounting and the CPA
Canada Public Sector Accounting Handbook.
6. When, for example, a financial reporting framework:
(a) is not established by such an organization; or
(b) is based on a fair presentation framework established by such
an organization, but does not comply with all the requirements
of that framework;
the framework is not necessarily a fair presentation framework.
7. It is a necessary feature of a fair presentation framework that it
include one of the acknowledgments referred to in paragraph
1 of this Q&A. When a financial reporting framework is based
on a financial reporting framework discussed in paragraph 5 of
this Q&A, unless these acknowledgements have been expressly
removed, modified or otherwise overridden, it can usually be
presumed that it contains one of these acknowledgments. In
Canada, such acknowledgements can be found in the CPA Canada
Handbook – Accounting as follows:
(a) IAS 1 Presentation of Financial Statements, paragraphs 15, 17(c)
and 19-24 in Part I;
(b) General Standards of Financial Statement Presentation,
paragraphs 1400.03-.06 in Part II;
(c) General Standards of Financial Statement Presentation,
paragraphs 1401.03-.06 in Part III;
(d) Pension Plans, Section 4600 of Part IV requires entities
that apply this Part to comply with the general financial
statement presentation requirements in either Part I or Part
II so the acknowledgements for Part IV are the respective
acknowledgements found in Part I or Part II depending on
which Part the entity chooses to follow; and
(e) General Standards of Financial Statement Presentation,
paragraphs 1400.03-.07 in Part V.
For entities that apply Canadian public sector accounting
standards, the acknowledgements can be found in Financial
Statement Presentation, paragraphs PS 1200.012-.014 in the CPA
Canada Public Sector Accounting Handbook.
When a financial reporting framework is not based on a
financial reporting framework discussed in paragraph 5 of this
Q&A it is much less likely that such a framework contains such
acknowledgments.
8. However, the CASs recognize that even when a framework
does contain the acknowledgments referred to in paragraph
1 of this Q&A, this is not necessarily sufficient for the financial
reporting framework to be a fair presentation framework. For
example, paragraph 19 of CAS 210, Agreeing the Terms of Audit
Engagements, states that when the auditor has determined that
a financial reporting framework prescribed by law or regulation
would be unacceptable but for the fact that it is prescribed by
law or regulation, the auditor shall accept the audit engagement
only if certain conditions are present, including that the auditor’s
opinion on the financial statements not include the phrase
“present fairly, in all material respects,” (i.e., the auditor reports
as if the financial reporting framework is a compliance framework
even if the framework contained one of the acknowledgments
referred to in paragraph 1 of this Q&A). Similarly, paragraph A3 of
CAS 800, Special Considerations — Audits of Financial Statements
Prepared in Accordance with Special Purpose Frameworks, states
that a special purpose framework may not be a fair presentation
framework even if the financial reporting framework on which it is
based is a fair presentation framework. This is because the special
purpose framework may not comply with all the requirements of
the financial reporting framework established by the authorized or
recognized standard-setting organization or by law or regulation
that are necessary to achieve fair presentation of the financial
statements.
9. Accordingly, when a financial reporting framework complies with
the definition of a fair presentation framework in CAS 200 but
differs from the financial reporting standards that would normally
be used for that type of entity, the auditor would consider the
nature and extent of differences between the framework and
those financial reporting standards and the circumstances of
the engagement. The following are examples of the auditor’s
considerations in this respect:
(a) If the financial statements are prepared to meet the specific
information needs of a regulator and the regulator has
specified the financial reporting framework for presenting
the financial position and results of operations of the entity,
the auditor may be more likely to conclude that the financial
reporting framework is a fair presentation framework rather
than a compliance framework.
(b) If the financial statements are not designed to present the
financial position, results of operations and cash flows of an
incorporated entity. For example, if the financial statements are
designed to present the financial position, results of operations
and cash flows of an acquired business that is part of an
incorporated entity, and the differences between the financial
reporting framework and the financial reporting standards
that would normally be used for general purpose financial
statements for an incorporated entity appear to be designed to
achieve fair presentation of the acquired business, the auditor
may be more likely to conclude that the financial reporting
framework is a fair presentation framework rather than a
compliance framework.
(c) If the financial statements are intended to meet the common
information needs of a broad range of users and the differences
between the financial reporting framework and the financial
reporting standards that would normally be used for general
purpose financial statements for that type of entity appear to
be pervasive, the auditor may be more likely to conclude that
the financial reporting framework is a compliance framework
rather than a fair presentation framework.
(d) If the nature of the financial statements is to present the
results of calculations prescribed by a regulator for monitoring
compliance with regulatory rules, such as a regulatory capital
report where there is limited scope for judgment (rather than
present the financial position and performance of the entity),
the auditor may be more likely to conclude that the financial
reporting framework is a compliance framework than a fair
presentation framework.

Q&A 2(e) Emphasis of Matter and Other Matter
Paragraphs in the Auditor’s Report

When must the auditor include an Emphasis of Matter or Other Matter
paragraph in the auditor’s report and what are the considerations in
deciding whether to include such a paragraph?
Background
1. Paragraph 5 of CAS 706, Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s Report, defines
Emphasis of Matter and Other Matter paragraphs as follows:
(a) Emphasis of Matter paragraph — A paragraph included in the
auditor’s report that refers to a matter appropriately presented
or disclosed in the financial statements that, in the auditor’s
judgment, is of such importance that it is fundamental to users’
understanding of the financial statements.
(b) Other Matter paragraph — A paragraph included in the
auditor’s report that refers to a matter other than those
presented or disclosed in the financial statements that, in the
auditor’s judgment, is relevant to users’ understanding of the
audit, the auditor’s responsibilities or the auditor’s report.
Emphasis of Matter paragraphs
2. To include more information in an Emphasis of Matter paragraph
than is presented or disclosed in the financial statements may
imply that the matter has not been appropriately presented or
disclosed. Accordingly, paragraph 6 of CAS 706 limits the use of an
Emphasis of Matter paragraph to matters presented or disclosed in
the financial statements.
3. Appendix 1 of CAS 706 identifies other CASs that require the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report in certain circumstances. These CASs are as follows:
(a) CAS 210, Agreeing the Terms of Audit Engagements —
paragraph 19(b);
(b) CAS 560, Subsequent Events — paragraphs 12(b) and 16;
(c) CAS 570, Going Concern — paragraph 19; and
(d) CAS 800, Special Considerations — Audits of Financial
Statements Prepared in Accordance with Special Purpose
Frameworks — paragraph 14.
4. Outside of the specific requirements to include an Emphasis of
Matter paragraph in the auditor’s report referred to in paragraph 3
of this Q&A, the use of such a paragraph is a matter of the auditor’s
professional judgment. Paragraph 6 of CAS 706 requires the
auditor to include an Emphasis of Matter paragraph in the auditor’s
report if the auditor considers it necessary to draw users’ attention
to a matter presented or disclosed in the financial statements
that, in the auditor’s judgment, is of such importance that it is
fundamental to users’ understanding of the financial statements.
5. Paragraph A1 of CAS 706 provides the following examples of
circumstances where the auditor may consider it necessary to
include an Emphasis of Matter paragraph:
(a) an uncertainty relating to the future outcome of exceptional
litigation or regulatory action;
(b) early application (where permitted) of a new accounting
standard (for example, a new International Financial Reporting
Standard) that has a pervasive effect on the financial
statements in advance of its effective date; and
(c) a major catastrophe that has had, or continues to have, a
significant effect on the entity’s financial position.
6. Furthermore, the CASs also include application and explanatory
material referring to the use of an Emphasis of Matter paragraph,
for example:
(a) CAS 540, Auditing Accounting Estimates, Including Fair Value
Accounting Estimates, and Related Disclosures — paragraph
A114;
(b) CAS 570, Going Concern — paragraphs A22 and A26;
(c) CAS 700, Forming an Opinion and Reporting on Financial
Statements — paragraph A33(b);
(d) CAS 710, Comparative Information — Corresponding Figures
and Comparative Financial Statements — paragraphs A6 and
A8; and
(e) CAS 805, Special Considerations — Audits of Single Financial
Statements and Special Elements, Accounts or Items of a
Financial Statement — paragraph 14.
7. Paragraph A2 of CAS 706 indicates that a widespread use of
Emphasis of Matter paragraphs diminishes the effectiveness of the
auditor’s communication of such matters.
8. Before including such a paragraph, the auditor is required to
obtain sufficient appropriate audit evidence that the matter is
not materially misstated in the financial statements. Further,
paragraph A3 of CAS 706 indicates that such a paragraph is not a
substitute for either:
(a) the auditor expressing a qualified opinion or an adverse
opinion, or disclaiming an opinion, when required by the
circumstances of a specific audit engagement; or
(b) disclosures in the financial statements that the applicable
financial reporting framework requires management to make.
9. Paragraph 8(c) of CAS 230, Audit Documentation, requires the
auditor to prepare audit documentation that is sufficient to enable
an experienced auditor, having no previous connection with the
audit, to understand significant matters arising during the audit.
Paragraph A8 of CAS 230 indicates that findings that could result
in the inclusion of an Emphasis of Matter paragraph in the auditor’s
report are examples of such significant matters.
10. Paragraph 7 of CAS 706 requires that when the auditor includes an
Emphasis of Matter paragraph in the auditor’s report the auditor
shall:
(a) include it immediately after the Opinion paragraph in the
auditor’s report;
(b) use the heading “Emphasis of Matter,” or other appropriate
heading;
(c) include in the paragraph a clear reference to the matter being
emphasized and, where relevant, to disclosures that fully
describe the matter can be found in the financial statements;
and
(d) indicate that the auditor’s opinion is not modified in respect of
the matter emphasized.
Other Matter paragraphs
11. Appendix 2 of CAS 706 identifies other CASs that require the
auditor to include an Other Matter paragraph in the auditor’s report
in certain circumstances. These CASs are as follows:
(a) CAS 560, Subsequent Events — paragraphs 12(b) and 16;
(b) CAS 710, Comparative Information — Corresponding Figures
and Comparative Financial Statements — paragraphs 13-14, 16-
17 and 19; and
(c) CAS 720, The Auditor’s Responsibilities Relating to Other
Information in Documents Containing Audited Financial
Statements — paragraph 10(a).
12. Outside of the specific requirements to include an Other Matter
paragraph in the auditor’s report referred to in paragraph 11 of
this Q&A, the use of such a paragraph is a matter of the auditor’s
professional judgment. Paragraph 8 of CAS 706 requires that, if the
auditor considers it necessary to communicate a matter other than
those that are presented or disclosed in the financial statements
that, in the auditor’s judgment, is relevant to users’ understanding
of the audit, the auditor’s responsibilities or the auditor’s report
and this is not prohibited by law or regulation, the auditor include
an Other Matter paragraph in the auditor’s report.
13. CAS 706 includes the following examples of circumstances in
which an Other Matter paragraph may be necessary:
(a) The possible effect of an inability to obtain sufficient
appropriate audit evidence due to a limitation on the scope of
the audit imposed by management is pervasive, but the auditor
is unable to withdraw from an engagement.
(b) Law or regulation may require or permit the auditor to
elaborate on matters that provide further explanation of the
auditor’s responsibilities in the audit of the financial statements
or of the auditor’s report.
(c) Where an entity prepares financial statements for a specific
purpose in accordance with a general purpose framework as
discussed in Q&A 2(c) of this Guide.
(d) Where an entity prepares more than one set of financial
statements as discussed in Q&A 2(c) of this Guide.
14. Furthermore, the CPA Canada Handbook – Assurance also includes
application and explanatory material referring to the use of an
Other Matter paragraph, for example:
(a) CAS 250, Consideration of Laws and Regulations in an Audit of
Financial Statements — paragraph A18;
(b) CAS 705, Modifications to the Opinion in the Independent
Auditor’s Report — paragraph A14;
(c) CAS 710, Comparative Information — Corresponding Figures
and Comparative Financial Statements — paragraph A11;
(d) CAS 805, Special Considerations — Audits of Single Financial
Statements and Special Elements, Accounts or Items of a
Financial Statement — paragraph A17;
(e) Section 5925, An Audit of Internal Control Over Financial
Reporting that Is Integrated with an Audit of Financial
Statements — paragraph 5925.A83; and
(f) Canadian Standard on Assurance Engagements (CSAE) 3416,
Reporting on Controls at a Service Organization —
paragraph A71.
15. Paragraph 8 of CAS 706 requires that when the auditor includes
an Other Matter paragraph in the auditor’s report, the auditor shall
include this paragraph, with the heading “Other Matter,” or other
appropriate heading, immediately after the Opinion paragraph and
any Emphasis of Matter paragraph, or elsewhere in the auditor’s
report if the content of the Other Matter paragraph is relevant to
the Other Reporting Responsibilities section.
16. Paragraph A7 of CAS 706 indicates that an Other Matter
paragraph does not deal with circumstances where the auditor
has other reporting responsibilities that are in addition to the
auditor’s responsibility under the CASs to report on the financial
statements, or where the auditor has been asked to perform
and report on additional specified procedures, or to express an
opinion on specific matters. Paragraphs 38 and 39 of CAS 700
contain requirements for other reporting responsibilities. See
for example, Assurance and Related Services Guideline AuG-48,
Legislative Requirements to Report on the Consistent Application
of Accounting Principles in the Applicable Financial Reporting
Framework.

Q&A 2(f) Dating of the Practitioner’s Report

Q&A 2(f)(i) On what date must the auditor date the auditor’s report?
1. The requirements in the CASs are different than the requirements
that apply for audits of financial statement for periods prior to
December 14, 2010. These latter requirements indicate that the
date of substantial completion of examination should be used as
the date of the auditor’s report (see Date of the Auditor’s Report,
paragraph 5405.06) and that the engagement quality control
review (EQCR) should be completed before the issuance of the
practitioner’s report (see Quality Control Procedures for Assurance
Engagements, paragraph 5030.43(c)).
2. Rather, paragraph 41 of CAS 700, Forming an Opinion and
Reporting on Financial Statements, 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 auditor’s opinion on the financial statements, including
evidence that:
(a) all the statements that comprise the financial statements,
including the related notes, have been prepared; and
(b) those with the recognized authority have asserted that they
have taken responsibility for those financial statements.
3. Even when the auditor has obtained audit evidence concerning (a)
and (b) in paragraph 2 of this Q&A, the auditor may still not be able
to date the auditor’s report because the auditor has not obtained
sufficient appropriate audit evidence from audit procedures to
support the content of his or her report based on the completed
financial statements. For example, the auditor may still need to
obtain audit evidence with respect to the application of the entity’s
accounting policies in accordance with the applicable financial
reporting framework and the adequacy of disclosures in the
financial statements.
4. Paragraph 19 of CAS 220, Quality Control for an Audit of Financial
Statements, requires that, for audits of listed entities, and those
other audit engagements, if any, for which the firm has determined
that an EQCR is required, the engagement partner shall not date
the auditor’s report until completion of the EQCR.
5. Paragraph 17 of CAS 220 requires that, on or before the date of the
auditor’s report, the engagement partner, through a review of the
audit documentation and discussion with the engagement team,
be satisfied that sufficient appropriate audit evidence has been
obtained to support the conclusions reached and for the auditor’s
report to be issued.
Q&A 2(f)(ii) When have all the statements that comprise the financial
statements, including the related notes, been prepared?
6. Paragraph 4 of CAS 200, Overall Objectives of the Independent
Auditor and the Conduct of an Audit in Accordance with Canadian
Auditing Standards, states that an audit is conducted on the
premise that management and, where appropriate, those charged
with governance have acknowledged certain responsibilities
that are fundamental to the conduct of the audit. One of these
responsibilities is the preparation of the financial statements in
accordance with the applicable financial reporting framework.
There may be instances when the entity has not completed the
financial statements and some adjustment or disclosure that could
be material to the financial statements is still to be made. This
may include, for example, the finalization of the entity’s income
tax provision or the updating of the financial statements for
subsequent events that require adjustment or disclosure. In such a
case, the financial statements would be complete when the income
tax provision is reflected in the financial statements or, in the case
of subsequent events that require adjustment to or disclosure in
the financial statements, when such events have been recognized
or disclosed in the financial statements.
7. If the entity is still in the process of completing the financial
statements (for example, the finalization of the entity’s bonus
accruals and income tax provision), the related audit procedures on
the financial statement items or notes that remain to be completed
will not yet have been performed by the auditor. The auditor’s
report must not be dated before the auditor has obtained sufficient
appropriate audit evidence from audit procedures to support
the content of his or her report based on the completed financial
statements.
8. As explained in paragraph A23 of CAS 210, Agreeing the Terms of
Audit Engagements, the terms of the audit engagement include the
agreement of management to inform the auditor of facts that may
affect the financial statements, of which management may become
aware during the period from the date of the auditor’s report to the
date the financial statements are issued. Paragraph 9 of CAS 560,
Subsequent Events, requires the auditor to request management
and, where appropriate, those charged with governance to provide
a written representation in accordance with CAS 580, Written
Representations, that all events occurring subsequent to the date
of the financial statements and for which the applicable financial
reporting framework requires adjustment or disclosure have been
adjusted or disclosed. Paragraph 14 of CAS 580 requires that
the date of the written representations be as near as practicable
to, but not after, the date of the auditor’s report on the financial
statements. In the circumstances where the date of the auditor’s
report is significantly later than the date on which those with
the recognized authority took responsibility for the financial
statements, the auditor will remind management of its agreement
under the terms of the engagement and its responsibility to
provide written representations with respect to subsequent events
up to the date of the auditor’s report.
Q&A 2(f)(iii) In Canada, who are “those with the recognized
authority”?
9. Paragraph A40 of CAS 700 indicates that in some jurisdictions,
law or regulation identifies the individuals or bodies (for example,
management or those charged with governance) that are
responsible for concluding that all the statements that comprise
the financial statements, including the related notes, have been
prepared, and discusses the approval process.
10. In Canada, most incorporating or other governing legislation
recognizes the board of directors as having the power to approve
the financial statements.7 Further, such legislation may also prohibit
the board of directors from delegating this power to a managing
director or a committee of directors.8 Accordingly, under such
legislation, it is the board of directors that has the recognized
authority to assert it has taken responsibility for the financial
statements. The auditor would determine those who have the
recognized authority by reference to the relevant legislation.
11. Some legislation may require that the financial statements be
approved by the shareholders or other equivalent body. In this
case, paragraph A41 of CAS 700 indicates that final approval by
shareholders is not necessary for the auditor to conclude that
sufficient appropriate audit evidence on which to base the auditor’s
opinion on the financial statements has been obtained. The date of
approval of the financial statements for purposes of the CASs is the
earlier date on which all the statements that comprise the financial
statements, including the related notes, have been prepared and
those with the recognized authority have asserted that they have
taken responsibility for those financial statements.
12. In some cases, the board may approve the financial statements
conditional on final changes being approved by a sub-committee
of the board. In this case, the auditor’s report would be dated
at the later date when the sub-committee approves the final
financial statements, unless such final changes are only to correct
typographical errors or make other minor changes that would not
involve the auditor having to obtain further audit evidence.
13. For entities whose legislation does not prescribe the approval
process for the financial statements, paragraph A40 of CAS 700
indicates that the entity follows its own procedures in preparing
and finalizing its financial statements in view of its management
and governance structures. In this circumstance, the auditor
would discuss with those charged with governance who have
the recognized authority to take responsibility for the financial
statements.
Q&A 2(f)(iv) How does the auditor date the auditor’s report when
a fact becomes known to the auditor after the date of the auditor’s
report and before the date the financial statements are issued?
14. Paragraph 11 of CAS 560 states that if management amends the
financial statements as a result of a subsequent event that became
known after the date of the auditor’s report, the auditor must carry
out audit procedures necessary with respect to the amendment
and, unless the circumstances in paragraph 12 apply, provide a new
auditor’s report. Paragraph 12 of CAS 560 states that where law,
regulation or the financial reporting framework does not prohibit
management from restricting the amendment of the financial
statements to the effects of the subsequent event or events
causing that amendment and those responsible for approving
the financial statements are not prohibited from restricting their
approval to that amendment, the auditor shall either:
(a) amend the auditor’s report to include an additional date
restricted to that amendment that thereby indicates that the
auditor’s procedures on subsequent events are restricted solely
to the amendment of the financial statements described in the
relevant note to the financial statements; or
(b) provide a new or amended auditor’s report that includes a
statement in an Emphasis of Matter paragraph or Other Matter
paragraph that conveys that the auditor’s procedures on
subsequent events are restricted solely to the amendment of
the financial statements as described in the relevant note to the
financial statements.
15. The auditor would consider law, regulation or the financial
reporting framework in deciding whether there is such a
prohibition. In Canada, Parts II to V of the CPA Canada Handbook
– Accounting and Canadian public sector accounting standards,
for example, do not prohibit management from restricting the
amendment of the financial statements to the effects of the
subsequent event or events causing that amendment or those
responsible for approving the financial statements from restricting
their approval to that amendment. When it is not clear whether
such a prohibition exists, the auditor would consider current
practice. With respect to IFRSs in Part I of the CPA Canada
Handbook – Accounting, research by CPA Canada accounting
standards staff indicates that practice globally is not consistent.
In most jurisdictions, when management amends the financial
statements for a subsequent event it will search for and update
the financial statements for any other subsequent events to the
date of the amending subsequent event and those responsible
for approving the financial statements update their approval
to this date. However, in other jurisdictions, while that is the
normal practice, there are exceptions in rare circumstances,
where management will restrict the amendment to the financial
statements to the effect of the subsequent event and those
responsible for approving the financial statements restrict their
approval to that amendment.
16. The auditor has three methods available for dating the auditor’s
report when the financial statements are amended after the
original date of the auditor’s report:
(a) Issue a new report in accordance with paragraph 11 of CAS 560
(new report date). Where the auditor issues a new auditor’s
report in accordance with paragraph 11 of CAS 560, the
auditor’s responsibility for events subsequent to the original
report date extends to the new date of the auditor’s report.
(b) Issue an amended report in accordance with paragraph 12(a) of
CAS 560 (dual-dated report).
(c) Issue a new or amended report, with a new report date, with an
Emphasis of Matter paragraph in accordance with paragraph
12(b) of CAS 560 (new report date with Emphasis of Matter
limiting responsibility).
For methods (b) and (c), the auditor’s responsibility for events
occurring subsequent to the original report date is limited to
the specific event described in the relevant note to the financial
statements.
17. The following is an example of an Emphasis of Matter paragraph
when there is a new report date with an Emphasis of Matter
paragraph as discussed in paragraph 15 of this Q&A:
Subsequent Event
Without modifying our opinion, we draw attention to Note X to the
financial statements which describes the subsequent event that
gave rise to the amendment of the financial statements on March
15, 2011, the date of our auditor’s report. Our procedures with
respect to events subsequent to February 28, 2011 are restricted
solely to that amendment to the financial statements.
Q&A 2(f)(v) When does the public accountant date the review
engagement report on financial statements?
18. General Review Standards, paragraph 8100.30, indicates that the
date of substantial completion of the review would be used as the
date of the review engagement report. However, the guidance on
the concept of “substantial completion” is minimal. Assurance and
Related Services Guideline AuG-47, Dating the Review Engagement
Report on Financial Statements, provides guidance on applying the
concept in a review engagement to report on financial statements.
Its intent is to adopt similar concepts for dating the report as in
CAS 700.
19. AuG-47 explains that the public accountant would not date his or
her report before he or she has:
(a) obtained, through inquiry and discussion management’s verbal
representations, in advance of obtaining management’s written
representations, in respect to:
(i) management’s acknowledgment of its responsibility for the
fair presentation of the financial statements; and
(ii) management’s belief that the financial statements are
complete and presented fairly; and
(b) performed sufficient procedures to support the content of his
or her report.

Q&A 2(g) Including the Additional Wording Required by
Paragraph 13(b) of CAS 800

When does the auditor’s report include the additional wording
required by paragraph 13(b) of CAS 800?
1. Paragraph 13(b) of CAS 800, Special Considerations — Audits
of Financial Statements Prepared in Accordance with Special
Purpose Frameworks, requires that if management has a choice of
financial reporting frameworks in the preparation of such financial
statements, the explanation of management's responsibility for
the financial statements in the auditor’s report shall also make
reference to management’s responsibility for determining that
the applicable financial reporting framework is acceptable in the
circumstances. Therefore, this additional reference is only made
in the auditor’s report when the financial reporting framework is a
special purpose framework.
2. The additional reference is not made when the financial reporting
framework is a general purpose framework. As discussed in
Q&A 2(c) in this Guide, when financial statements are prepared
for a specific purpose in accordance with a general purpose
framework, the auditor would report on such financial statements
in accordance with CAS 700, Forming an Opinion and Reporting
on Financial Statements. For example, if a contract requires that
financial statements be prepared in accordance with “Canadian
generally accepted accounting principles”, management has a
choice of financial reporting frameworks because Canadian GAAP
includes different financial reporting frameworks in Parts I to V
of the CPA Canada Handbook – Accounting and the CPA Canada
Public Sector Accounting Handbook. In such a case, the financial
reporting framework applied by management in preparing the
financial statements is a general purpose framework and the
auditor reports in accordance with CAS 700, unless the financial
reporting framework is not designed for that type of entity when,
as discussed in Q&A 2(c) in this Guide, the auditor may conclude
that the financial reporting framework is a special purpose
framework and that the auditor can report in accordance with CAS
800.
3. The following examples may be useful in explaining when
the auditor’s report is amended to meet the requirement in
paragraph 13(b) of CAS 800:
(a) A creditor may request cash flow information but not
specify how the cash flow information must be prepared. In
satisfying the creditor’s request for information, management
may, for example, prepare the cash flow information using
the cash receipts and disbursements basis of accounting.
In this circumstance, management has had to choose a
financial reporting framework that it believes will result in the
preparation of financial information that meets the needs of the
intended user.
(b) The financial reporting provisions of a contract may require
financial statements prepared in accordance with a financial
reporting framework established by a recognized standardsetting
organization or by law or regulation, but not comply
with all the requirements of that framework (for example,
“Canadian generally accepted accounting principles except
that no amortization will be recognized on property, plant
and equipment”). Because, as stated above, Canadian
GAAP includes different financial reporting frameworks, the
reference to Canadian GAAP is not specific enough to enable
management to choose its accounting policies. Management
chooses the financial reporting framework in Canadian GAAP
that is designed for that type of entity and is acceptable in
the circumstances and uses that framework as the basis for
preparing financial statements that comply with the prescribed
financial reporting framework (for example, Canadian
accounting standards for private enterprises prepared without
amortization of property, plant and equipment). For some
entities, the CPA Canada Handbook – Accounting provides
a choice of financial reporting frameworks. For example,
a private enterprise applies either Canadian accounting
standards for private enterprises in Part II or the International
Financial Reporting Standards in Part I of the CPA Canada
Handbook – Accounting. In this case, the auditor amends the
auditor’s report to comply with paragraph 13(b) of CAS 800.
Accordingly, even though the financial reporting framework
may be described as, for example, “the financial reporting
provisions in the contract”, management has a choice of
financial reporting frameworks to apply in complying with
those reporting provisions. For pension plans, CPA Canada
Handbook – Accounting requires the entity to apply Part IV,
Canadian accounting standards for pension plans. Because
a pension plan does not have a choice of financial reporting
frameworks, the auditor’s report does not need to be amended.
4. When the explanation of management’s responsibility for the
financial statements in the auditor’s report includes the additional
reference required by paragraph 13(b) of CAS 800, the explanation
(shown in underlining) might be worded as follows:
Management is responsible for the preparation [and fair
presentation] of the financial statements in accordance with
[the applicable financial reporting framework]; this includes
determining that the applicable financial reporting framework
is acceptable for the preparation of the financial statements in
the circumstances, and for such internal control as management
determines is necessary to enable the preparation of the
financial statements that are free from material misstatement,
whether due to fraud or error.
5. Illustrative Reports 3(f) and 6(b) provide examples of an auditor’s
report containing the additional reference in the explanation of
management’s responsibility for financial statements, and for a
schedule of items of a financial statement, respectively.

Q&A 2(h) Reporting on Summary Financial Statements

Q&A 2 (h)(i) What are summary financial statements?
1. Paragraph 4(c) of CAS 810, Engagements to Report on Summary
Financial Statements, defines summary financial statements as
“historical financial information that is derived from financial
statements but that contains less detail than the financial
statements, while still providing a structured representation
consistent with that provided by the financial statements of the
entity’s economic resources or obligations at a point in time or the
changes therein for a period of time.”
2. An entity may be required to present its financial statements in
accordance with an applicable financial reporting framework in a
form prescribed, for example, by a regulator. While not conflicting
with the presentation and disclosure requirements of the applicable
financial reporting framework, the form may require more detailed
information to be presented than is necessary to comply with such
a framework. The entity may decide also to prepare and present
financial statements for other users in a less detailed format than
the prescribed form while still complying with the requirements of
the applicable financial reporting framework. These less-detailed
financial statements are not summary financial statements, they are
financial statements presented in a different format in compliance
with the same applicable financial reporting framework. The
auditor would report on such financial statements in accordance
with CAS 700, Forming an Opinion and Reporting on Financial
Statements, and CAS 800, Special Considerations — Audits of
Financial Statements Prepared in Accordance with Special Purpose
Frameworks, if applicable.
3. If the less-detailed financial statements are prepared for a specific
purpose in accordance with a general purpose financial reporting
framework, the auditor would report on such financial statements
in accordance with CAS 700 and may consider adding the Other
Matter paragraph referred to in paragraph 3(b) of Q&A 2(c) in this
Guide, stating that the auditor’s report is intended solely for the
intended users, and should not be distributed to or used by other
parties.
Q&A 2(h)(ii) When may it not be appropriate to accept an
engagement to report on summary financial statements?
4. Before accepting an engagement to report on summary financial
statements, paragraph 6(a) of CAS 810 requires the auditor to
determine whether the applied criteria are acceptable. Paragraph
A3 of CAS 810 indicates that the preparation of summary financial
statements requires management to determine the information
that needs to be reflected in the summary financial statements so
that they are consistent, in all material respects, with or represent
a fair summary of the audited financial statements. Because
summary financial statements by their nature contain aggregated
information and limited disclosure, there is an increased risk
that they may not contain the information necessary so as not
to be misleading in the circumstances. This risk increases when
established criteria for the preparation of summary financial
statements do not exist.
5. In Canada, there are currently no generally recognized criteria
for preparing summary financial statements. As a result, when
summary financial statements are required to be prepared, often
either:
(a) management has to develop the criteria to apply; or
(b) management has to make significant interpretations when
applying established criteria (for example, in legislation or
regulation) because the criteria are not specific enough for
management to determine what information to include in the
summary financial statements.
In these circumstances, the risk that summary financial statements
may be misleading may be higher, and determining the
acceptability of the applied criteria will be more challenging.
Q&A 2(h)(iii) What are acceptable criteria for the preparation of
summary financial statements?
6. Paragraph A5 of CAS 810 states that criteria established by an
authorized or recognized standards setting organization or by law
or regulation may be presumed to be acceptable, similar to the
case of financial statements, as discussed in CAS 210, Agreeing the
Terms of Audit Engagements.
7. Paragraph A6 of CAS 810 states that where established criteria
for the preparation of summary financial statements do not exist,
criteria may be developed by management, for example, based on
practice in a particular industry. Criteria that are acceptable in the
circumstances will result in summary financial statements that :
(a) adequately disclose their summarized nature and identify the
audited financial statements;
(b) clearly describe from whom or where the audited financial
statements are available or, if law or regulation provides that
the audited financial statements need not be made available
to the intended users of the summary financial statements and
establishes the criteria for the preparation of the summary
financial statements, that law or regulation;
(c) adequately disclose the applied criteria;
(d) agree with or can be recalculated from the related information
in the audited financial statements; and
(e) in view of the purpose of the summary financial statements,
contain the information necessary, and are at an appropriate
level of aggregation, so as not to be misleading in the
circumstances.
8. Management is responsible for determining the nature and
extent of information that needs to be reflected in the summary
financial statements. Management will use professional judgment
in developing criteria that are acceptable. In evaluating the
acceptability of management’s criteria in relation to paragraph
A6 of CAS 810, the auditor may consider whether the summary
financial statements include:
(a) a summary financial statement for each of the financial
statements in the complete set of financial statements;
(b) the major subtotals and totals from the complete financial
statements;
(c) information necessary to achieve fair summarization of the
complete set of financial statements;
(d) a description of from whom or where the audited financial
statements are available;
(e) a description of the criteria applied in the preparation of the
summary financial statements; and
(f) information from notes to the complete financial statements
dealing with matters having a pervasive or otherwise
significant effect on the summary financial statements, such as
contingencies and subsequent events.
9. Paragraph 8(c) of CAS 810 requires the auditor to evaluate
whether the summary financial statements adequately disclose
the applied criteria. Normally, management would disclose the
basis of preparation of the summary financial statements in a note
to the summary financial statements. When the criteria are set
out in law or regulation, the auditor would consider whether the
summary financial statements adequately describe any significant
interpretations management may have made in applying the
criteria in the preparation of the summary financial statements.
For example, criteria prescribed in regulation for preparation of
summary financial statements may only set out certain minimum
contents for the summary financial statements and management
may have provided more detail in the summary financial
statements than required by the regulation, for which it has made
significant interpretations.
Q&A 2(h)(iv) Can the auditor report on summary financial statements
derived from special purpose financial statements?
10. CAS 810 applies to audits of summary financial statements derived
from financial statements audited in accordance with the CASs
by that same auditor. As the CASs apply to audits of financial
statements prepared in accordance with both general purpose and
special purpose frameworks, CAS 810 applies to audits of summary
financial statements derived from either general purpose or special
purpose financial statements.
11. Paragraph 14 of CAS 800 requires the auditor’s report on financial
statements prepared in accordance with a special purpose
framework to include an Emphasis of Matter paragraph alerting
users of the auditor’s report that the financial statements are
prepared in accordance with a special purpose framework and that,
as a result, the financial statements may not be suitable for another
purpose.
12. Paragraph 17 of CAS 810 requires that when the auditor’s report
on the audited financial statements contains a qualified opinion,
an Emphasis of Matter paragraph, or an Other Matter paragraph,
but the auditor is satisfied that the summary financial statements
are consistent, in all material respects, with or are a fair summary
of the audited financial statements, in accordance with the applied
criteria, the auditor’s report on the summary financial statements
shall:
(a) state that the auditor’s report on the audited financial
statements contains a qualified opinion, an Emphasis of Matter
paragraph, or an Other Matter paragraph; and
(b) describe:
(i) the basis for the qualified opinion on the audited financial
statements, and that qualified opinion,; or the Emphasis
of Matter or the Other Matter paragraph in the auditor’s
report on the audited financial statements; and
(ii) the effect thereof on the summary financial statements, if
any.
13. Paragraph 20 of CAS 810 also requires that when distribution or
use of the auditor’s report on the audited financial statements
is restricted, or the auditor’s report on the audited financial
statements alerts readers that the audited financial statements
are prepared in accordance with a special purpose framework, the
auditor shall include a similar restriction or alert in the auditor’s
report on the summary financial statements.
14. When preparing the auditor’s report on summary financial
statements derived from special purpose financial statements, the
auditor’s report would include a paragraph(s) after the opinion
paragraph that complies with paragraphs 17 and 20 of CAS 810.
The following is an example of a paragraph that meets these
requirements, assuming that the auditor’s report on the audited
financial statements included a paragraph after the opinion
paragraph alerting readers to the basis of accounting:
Basis of Accounting
Our auditor’s report dated [date] on the audited financial
statements included a Basis of Accounting paragraph, drawing
attention to the note to the financial statements that describes the
basis of accounting. The audited financial statements are prepared
to assist ABC Company to meet the requirements of Regulator
DEF. As a result, the audited financial statements may not be
suitable for another purpose. Because the summary financial
statements are derived from the audited financial statements, the
summary financial statements also may not be suitable for another
purpose.
Q&A 2(h)(v) Do the audited financial statements have to be available
to the intended users of the summary financial statements?
15. Paragraph 6(b)(ii) of CAS 810 requires that, before accepting
an engagement to report on summary financial statements, the
auditor obtain the agreement of management that it acknowledges
and understands its responsibility to make the audited financial
statements available to the intended users of the summary financial
statements without undue difficulty (or, if law or regulation
provides that the audited financial statements need not be made
available to the intended users of the summary financial statements
and establishes the criteria for the preparation of the summary
financial statements, to describe that law or regulation in the
summary financial statements).
16. Paragraph A8 of CAS 810 provides factors that may affect the
auditor’s evaluation of whether the audited financial statements are
available to the intended users of the summary financial statements
without undue difficulty. These factors are whether:
(a) the summary financial statements describe clearly from whom
or where the audited financial statements are available;
(b) the audited financial statements are on public record; or
(c) management has established a process by which the intended
users of the summary financial statements can obtain ready
access to the audited financial statements.
17. Paragraph 8(b) of CAS 810 requires the auditor, when summary
financial statements are not accompanied by the audited financial
statements, to evaluate whether the summary financial statements
describe clearly:
(a) from whom or where the audited financial statements are
available; or
(b) the law or regulation that specifies that the audited financial
statements need not be made available to the intended
users of the summary financial statements and establishes
the criteria for the preparation of the summary financial
statements.
18. Accordingly, audited financial statements have to be available to
intended users of the summary financial statements unless law or
regulation:
(a) specifies that audited financial statements need not be
available;, and
(b) establishes criteria for preparation of the summary financial
statements.

Q&A 2(i) Supplementary Information Presented with the
Financial Statements

When supplementary information is presented with the financial
statements, how does this affect the auditor’s report?
Background
1. In some circumstances, an entity may be required by law,
regulation or standards, or may voluntarily choose, to present
information, together with the audited financial statements, that
is not required by the applicable financial reporting framework.
Such information is described in CAS 700, Forming an Opinion
and Reporting on Financial Statements, as “supplementary
information.”
2. Supplementary information may be presented to enhance a user’s
understanding of the applicable financial reporting framework
or to provide further explanation of specific financial statement
items. Normally, supplementary information is presented in either
supplementary schedules or as additional notes. - For example,
the information could be presented in supplementary schedules
disaggregating certain financial statement line items (such as a
schedule describing the components of selling and administrative
expenses) or in additional notes explaining the extent to which
the financial statements comply with another financial reporting
framework (such as a reconciliation to US GAAP).
3. This Q&A provides guidance to assist auditors when applying the
requirements in paragraphs 46 and 47 of CAS 700 with respect
to supplementary information. (See the Appendix to this Q&A for
a decision tree that assists in understanding the implications of
supplementary information on the auditor’s report.)
4. This Q&A does not address the circumstances when the auditor is
specifically requested to conduct a separate engagement to report
on supplementary information, whether or not presented with
the financial statements — in this circumstance, the auditor will
conduct the engagement in accordance with the appropriate CASs
or Other Canadian Standards.
Information is not presented with the financial statements
5. When information is not presented with the audited financial
statements, it is not supplementary information and is not
discussed in this Q&A. The auditor may need to refer to CAS 720,
The Auditor’s Responsibilities Relating to Other Information
in Documents Containing Audited Financial Statements, if the
information meets the definition of “Other Information” in CAS 720.
The auditor may also need to refer to Section 7500, Auditor’s
Consent to the Use of the Auditor’s Report in Connection with
Designated Documents, if the information is contained in a
designated document filed with securities regulatory authorities
in connection with the entity’s financial statements, such as the
Management Discussion and Analysis.
Information is required by the financial reporting framework
6 When information is presented with the audited financial
statements, the auditor needs to determine whether the
information is required by the financial reporting framework. If the
information is required by the financial reporting framework, that
information is not supplementary information, is subject to audit
and is covered by the auditor’s report on the financial statements.
The auditor is requested to audit supplementary information as part of the
audit of the financial statements
7. In some circumstances, law or regulation may require, or
management may decide, that the supplementary information
should be audited as part of the audit of the financial statements.
In this case, the auditor would plan the audit so that it is performed
to obtain sufficient appropriate audit evidence about the
supplementary information.
8. In forming an opinion on the financial statements, the auditor
would determine whether the financial statements identify the
supplementary information as an integral part of the financial
statements (for example, by placing the supplementary information
proximate to the financial statements, by including cross-references
from the financial statements to the supplementary information, or
by including such supplementary information in the notes to the
financial statements).
9. Paragraph A47 of CAS 700 states that supplementary information
that is covered by the auditor’s opinion need not be specifically
referred to in the introductory paragraph of the auditor’s
report when the reference to the notes in the description of
the statements that comprise the financial statements in the
introductory paragraph is sufficient.
Unaudited supplementary information is not clearly differentiated from the
financial statements
10. When unaudited supplementary information is presented with
the audited financial statements, it is important that it is clearly
differentiated from the financial statements so that readers do not
construe the supplementary information as being covered by the
auditor’s opinion. The auditor’s evaluation includes, for example,
where that information is presented in relation to the financial
statements and any audited supplementary information, and
whether it is clearly labelled as “unaudited”.
11. Management could present the unaudited supplementary
information so as to clearly differentiate it from the audited
financial statements, as discussed in paragraph A50 of CAS 700,
for example, by:
• removing any cross-references from the financial statements
to unaudited supplementary schedules or unaudited notes
so that the demarcation between the audited and unaudited
information is sufficiently clear; and
• placing the unaudited supplementary information outside
of the financial statements or, if that is not possible in the
circumstances, at a minimum placing the unaudited notes
together at the end of the required notes to the financial
statements and clearly labelling them as “unaudited.”.
12. Paragraph 47 of CAS 700 requires the auditor’s opinion to cover
supplementary information that is not required by the applicable
financial reporting framework but is nevertheless an integral part of
the financial statements because it cannot be clearly differentiated
from the audited financial statements due to its nature and how it
is presented. Accordingly, the supplementary information must be
audited.
Management changes how unaudited supplementary information is presented
13. When supplementary information can be, but is not, clearly
differentiated from the audited financial statements, paragraph 46
of CAS 700 requires the auditor to ask management to change
how the unaudited supplementary information is presented.
14. If management clearly differentiates the supplementary
information, there is no impact on the auditor’s report as the
readers will not construe that the supplementary information is
being covered by the auditor’s opinion.
Management refuses to change how unaudited supplementary information is
presented
15. When supplementary information can be, but is not, clearly
differentiated from the audited financial statements, as discussed
in paragraph 13 of this Q&A, and management refuses to do
so, the auditor is required to explain in the auditor’s report that
such supplementary information has not been audited. Such an
explanation would be made in an Other Matter paragraph in the
auditor’s report.
Unaudited supplementary information
16. Paragraph A51 of CAS 700 states that the fact that supplementary
information is unaudited does not relieve the auditor of the
responsibility to read the information to identify material
inconsistencies with the audited financial statements. The
auditor’s responsibilities with respect to unaudited supplementary
information are consistent with those described in CAS 720,
The Auditor’s Responsibilities Relating to Other Information in
Documents Containing Audited Financial Statements.
APPENDIX
Decision tree to assist in understanding the implications of supplementary
information on the auditor’s report

Q&A 2(j) Determining the Acceptability of a General
Purpose Framework and Reporting on an Unacceptable
Framework

Q&A 2(j)(i) What factors does the auditor consider in determining
whether a general purpose framework (other than an AcSB or PSAB
framework) is acceptable?
1. Paragraph 6(a) of CAS 210, Agreeing the Terms of Audit
Engagements, requires the auditor to determine whether the
financial reporting framework to be applied in the preparation of
the financial statements is acceptable.
2. Paragraph A4 of CAS 210 indicates that factors that are relevant
to the auditor’s determination of the acceptability of the financial
reporting framework to be applied in the preparation of the
financial statements include:
(a) the nature of the entity (for example, whether it is a
business enterprise, a public sector entity or a not-for-profit
organization);
(b) the purpose of the financial statements (for example, whether
they are prepared to meet the common financial information
needs of a wide range of users or the financial information
needs of specific users);
(c) the nature of the financial statements (for example, whether
the financial statements are a complete set of financial
statements or a single financial statement); and
(d) whether law or regulation prescribes the applicable financial
reporting framework.
3. Paragraph CA8a of CAS 210 indicates that accounting standards
promulgated by the Accounting Standards Board and the
Public Sector Accounting Board (AcSB and PSAB frameworks)
are generally accepted and are relevant in determining the
acceptability of the applicable financial reporting framework even
when incorporating or other governing legislation does not specify
that generally accepted accounting principles be used when
preparing general purpose financial statements. Paragraph CA8b
of CAS 210 states that some legislation and regulation also permits
certain reporting issuers to use International Financial Reporting
Standards, promulgated by the International Accounting Standards
Board, or United States generally accepted accounting principles,
promulgated by the US Financial Accounting Standards Board.
4. Paragraph A9 of CAS 210 states that law or regulation may
prescribe the financial reporting framework to be used in the
preparation of general purpose financial statements for certain
types of entities. In the absence of indications to the contrary, such
a financial reporting framework is presumed to be acceptable for
general purpose financial statements prepared by such entities.
Appendix 2 of CAS 210 identifies the attributes — relevance,
completeness, reliability, neutrality and understandability —
normally exhibited by acceptable general purpose frameworks that
result in information provided in financial statements that is useful
to the intended users.
5. Where law or regulation prescribes a general purpose framework
other than AcSB or PSAB frameworks, the guidance in CAS 210 and
the following factors may be considered in determining whether
there are indications to the contrary:
(a) The process followed to develop the financial reporting
framework, including the opportunity for input from
stakeholders and deliberation of their views so that the
financial reporting framework exhibits the attributes of an
acceptable general purpose framework — For example, when
a regulator issues a proposed financial reporting framework
for public comment and the final financial reporting framework
reflects deliberation of comments received, such a financial
reporting framework is more likely to be acceptable than a
financial reporting framework developed by the regulator in
isolation that may reflect the regulator’s individual preferences.
As a result, it will not exhibit the attributes of relevance,
completeness or neutrality.
(b) The reasons for development of the financial reporting
framework — For example, where law or regulation addresses
the circumstances of a particular type of entity, such a financial
reporting framework may be acceptable if the applicable AcSB
and PSAB frameworks do not provide specific guidance on the
accounting for that type of entity. However, if the Accounting
Standards Board and the Public Sector Accounting Board
have already considered a particular issue and reached a
conclusion on the appropriate recognition, measurement and
disclosure, a financial reporting framework that conflicts with
that conclusion is an indicator that the financial reporting
framework may not exhibit attributes of an acceptable general
purpose framework such as completeness and neutrality.
(c) The body prescribing the financial reporting framework — For
example, some governments and government organizations
have legislative authority with respect to the application of
a financial reporting framework in the preparation of general
purpose financial statements. There is the potential in this
situation that the financial reporting framework applied may
reflect the government or government organization’s individual
preferences and information needs, and may not be neutral and
free from bias.
(d) Whether the resulting financial statements prepared in
accordance with the financial reporting framework will be
misleading.
Q&A 2(j)(ii) What are the reporting implications if a general purpose
framework is unacceptable (other than an AcSB or PSAB framework)?
6. Paragraph 8 of CAS 210 states that unless required by law or
regulation to do so, the auditor shall not accept a proposed audit
engagement if the auditor has determined that the financial
reporting framework to be applied in the preparation of the
financial statements is unacceptable, except as provided in
paragraph 19.
7. Paragraph 19 of CAS 210 requires that if the auditor has determined
that the financial reporting framework prescribed by law or
regulation would be unacceptable but for the fact that it is
prescribed by law or regulation, the auditor shall accept the audit
engagement only if the following conditions are present:
(a) Management agrees to provide additional disclosures in the
financial statements required to avoid the financial statements
being misleading. (Whether, and if so, what additional
disclosures in the financial statements can avoid financial
statements being misleading is a matter of professional
judgment for the auditor.)
(b) It is recognized in the terms of the audit engagement that:
(i) the auditor’s report on the financial statements will
incorporate an Emphasis of Matter paragraph, drawing
users’ attention to the additional disclosures, in accordance
with CAS 706, Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditor’s Report;
and
(ii) unless the auditor is required by law or regulation to
express the auditor’s opinion on the financial statements by
using the phrases “present fairly, in all material respects,”
or “give a true and fair view” in accordance with the
applicable financial reporting framework, the auditor’s
opinion on the financial statements will not include such
phrases.
8. The following is an example of an Emphasis of Matter paragraph in
accordance with paragraph 19(b)(i) of CAS 210:
Emphasis of Matter (or other appropriate heading)
Without modifying our opinion, we draw attention to Note X to the
financial statements, which describes the basis of accounting and
the significant differences between such basis of accounting and
[AcSB or PSAB framework, as appropriate to the type of entity].
9. Paragraph 19(b)(ii) of CAS 210 prohibits the use of the phrase
“presents fairly, in all material respects” or “give a true and fair
view” in the auditor’s opinion unless required by law or regulation
to do so. Accordingly, unless required by law or regulation to refer
to “presents fairly, in all material respects” or “give a true and fair
view”, the auditor’s opinion would be in the form of an auditor’s
opinion on financial statements prepared in accordance with a
compliance framework as required by paragraph 36 of CAS 700,
Forming an Opinion and Reporting on Financial Statements (i.e.,
that the financial statements are prepared, in all material respects,
in accordance with [the applicable financial reporting framework]).
10. Paragraph A6 of CAS 700 states that a description that the
financial statements are prepared in accordance with a particular
applicable financial reporting framework is appropriate only if
the financial statements comply with all the requirements of that
framework that are effective during the period covered by the
financial statements.
11. The auditor may also need to consider the wording of other
sections of the auditor’s report, depending on the circumstances.
For example, the auditor may conclude that the financial
reporting framework is not a fair presentation framework and,
therefore, the auditor’s report should not include the additional
references included in the management responsibility and
auditor’s responsibility sections of the auditor’s report required
by paragraphs 27 and 32 of CAS 700 when the financial reporting
framework is a fair presentation framework (i.e., the explanation
of management’s responsibility for the financial statements as
being for “the preparation and fair presentation of these financial
statements” or “the preparation of financial statements that give a
true and fair view,” and the description of the audit in the auditor’s
report referring to “the entity’s preparation and fair presentation
of the financial statements” or “the entity’s preparation of financial
statements that give a true and fair view,” as appropriate in the
circumstances).
12. When law or regulation requires the auditor to express an opinion
whether the financial statements are “presented fairly, in all
material respects”, or other similar phrases, the auditor would refer
to the relevant law or regulation in developing the wording of the
auditor’s opinion in the auditor’s report and would use the wording
required by law or regulation.
13. Paragraph A35 of CAS 210 indicates that in a case where law or
regulation prescribes that the wording of the auditor’s opinion use
the phrases “presents fairly, in all material respects” or “give a true
and fair view” and the auditor believes that the applicable financial
reporting framework prescribed by law or regulation would
otherwise have been unacceptable, the terms of the prescribed
wording of the auditor’s report in law or regulation are significantly
different from the CASs. Paragraph A35 of CAS 210 refers the
auditor to paragraph 21 of CAS 210, which requires the auditor to
evaluate:
(a) whether users might misunderstand the assurance obtained
from the audit of the financial statements and, if so,
(b) whether additional explanation in the auditor’s report can
mitigate possible misunderstanding.
14. In performing the evaluation required by paragraph 21 of CAS 210,
the auditor may consider it necessary to alert readers that law
or regulation requires the auditor to express an opinion using
wording that is otherwise prohibited by the CASs. Such an alert
may be included in an Other Matter paragraph or in the section
of the auditor’s report subtitled “Reporting on Other Legal and
Regulatory Requirements,” as appropriate. The following is an
example of such an alert:
Other Matter (or other appropriate heading)
We wish to alert readers that we are required by [specify legislation
or regulation] to express our opinion on the financial statements
using the phrase “presents fairly, in all material respects”, which
would not be the case under Canadian generally accepted auditing
standards as we have determined that the financial reporting
framework prescribed by [legislation or regulation] would be
unacceptable for the Company but for the fact that it is prescribed
by law or regulation.
15. Paragraph 20 of CAS 210 states that if the conditions outlined in
paragraph 19 are not present and the auditor is required by law or
regulation to undertake the audit engagement, the auditor shall:
(a) evaluate the effect of the misleading nature of the financial
statements on the auditor’s report; and
(b) include appropriate reference to this matter in the terms of the
audit engagement.
16. In performing such evaluation, the auditor would make reference to
CAS 705, Modifications to the Opinion in the Independent Auditor’s
Report, and modify his or her opinion accordingly.

Q&A 2(k) Prior period financial statements audited by a
predecessor auditor

What are the implications for the successor auditor’s report when
prior period financial statements were audited by a predecessor
auditor?
1. Q&A 2(a) discusses comparative information and its effect on the
auditor’s report, including the difference between “corresponding
figures” and “comparative financial statements”. This Q&A
discusses the similarities and differences between these two
reporting approaches in the context of the requirements in
CAS 710, Comparative Information — Corresponding Figures and
Comparative Financial Statements, when prior period financial
statements are audited by a predecessor auditor. It also addresses
reporting implications when financial information in the prior
period financial statements audited by a predecessor auditor is
restated. Where necessary to improve the clarity of this Q&A, the
word “successor” has been added to text of requirements and
application material in the CASs.
Reference to a predecessor auditor
2. Paragraph 13 of CAS 710, which applies to the corresponding
figures reporting approach, indicates that if the financial
statements of the prior period were audited by a predecessor
auditor and the successor auditor is not prohibited by law or
regulation from referring to the predecessor auditor's report on the
corresponding figures and decides to do so, the successor auditor
shall state in an Other Matter paragraph in the successor auditor's
report:
(a) (that the financial statements of the prior period were audited
by the predecessor auditor;
(b) the type of opinion expressed by the predecessor auditor and,
if the opinion was modified, the reasons therefore; and
(c) the date of that report.
3. Accordingly, under the corresponding figures reporting approach,
the successor auditor may, but is not required to, include an Other
Matter paragraph referring to a predecessor auditor. Illustrative
Reports in this Guide dealing with the corresponding figures
reporting approach when a predecessor auditor is involved
(Illustrative Reports 7(b), 7(f), 7(j), 7(n) and 7(t)) assume the
successor auditor has decided to refer to the predecessor auditor
and, therefore, include such an Other Matter paragraph.
4. Paragraph 17 of CAS 710, which applies to the comparative financial
statements reporting approach, indicates that if the financial
statements of the prior period were audited by a predecessor
auditor and the predecessor auditor's report on the prior period's
financial statements is not reissued with the current period financial
statements, in addition to expressing an opinion on the current
period's financial statements, the successor auditor shall state in an
Other Matter paragraph:
(a) that the financial statements of the prior period were audited
by a predecessor auditor;
(b) the type of opinion expressed by the predecessor auditor and,
if the opinion was modified, the reasons therefore; and
(c) the date of that report.
5. Accordingly, under the comparative financial statements reporting
approach, the successor auditor is required to include an Other
Matter paragraph referring to a predecessor auditor when the
predecessor auditor does not reissue his or her report. Illustrative
Reports in this Guide dealing with the comparative financial
statements reporting approach when a predecessor auditor is
involved (Illustrative Reports 7(d), 7(h), 7(l), 7(p), 7(q), 7(r) and
7(v)) assume the predecessor auditor’s report on the prior period’s
financial statements is not reissued with the current period financial
statements and, therefore, include such an Other Matter paragraph.
6. When the predecessor auditor's report on the prior period's
financial statements is not reissued with the financial statements,
the successor auditor’s report will include an Other Matter
paragraph referring to a predecessor auditor. Consequently,
the successor auditor’s report under the comparative financial
statements reporting approach will often be identical to the
auditor’s report under the corresponding figures reporting
approach with respect to reference to the predecessor auditor
when the successor auditor decides to refer to the predecessor
auditor’s report under the corresponding figures reporting
approach.
7. When the predecessor auditor’s report on the prior period’s
financial statements is reissued, the successor auditor may, but is
not required to, include an Other Matter paragraph referring to a
predecessor auditor. Consequently, the successor auditor under
the comparative financial statements reporting approach has a
choice with respect to reference to the predecessor auditor similar
to the successor auditor under the corresponding figures reporting
approach. As a result, the successor auditor’s report under the
comparative financial statements reporting approach may be
identical to the auditor’s report under the corresponding figures
reporting approach with respect to reference to the predecessor
auditor in this circumstance.
8. The following is an example of an Other Matter paragraph referring
to the predecessor auditor included in the successor auditor’s
report:
Other Matter (or other appropriate heading)
The financial statements of ABC Company for the year ended [end
of prior reporting period] were audited by another auditor who
expressed an unmodified opinion on those financial statements on
[date].
9. The Other Matter paragraph referred to in paragraph 8 of this
Q&A may need to be revised when the comparative information
in the current period financial statements has been restated from
the prior period financial statements, and the predecessor auditor
has not reported on the restated comparative information or the
restated and reissued financial statements. The following is an
example of an Other Matter paragraph referring to the predecessor
auditor in this circumstance (underlining has been used to identify
differences in the wording from the example in paragraph 8 of this
Q&A):
Other Matter (or other appropriate heading)
The financial statements of ABC Company for the year ended
[end of prior reporting period] (prior to the restatement described
in Note X to the financial statements) were audited by another
auditor who expressed an unmodified opinion on those financial
statements on [date].
Restatement of financial information in prior period financial statements
10. The financial information in the prior period financial statements
may be restated for a number of reasons, (for example, to reflect
the correction of an error, the retrospective application of an
accounting policy or reclassification of amounts). Depending on
various factors (for example, the nature of the restatement and
whether the issuance of financial statements for a subsequent
period is imminent), the entity may adopt either of two possible
approaches to reflect the restatement:
(a) restating and reissuing the prior period financial statements, or
(b) restating the comparative information in the current period
financial statements.
Irrespective of the approach followed by the entity, the successor
auditor is required by paragraph 6 of CAS 510, Initial Audit
Engagements — Opening Balances, to obtain sufficient appropriate
audit evidence about whether the opening balances contain
misstatements that materially affect the current period’s financial
statements, including determining whether the prior period’s
closing balances have been correctly brought forward to the
current period or, when appropriate, have been restated. However,
the implications for the successor auditor’s report on the current
period financial statements will depend on the approach followed
by the entity and the respective involvement of the successor
auditor and the predecessor auditor.
11. The following sets out the two possible approaches discussed in
paragraph 10 of this Q&A:
(a) When the entity restates and reissues the prior period financial
statements, as discussed in paragraph 10(a) of this Q&A, the
predecessor auditor, in most circumstances, will be engaged
to reissue the auditor’s report on the restated and reissued
prior period financial statements or, in rare circumstances, the
successor auditor will be engaged to audit the restated and
reissued prior period financial statements. Paragraphs 2-8 of
this Q&A include guidance when the predecessor auditor’s
report is reissued on the restated and reissued prior period
financial statements. When the successor auditor has audited
both the restated and reissued prior period financial statements
and the current period financial statements, and assuming
no other comparative information is being presented, this
Q&A does not apply because there is no predecessor auditor
involved.
(b) When the entity does not restate and reissue the prior period
financial statements but restates the comparative information
in the current period financial statements, as discussed in
paragraph 10(b) of this Q&A, the reporting implications will
depend on the respective involvement of the successor auditor
and the predecessor auditor. This involvement may be affected
by such things as the needs of the users of the financial
statements, including the requirements of securities regulators
(who may require that there be an audit opinion on all periods
presented), and the willingness of the respective auditor to be
involved. For example:
(i) the successor auditor may be engaged to report on
the proper application of the restatement (i.e., the
appropriateness of the adjustments to the comparative
information in the current period financial statements) but
neither the successor auditor nor the predecessor auditor is
engaged to opine on the restated comparative information
taken as a whole; (however, this does not mean that the
comparative information is described as being unaudited);
(ii) the predecessor auditor may be engaged to report on the
comparative information included in the current period
financial statements and the successor auditor engaged
to report only on the current period financial statements,
other than the comparative information; or
(iii) he successor auditor may be engaged to report on the
comparative information included in the current period
financial statements in addition to the current period
financial statements.
12. The following sets out the circumstance in paragraph 11(b)(i) of
this Q&A when the successor auditor is engaged to report on the
proper application of the restatement:
(a) Under the corresponding figures reporting approach, there
is no requirement for the successor auditor to explain in his
or her report that the application of the restatement to the
comparative information has been audited. However, when
the successor auditor is engaged to report on the proper
application of the restatement (i.e., the appropriateness of
the adjustments to the comparative information in the current
period financial statements), the successor auditor may
consider it appropriate to include an Other Matter paragraph
reporting on the proper application of the restatement. In
that situation, the successor auditor may also refer to the
predecessor auditor as having audited the comparative
information before the restatement, as discussed in paragraph
9 of this Q&A.
(b) Under the comparative financial statements reporting
approach, when the predecessor auditor does not reissue his or
her report on the prior period financial statements, paragraph
A11 of CAS 710 states that if the successor auditor is engaged
to audit and obtains sufficient appropriate audit evidence to
be satisfied as to the appropriateness of the amendment, the
auditor’s report may include an Other Matter paragraph. Such
an Other Matter paragraph reports on the proper application
of the restatement (i.e., the appropriateness of the adjustments
to the comparative information in the current period financial
statements). In that situation, the successor auditor must
also refer to the predecessor auditor as having audited the
comparative information before the restatement, as discussed
in paragraph 9 of this Q&A.
(c) The following is an example of an extension of the Other Matter
paragraph (referred to in paragraph 9 of this Q&A) included
in the successor auditor’s report referring to the audit of the
restatement :
As part of our audit of the financial statements of ABC
Company for the year ended [end of current reporting period],
we also audited the adjustments described in Note X that
were applied to restate the financial statements for the year
ended [end of prior reporting period]. In our opinion, such
adjustments are appropriate and have been properly applied.
(d) When the successor auditor has been engaged to report on the
proper application of the restatement (i.e., the appropriateness
of the adjustments to the comparative information in the
current period financial statements) but has not been engaged
to perform any other procedures related to the comparative
information or the prior period financial statements audited by
the predecessor auditor, the successor auditor may determine
it necessary to clearly communicate this fact. The successor
auditor may consider it appropriate to extend the Other
Matter paragraph (referred to in paragraphs 9 and 12(c) of
this Q&A) to clarify the successor auditor’s involvement in the
comparative information.
(e) The following is an example of an extension of the Other Matter
paragraph (referred to in paragraph 12(d) of this Q&A) to
clarify the successor auditor’s involvement in the comparative
information:
We were not engaged to audit, review, or apply any procedures
to the financial statements of ABC Company for the year ended
[end of prior reporting period] other than with respect to the
adjustments and, accordingly, we do not express an opinion or
any other form of assurance on the financial statements for the
year ended [end of prior reporting period] taken as a whole.
(f) See Illustrative Report 7(p) for an example of the Other Matter
paragraph that includes the extensions discussed in paragraphs
12(c) and 12(e) of this Q&A.
13. The following sets out the circumstance in paragraph 11(b)(ii) of
this Q&A when the predecessor auditor is engaged to report on the
comparative information included in the current period financial
statements and the successor auditor is engaged to report only on
the current period financial statements, other than the comparative
information:
(a) The successor auditor and the predecessor auditor would
need to consider how to clearly describe their respective
responsibilities with respect to the entity’s current period
financial statements.
(b) The predecessor auditor would describe what financial
information comprises the comparative information on which
the auditor is reporting. The predecessor auditor also may
decide to include an Other Matter paragraph describing the
information in the current period financial statements that
has been audited by the successor auditor. The following is
an example of such an Other Matter paragraph for financial
statements prepared in accordance with IFRSs:
Other Matter (or other appropriate heading)
The accompanying financial statements of ABC Company,
which comprise the statement of financial position as at [end
of current reporting period], the statement of comprehensive
income, statement of changes in equity, and statement of cash
flows of ABC Company for the year ended [end of current
reporting period], and the summary of significant accounting
policies and other explanatory information, were audited by
another auditor who expressed an unmodified opinion on
[date].
(c) Since the predecessor auditor is issuing an opinion on the
comparative information, the successor auditor is not required
to add an Other Matter paragraph referring to the predecessor
auditor. However, to clarify the respective responsibilities of the
successor auditor and the predecessor auditor, the successor
auditor may wish to include an Other Matter paragraph stating
that the comparative information, including Note X, which
describes the restatement of the comparative information, was
audited by another auditor. The following is an example of such
an Other Matter paragraph for financial statements prepared in
accordance with IFRSs:
Other Matter (or other appropriate heading)
The accompanying comparative information of ABC Company,
which comprises the statement of financial position as at [end
of prior reporting period], the statement of comprehensive
income, statement of changes in equity, and statement of
cash flows of ABC Company for the year then ended, and
the summary of significant accounting policies and other
explanatory information, including Note X, which explains
that certain comparative information has been restated, were
audited by another auditor who expressed an unmodified
opinion on [date].
Restatement of financial information in prior period financial statements
when an opening statement of financial position is presented
14. Some financial reporting frameworks require that an entity
present a third statement of financial position (“opening balance
sheet”) as at the beginning of the preceding period in addition
to the minimum comparative financial statements required by
the financial reporting framework (for example, see paragraph
40A of IAS 1 Presentation of Financial Statements, when an entity
applies an accounting policy retrospectively, makes a retrospective
restatement of items in its financial statements or reclassifies
items in its financial statements and the retrospective application,
retrospective restatement or the reclassification has a material
effect on the information in the statement of financial position at
the beginning of the preceding period). In this circumstance, the
opening balance sheet reflects the statement of financial position
as at the end of the prior period, audited by the predecessor
auditor, subsequent to the adjustments applied to restate the
financial information.
15. The following assumptions are used as a basis for examples of
the reporting implications discussed in paragraphs 16 and 17 of
this Q&A in respect of the two reporting approaches discussed in
paragraph 11(b) of this Q&A:
• The financial statements are for the year ended December 31,
20X2 with comparative information for the year ended
December 31, 20X1.
• The predecessor auditor audited the financial statements for the
years ended December 20X1 and prior.
• The successor auditor audited the December 20X2 financial
statements.
• The December 20X1 comparative information has been restated
and an opening balance sheet as at January 1, 20X1, derived
from the statement of financial position as at December 31,
20X0, is presented.
16. The following are examples of references to the audit of the
restatement, applying the assumptions in paragraph 15 of this Q&A,
when the successor auditor is engaged to report on the proper
application of the restatement as discussed in paragraph 11(b)(i) of
this Q&A. Adjustments arising from such application were applied
to restate the December 20X1 comparative information, and derive
the opening balance sheet as at January 1, 20X1. (underlining has
been used to identify differences in the wording from the examples
included in paragraphs 9, 12(c) and 12(e) of this Q&A):
(a) When the successor auditor’s report includes the Other Matter
paragraph referred to in paragraph 9 of this Q&A:
Other Matter (or other appropriate heading)
The statement of financial position as at January 1, 20X1 of ABC
Company has been derived from the statement of financial
position as at December 31, 20X0 (not presented herein). The
financial statements of ABC Company for the years ended
December 31, 20X1 and 20X0 (prior to the restatement
described in Note X to the financial statements) were audited
by another auditor who expressed an unmodified opinion on
those financial statements on [dates] respectively.
(b) When the successor auditor’s report includes the extension of
the Other Matter paragraph referred to in paragraph 12(c) of
this Q&A:
As part of our audit of the financial statements of ABC
Company for the year ended December 31, 2012, we also
audited the adjustments described in Note X that were
applied to restate the financial statements for the year ended
December 31, 20X1 and to derive the statement of financial
position as at January 1, 20X1. In our opinion, such adjustments
are appropriate and have been properly applied.
(c) When the successor auditor’s report includes the extension of
the Other Matter paragraph referred to in paragraph 12(e) of
this Q&A:
We were not engaged to audit, review, or apply any procedures
to the financial statements of ABC Company for the years
ended December 31, 20X1 and 20X0, or to the statement of
financial position as at January 1, 20X1 other than with respect
to the adjustments and, accordingly, we do not express
an opinion or any other form of assurance on the financial
statements for the years ended December 31, 20X1 and 20X0,
or the statement of financial position as at January 1, 20X1,
taken as a whole.
See Illustrative Report 7(q) for an example of the auditor’s report in
this circumstance.
17. The following addresses references in the predecessor auditor’s
report and the successor auditor’s report, applying the
assumptions in paragraph 15 of this Q&A, when the predecessor
auditor is engaged to report on the comparative information
included in the current period financial statements and the
successor auditor is engaged to report only on the current period
financial statements, other than the comparative information, as
discussed in paragraph 11(b)(ii) of this Q&A:
(a) When the predecessor auditor’s report contains the Other
Matter paragraph referred to in paragraph 13(b) of this Q&A,
the Other Matter paragraph would be unchanged.
(b) When the successor auditor’s report includes the Other
Matter paragraph referred to in paragraph 13(c) of this Q&A
(underlining has been used to identify differences in the
wording from the example included in paragraph 13(c) of this
Q&A):
Other Matter (or other appropriate heading)
The accompanying comparative information of ABC Company,
which comprises the statements of financial position as at [end
of prior reporting period] and [beginning of prior reporting
period], the statement of comprehensive income, statement
of changes in equity, and statement of cash flows of ABC
Company for the year then ended [end of prior reporting
period], and the summary of significant accounting policies and
other explanatory information, including Note X, which explains
that certain comparative information has been restated, were
audited by another auditor who expressed an unmodified
opinion on [date].
See Illustrative Report 7(r) for an example of the auditors’ reports
in this circumstance.

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