Reporting Implications of New Auditing and Accounting Standards Issue No. 12 — April 2014

This CPA Canada publication has been developed by the Task Force
on Audit Reporting Implications of the New Canadian Auditing
Standards. The material in this Guide represents the views of the Task
Force.
Practitioners are expected to use professional judgment in
determining whether the material in this Guide is both appropriate
and relevant to the circumstances of each audit engagement. This
Guide has not been issued under the authority of the Auditing and
Assurance Standards Board (AASB).

The information contained in this document is intended solely to provide general guidance
on matters of interest to the reader, who accepts full responsibility for its use. The Canadian
Professional Accountants of Canada, its boards and committees, and the authors are not
responsible for any errors, omissions or results obtained from the use of this information.

Introduction

There are a number of significant changes taking place to accounting and
auditing standards in Canada. The Auditing and Assurance Standards Board
(AASB) recognizes that these changes may have an impact on the form and
content of practitioners’ reports. The AASB formed a Task Force to develop
guidance that will address complex reporting issues that may arise during
this period of change with a view to promoting consistency in reporting.

Changes to accounting standards

The CPA Canada Handbook – Accounting has been restructured to move
away from a single financial reporting framework referred to as Canadian
generally accepted accounting principles (GAAP) to include various different
financial reporting frameworks in Canadian GAAP. These different financial
reporting frameworks in Canadian GAAP are identified in the CPA Canada
Handbook – Accounting as follows:
• Part I — International Financial Reporting Standards (IFRSs)
• Part II — Accounting standards for private enterprises
• Part III — Accounting standards for not-for-profit organizations
• Part IV — Accounting standards for pension plans
• Part V — Canadian GAAP prior to the adoption of Parts I, II, III or IV
(Pre‑changeover accounting standards)
Part I became effective for interim and annual financial statements relating
to fiscal years beginning on or after January 1, 2011 (except for a three-year
deferral for investment companies and segregated accounts of life insurance
enterprises and a four-year deferral for entities with rate-regulated activities,
as outlined in paragraph I.7 of the Introduction to Part I of the CPA Canada
Handbook – Accounting). Parts II and IV (except for benefit plans providing
benefits during active service, which became effective relating to fiscal years
beginning on or after January 1, 2012) became effective for annual financial
statements relating to fiscal years beginning on or after January 1, 2011.
Part III became effective for annual financial statements relating to fiscal
years beginning on or after January 1, 2012. Earlier application of Parts I-IV
is permitted. If an entity chooses not to adopt the standards applicable to
it before their effective date, it continues to follow Part V, pre-changeover
accounting standards, prior to that date.
The CPA Canada Public Sector Accounting Handbook contains the
accounting standards for federal, provincial, territorial and local governments
and government organizations. The Public Sector Accounting Board (PSAB)
has made changes to its standards clarifying which standards apply to
government organizations. For example, government business enterprises
were required to follow IFRSs for periods beginning on or after January 1,
2011. Other government organizations are permitted to choose to prepare
their financial statements in accordance with public sector standards or with
IFRSs, based on the needs of users of their financial statements, for fiscal
periods beginning on or after January 1, 2011. Government not-for-profit
organizations were required to apply the accounting standards in the CPA
Canada Public Sector Accounting Handbook, with or without the “PS 4200”
series of standards, for fiscal periods beginning on or after January 1, 2012.

Changes to auditing standards

The AASB has adopted International Standards on Auditing as Canadian
Auditing Standards (CASs) effective for audits of financial statements
and other historical financial information for periods ending on or after
December 14, 2010. The CASs are contained in the CPA Canada Handbook –
Assurance. Standards in effect prior to the issuance of the CASs have been
retained in the Handbook, on a temporary basis, to assist auditors performing
audits of financial statements for periods ending before December 14, 2010.

Purpose of this Guide

With the complexities relating to the changes to accounting and auditing
standards, the purpose of this Guide is to promote consistency in the form
and content of practitioners’ reports by providing guidance with respect to
commonly occurring circumstances. This Guide does not amend or override
auditing or review standards, the texts of which alone are authoritative, nor
does it necessarily address all audit reporting changes resulting from the new
CASs. With respect to audit reporting on financial statements for periods
ending on or after December 14, 2010, readers are referred to the following
CASs for guidance:
• CAS 510, Initial Audit Engagements — Opening Balances
• CAS 560, Subsequent Events
• CAS 700, Forming an Opinion and Reporting on Financial Statements
• CAS 705, Modifications to the Opinion in the Independent Auditor’s
Report
• CAS 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in
the Independent Auditor’s Report
• CAS 710, Comparative Information — Corresponding Figures and
Comparative Financial Statements
• CAS 800, Special Considerations — Audits of Financial Statements
Prepared in Accordance with Special Purpose Frameworks
• CAS 805, Special Considerations — Audits of Single Financial Statements
and Special Elements, Accounts or Items of a Financial Statement
• CAS 810, Engagements to Report on Summary Financial Statements
Readers are also referred to the following useful guidance :
• Explanatory Memorandum, “Reporting on Financial Statements under
Canadian Auditing Standards” that helps stakeholders understand the
decision-making process followed by the auditor when reporting on
financial statements, and the form of the auditor’s report, under CASs.
• “Assurance Implications of the Changeover to IFRSs” that provides
guidance to auditors dealing with significant auditing and assurance
matters arising from their clients’ changeover from pre-changeover
accounting standards to IFRSs.

Format of this Guide

This Guide will be updated periodically as further reporting issues are
identified. The Guide will indicate its version date and the nature and extent
of changes since the last version will be highlighted in each new version.
The Guide presents a series of issues in Question and Answer format. It
also presents a series of Illustrative Reports. These are designed to help
practitioners understand and apply requirements and supporting guidance
issued by the AASB relating to reporting.

Further Information

Staff contact: Eric R Turner, CPA, CA
Email: eturner@.cpacanada.ca
Telephone: (416) 204-3240
Fax: (416) 204-3408

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