ThinkTWENTY20

By Jacqui Kuypers, CPA, CA

Jacqui Kuypers, CPA, CA, is a Principal, Auditing and Assurance Standards, with the Canadian Auditing and Assurance Standards Board (AASB), the independent setter of auditing, assurance and related services standards. She is leading the AASB’s efforts to develop a new strategic plan for the period April 1, 2021 to March 31, 2025.

No one is able to predict the future, but the AASB is looking at significant domestic and global developments that affect its stakeholders. The AASB wants to plan how it should be responding so that Canadian auditing and assurance standards are ready for what the future holds.

Looking at how the world is evolving, the AASB believes it needs to focus on the following developments in the coming years:

The advancement in, and use of, technology:

We have seen a rapid change in, and evolution of, technologies used by entities. The use of technologies for communication and information systems has an impact on an entity’s operations. The COVID-19 pandemic has accelerated the adoption of collaboration technologies. Practitioners have also increased use of technology-enhanced tools and techniques to perform work on engagements. The way such technologies influence how engagement teams are structured and interact is evolving.

Increasing complexity in business environments and its implications:

Accounting practices have responded to increased complexity in the business environment. Transactions have become more complicated and financial reporting continues to change. This is resulting in more estimates and management judgments. Furthermore, disruptions arising from economic, political, environmental or societal developments create economic uncertainty, which increases the complexity around such estimates and judgments. The pace of change in the business environment is increasing pressures on the responsiveness and relevance of standards. As well, the growing adoption of more complex auditing and assurance standards increases implementation and application challenges for practitioners and, consequently, the need for guidance and support.

The environment for small and medium-sized entities:

Small and medium-sized entities are asking for assurance services that are more responsive to their activities and the needs of their stakeholders. There is increasing pressure on standard setters to provide scalable and proportional standards that respond to the less complex elements of an entity’s operations and financial statements.

Changing information needs of users:

Information provided by entities continues to evolve, with many users in various sectors of the economy looking for information beyond traditional financial statements. The need for assurance on this information is evolving and additional standards may be required to meet these evolving needs.

Stakeholder expectations and changing public confidence in audits:

Research indicates that stakeholders expect more thanwhat the standards require an auditor to do, such as expectations relating to the detection and reporting of fraud and consideration of going concern issues. This expectation gap may be heightened when there is greater economic uncertainty.

Significant corporate failures in other jurisdictions and the related actions taken provide an opportunity for the AASB to consider the quality of entity reporting in Canada.

The remote working environment: Health and safety concerns resulting from the COVID-19 pandemic have caused an increase in remote working, both by entity personnel and practitioners.Practitioners are responding to the need to conduct engagements remotely, and raising questions about how standards can be adapted to this environment.

Effects of the COVID-19 Pandemic

The AASB considered how the pandemic might affect its strategic directions and goals, as well as its ability to obtain stakeholder feedback. The AASB Draft Strategic Plan reflects the Board’s view that the domestic and global developments remain relevant, although influenced by the pandemic.

Responding to Developments

The Board set the following goals to respond to the environment. These goals will direct annual plans for the coming years:

monitor and understand emerging issues in the changing environment to better anticipate standard-setting issues;

engage and collaborate with stakeholders to understand their needs and expectations;

set high-quality standards and guidance that respond to the evolving needs and expectations of stakeholders;

enhance our standard-setting processes and capabilities to develop more timely solutions; and

support the effective implementation and application of standards and guidance to enhance consistency and quality in engagement performance. 

Share Your Views!

Having examined the potential impact of the pandemic on the Draft Strategic Plan, the AASB is now ready to seek stakeholder input.

The Board issued a document for public comment in January 2021, which includes a few questions, including whether the strategic directions are appropriate and whether respondents agree with the proposed goals and objectives. The Board also asks if there are developments likely to affect Canadian stakeholders that have not been identified in the Draft Strategic Plan.

In addition, the Board is exploring some of the practical aspects of the goals and objectives with stakeholders through a series of consultations, polls and open-ended questions. Each of these focuses on the environmental themes the Board identified in the Draft Strategic Plan.

Stakeholders are helping the Board explore, for example:

how standards can reflect the evolution of technology;

the impact of the current remote working environment on the quality of audits and the potential long-term implications;

how auditing standards can be more adaptable to entities of varying sizes and complexities;

the Canadian landscape for assurance, including on information beyond the financial statements; and

particular areas where assurance or related services standards can respond to the challenging environment.

I invite you to download the

2022-2025 Draft Strategic Plan and submit feedback via Connect.FRASCanada.ca or by submitting a comment letter by April 15, 2021.