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This section of the manual applies when the OAG engages one or more service providers (also called contractors) to fulfill all, or substantially all, engagement team positions to complete a financial audit, performance audit or special examination. These audits are called “contracted out” audits. In these cases, responsibility for audit quality and accountability for the performance of the engagement in accordance with applicable professional standards, legal and regulatory requirements, and the conclusions reached remains with an OAG engagement leader. The involvement of the contractor’s partner (or equivalent) in the contracted-out audit does not lessen the engagement leader’s responsibilities.
This section of the manual does not apply to joint audits where the responsibility and accountability for the overall opinion is shared with the appointed joint auditor. For information on joint audits, see section 3067 Working Arrangement with Joint Auditor.
All contracted out audits shall be assigned an engagement leader who is an employee of the OAG. [Dec-2021]
The engagement leader shall ensure that the contracted-out audit is carried out in compliance with OAG audit policies, professional standards, applicable legal and regulatory requirements, and the OAG’s system of quality management. [Dec-2021]
Audit documentation prepared by contractors is the property of the OAG and shall be retained in accordance with OAG Audit 1191 Retention policies and procedures. [Dec-2021]
Engagement Leader responsibilities
When contracting out an audit, the OAG is engaging a contractor to perform audits on its behalf, thus discharging some of the responsibilities involved in conducting the audit engagement. The decision to contract out (including what audits, to which supplier or firm) falls outside the scope of this guidance. Having made the decision to hire a contractor for an audit engagement, the engagement leader is not abdicating any of his or her responsibilities for the audit. All the requirements in the applicable standards and OAG audit policies remain and are to be complied with. Even in a situation where a contractor’s partner (or equivalent) is involved, the engagement leader retains the same accountabilities as if the OAG had staffed the audit with OAG staff.
Contracting
Tenders and contracts for contracted out audits as well as the engagement leader’s responsibilities and involvement in the procurement process are subject to the OAG’s specific procurement processes and procedures and fall outside the scope of this guidance.
For more information on procurement applicable to this area, see http://cmsprd.oag-bvg.gc.ca/intranet/comptroller/contracting-procurement/tv_lp_e_3915.shtm.
The timing of engaging in consultation with procurement (who will then involve Legal Services if necessary) is important, as the need to consider how to structure the procurement and related contract should be evaluated in advance of engaging with a potential contractor.
Further, of particular importance during the procurement process is the verification of the contractor’s competence and capacity as well as provisions to resolve unanticipated changes in the staff assigned to the engagement.
Engagement Performance
Before the work begins, the engagement leader:
The engagement leader retains the responsibilities for the overall quality and oversight of the contracted-out audit engagement. As part of these responsibilities, the engagement leader remains alert for evidence of non-compliance with relevant ethical and independence requirements by audit team members, including those contracted out. In regards to consultations, the engagement leader ensures these are undertaken when needed and acts as a liaison between the contractor and the OAG. Consultations may include those with Legal Services (via assigned legal counsel, as applicable) on, for example, (a) Cabinet confidences and secret documents; (b) personal information or confidential business information; and (c) solicitor-client privileged information provided by entities’ legal counsel or by the Office Legal Services. The engagement leader should be aware of the OAG’s position not to grant contractors access to Cabinet confidences. Further, the engagement leader works with the Legal Services (via assigned legal counsel, as applicable) to put in place an approach whereby the contractor would have access to legal advice (both entity and the OAG) in such a way as to minimize the risk of waiving solicitor client privilege.
The engagement leader reviews critical areas of judgment, especially those relating to difficult or contentious matters identified during the course of the engagement, significant risks and other areas the considered important and discusses significant matters with the quality reviewer, if the one is appointed.
The engagement leader ensures the contractor’s work provides sufficient appropriate audit evidence to support the audit findings and conclusions before releasing the audit report. The contractor’s engagement partner (or equivalent) may also provide written sign off on the audit, if such was agreed to in the contracting-out arrangement.
Documentation
In regards to the audit documentation, the level of involvement of the engagement leader in the review (and documentation of this review) should be sufficient as to satisfy the quality management procedures. In this sense, the engagement leader ensures that appropriate audit documentation is maintained to provide evidence of the achievement of the practitioner’s objectives and that the engagement was performed in accordance with the OAG audit policies, professional standards and relevant legal and regulatory requirements. Appropriate audit documentation is sufficient to determine the nature, timing and extend of the procedures performed, and the results of the procedures performed and the audit evidence obtained. It reflects the work performed and supports the conclusions reached. The engagement leader also ensures that the audit documentation, including contractor’s files, are complete and ready for finalisation in accordance with the provisions of this audit manual.
In some instances, the contractor might want to use their own methodology and audit software. These instances should be avoided, as documenting the audit file can pose some challenges. Under exceptional circumstances where avoidance is not possible, the engagement leader should ensure, before the work begins, that there are ways to retrieve the audit documentation from the contractor. The OAG is ultimately the owner of the audit documentation and should therefore have a complete readable copy of the audit file accessible at any time for consultation, internal review or inspection. The engagement leader is responsible for dealing with the issue of access to audit files and for ensuring that appropriate security practices are adhered to by the contractor.