Methodology Update—September 2020
Sep-2020
Target audience: All Attest Auditors
Effective date: The revised methodology is effective upon release.
Standards: This update reflects up to CPA Canada—Assurance—Update Number 30—June 2020 (excluding revisions to CAS 315 which will be reflected in a future methodology update)
Copyright: CPA Canada Handbook sections and excerpts are reproduced herein for your non-commercial use with the permission of The Chartered Professional Accountants of Canada (“CPA Canada”). These may not be modified, copied or distributed in any form as this would infringe CPA Canada’s copyright.
Description of subject: The update includes changes to audit manual policies and guidance, audit procedures, templates and Intranet pages. Significant changes to the methodology are summarized below.
Key changes are:
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New manual sections, procedures and practice aid to reflect the revised CAS 540 Auditing Accounting Estimates and Related Disclosures
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New policy requiring consultation with Audit Services when previously undetected prior period errors meeting specific criteria are identified.
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New policy requiring consultation with audit Services when proposing a modified opinion, emphasis of matter paragraphs, or other matter paragraphs.
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New procedures on cybersecurity risk assessment
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Updated or new planning templates to document planned involvement of the IT Audit team, controls assurance team and data analytics and research methods team.
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Removed references to TeamMate and Annual Audit Practice Team (AAPT).
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Changed the French version of external-facing templates to reflect the gender of the current Auditor General.
Updates to the Manual
A number of revisions have been made to the annual audit manual sections. The following is a summary of all revisions other than editorial revisions, revisions made solely to CAS extracts or revisions made solely to procedure references:
| Section | Section Title | Nature of Changes |
|---|---|---|
| Annual Audit Sections | ||
| 3081.1 |
Summary of matters for consultations |
Updated to reflect changes made throughout the audit manual. |
| 7071 |
Introduction |
New manual section related to the revised CAS 540 on auditing accounting estimates and related disclosures |
| 7072 |
Understand the Entity and Its Environment |
|
| 7073.1 |
Step 1: Perform Risk Assessment Procedures |
|
| 7073.2 |
Step 2: Set Roles and Responsibilities |
|
| 7073.3 |
Step 3: Determine Risk of Material Misstatement and Testing Approach |
|
| 7073.4 |
Step 4: Test Method(s) |
|
| 7073.5 |
Step 5: Test Significant Assumptions |
|
| 7073.6 |
Step 6: Test Data |
|
| 7073.7 |
Step 7: Evaluate Work of Specialists and Experts |
|
| 7073.8 |
Step 8: Address Estimation Uncertainty and Test Disclosures |
|
| 7073.9 |
Step 9: Consider Management Bias |
|
| 7073.1 |
Step 10: Perform Overall Evaluation |
|
| 7074 |
Completion Procedures |
|
| 8011 |
Forming an opinion |
New policy requiring consultation with Audit Services when proposing a modified opinion on the financial statements or financial information. |
| 8013 |
Modified Audit Opinion |
New policy requiring consultation with Audit Services when proposing a modified opinion on the financial statements or financial information and clarified internal process to address the risk of inappropriate modified auditor’s report. |
| 8014 |
Emphasis of matter and other matter paragraphs |
New policy requiring consultation with Audit Services when proposing emphasis of matter paragraphs, or other matter paragraphs. |
| 9015 |
Evaluating the effect of uncorrected misstatements |
New policy requiring consultation with Audit Services when previously undetected prior period errors meet specific criteria. Re-organized and enhanced guidance on evaluating impact of uncorrected misstatements. Clarified internal process related to undetected prior period errors. |
| 11015 |
Reporting on compliance with authorities |
New policy requiring consultation with Audit Services when proposing a modified opinion on the financial statements or financial information, emphasis of matter paragraphs, or other matter paragraphs. |
Updates to the Annual Audit Procedures
The following is a summary of all revisions other than editorial revisions.
Annual Audit Procedures Cabinet
Action required: Ensure you have the most updated procedure steps and procedure documents.
| Program (PRG) | Procedure Step | Change |
|---|---|---|
|
A.1.PRG—Audit Mandate and Client Acceptance and Continuance |
CPA Canada licence Agreement (Sept-2020) |
Copyright date changed from 2019 to 2020. |
|
Acceptance and continuance and terms of engagement (Sept-2020) |
Updated to reflect current guidance on communication in official languages as per OAG Audit 2213. Procedure document |
|
|
B.1.PRG—Understand the Entity and Environment |
Understand entity and environment (Sept-2020) |
Removed section “Assessing the impact of cybersecurity risks on the audit” (steps 5 and 6). This has been replaced by new cybersecurity procedure. Procedure document has been replaced by |
|
Understand and evaluate control activities (including PEFR process) (Sept-2020) |
Added new option and tab for leases |
|
|
B.4.PRG—Assess Risk |
Fraud risk assessment (Sept-2020) |
Added in step 8 documentation on obtaining views from those charged with governance on risk of material misstatement due to error. Procedure document has been replaced by |
|
Accounting estimates—Understanding and risk assessment (Sept-2020) |
Updated to reflect revised CAS 540 standard on auditing accounting estimates and disclosure. Procedure document has been replaced by |
|
|
Financial statements review risk assessment (Sept-2020) |
Updated by AEA to add text box allowing auditors to describe why the financial statements or entity are considered complex. Link to updated guidance on FSR. Procedure document has been replaced by |
|
|
Understand cybersecurity risk related to the audit (Sept-2020) |
New procedure on understanding cybersecurity risk related to the audit New procedure document |
|
|
C.2.PRG—Develop audit plan |
Determine audit strategy and plan (Sept-2020) |
Procedure document has been replaced by |
|
D.1.PRG—Completion and Reporting Activities |
Communications with those charged with governance—Report to the Audit Committee (Sept-2020) |
Procedure document has been replaced by |
|
Other auditing and completion procedures (Sept-2020) |
Added step 14 on verifying consistency of names of the entity’s financial statements in the audit report and reference to CAS 700.24. Procedure document has been replaced by |
|
|
Update on preliminary risk assessments (Sept-2020) |
Updated step 11 on accounting estimates and added step 14 on IT Dependencies. Procedure document has been replaced by |
|
|
D.2.PRG—Financial Statements and Notes |
Financial statements related procedures (Sept-2020) |
Procedure document has been replaced by |
|
Financial statements and Auditor’s Report review (Sept-2020) |
Updated instructions for FS Review by AEA. Procedure document has been replaced by |
|
|
E.1.PRG—General Execution Procedures |
Respond to the risk of fraud involving management override of controls (Sept-2020) |
Enhanced step 6 to document results of agreement of the opening balance and the financial statement account balances. Procedure document has been replaced by |
Annual Audit Procedures—Supplement Cabinet
Action required: Ensure you have the most updated procedure steps and procedure documents.
| Program (PRG) | Procedure Step | Change |
|---|---|---|
|
B.2.PRG—Component Auditor—Planning |
CA—Planning procedures (Sept-2020) |
Added step 2 to document elements of communicated group audit strategy and plan that may impact the procedures to be performed by the component auditor. Procedure document has been replaced by |
|
CA—Group reporting package related procedures (Sept-2020) |
Updated steps 9 and 10 to refer to tie-out of financial statement disclosure. Added new optional tabs to document testing of financial information and disclosures. Procedure document has been replaced by |
|
|
D.1.PRG—Reliance on the Work of Others |
Plan use of work of auditor’s experts—[FSLI] (Sept-2020) |
Added reference to the new Test accounting estimate procedure in step 3. Procedure document has been replaced by |
|
Plan use of work of management’s experts—[FSLI] (Sept-2020) |
Added reference to the new Test accounting estimate procedure in step 3. Procedure document has been replaced by |
|
|
F.1.PRG—General Execution Procedures |
Assess the impact of cybersecurity incident on the audit (Sept-2020) |
New procedure to document impact of cybersecurity incident. New procedure document |
|
Test accounting estimate (Sept-2020) |
Updated to reflect revised CAS 540 standard on auditing accounting estimates and disclosure. Procedure document has been replaced by |
Updates to templates
The following is a summary of all revisions other than editorial revisions and any actions that need to be taken:
| Annual Audit Templates | |||
|
Planning |
Budget and Workload Allocation |
Updated references to IT Audit, AEA and Audit Working Paper Software |
None Given the changes are administrative/editorial in nature, auditors can continue to use the previous version. |
|
Planning |
Control Matrix |
Deleted column for “Year Performed” as rotational walkthrough has been removed from the methodology. Added documentation on understanding of ITGCs. |
Action required Ensure you have the most updated template. |
|
Planning |
Controls Library |
Updated numbering of controls that matches the number reference on the Audit Planning Template |
None Given the changes are administrative/editorial in nature, auditors can continue to use the previous version. |
|
Planning |
Engagement Letter |
Removed “Other Audit Work” section and made other editorial changes. Changed the French version to reflect the gender of the current Auditor General. |
Action required Ensure you have the most updated template. |
|
Planning |
IT Audit Planning Memorandum |
Updated planning template to document the planned involvement of IT audit team. |
Action required Ensure you have the most updated template. |
|
Planning |
Controls Assurance Planning Memo |
New planning template to document the planned involvement of the controls assurance team. |
Action required Ensure you have the most updated template. |
|
Planning |
Control Matrix—Example |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand and Evaluate Control Activities (incl PEFR process)—Example |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand and Evaluate Internal Control Components (excl control activities)—Example |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand and Evaluate Internal Control Components (excl control activities)—Mapped Example |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand the entity’s response to IT risks—Example |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand the entity’s response to IT risks—IT Function Guidance |
DELETED from the templates and checklists listing |
None |
|
Planning |
Understand the entity’s response to IT risks—In-Scope Systems Guidance |
DELETED from the templates and checklists listing |
None |
|
Planning |
Letters for Solicitor/Client Privilege |
Replaced reference to OAG Senior General Counsel with OAG General Counsel. |
Action required Ensure you have the most updated template. |
|
Planning |
Data Analytics and Research Methods Planning Memo |
New planning template to document the planned involvement of the data analytics and research methods team. |
Action required Ensure you have the most updated template. |
|
Reporting |
Management Representation Letter—IFRS |
Updates made related to auditing accounting estimates, COVID-19, IFRS standards, and other editorial changes. |
Action required Ensure you have the most updated template. |
|
Reporting |
Management Representation Letter—PSAS |
Updates made related to auditing accounting estimates, COVID-19, PSAS standards, and other editorial changes. |
Action required Ensure you have the most updated template. |
| Phase | Template Name | Change | Action Required/Impact |
|---|---|---|---|
Updates to INTRAnet
The Financial Audit INTRAnet pages reflect the changes included in this Methodology Update.