Methodology Update—Fall 2021 Accounting Update
Oct-2021
Target audience: All Attest Auditors
Effective date: The revised methodology is effective upon release.
Standards: This update reflects changes in standards effective for fiscal years beginning on or after 1 January 2021 (IFRS).
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 TeamMate procedures, templates, checklists and INTRAnet pages. Significant changes to the methodology are summarized below.
Key changes are:
PSAS and IFRS
-
New CAS 540 procedures
The generic procedure “Test accounting estimate” has been embedded into specific FSLI procedures. As a result the audit team will now use a procedure specific to the nature of the estimate being tested that also includes steps to address CAS 540 requirements. -
Confirmation procedures
Updated to align with enhanced guidance in OAG Audit 7050 External Confirmations (selecting the appropriate confirming party, determining the method for sending external confirmation requests, and testing the validity of confirming party addresses).
IFRS
- Two new procedures related to interest rate benchmark reform. One to determine the impact on the risk assessment and the audit plan, and the other to document testing of application requirements of Interest rate benchmark reform—Phase 2—Amendments to IFRS 9 , IAS 39, IFRS 7, IFRS 4 and IFRS 16.
Annual Audit
- Service Organization procedures and OAG Audit 6041 have been modified as a continuous improvement.
|
IMPORTANT—Remember to update the Substantive Procedure Library in the Audit Planning Template in order to ensure you are using the most up to date IFRS and PSAS substantive procedure libraries. |
Updates to TeamMate
The procedures in the TeamMate Cabinets have been updated as follows:
PSAS and IFRS
Revision not a result of changes in standards:
-
Most of the specific accounting estimate FSLI procedures have been revised to embed CAS 540 steps to address CAS 540 requirements. Those revised procedures contain “CAS 540” in their procedure title.
-
Confirmation procedures have been modified as a continuous improvement and is consistent with the enhanced guidance in OAG Audit 7050 published last June.
Note: Please refer to the specific framework Inventory of Procedures report mentioned below for a complete list of impacted procedures.
PSAS
Revision not a result of changes in standards:
-
The procedure “Examine the accounting for amendments, curtailments and settlements” has been modified with new elements to consider.
-
The procedure “Test cash flow statements” has been modified to include a new tab “Statement of Cash Flows Testing”.
For a complete list of impacted procedures and FSLIs, please refer to the PSAS Inventory of Procedures report.
IFRS
Revision of procedures affected by new and amended accounting standards effective for fiscal years beginning on or after 1 January 2021:
- New procedure “Test impact of interest rate benchmark reform—[FSLI or type of instrument etc.]” to document testing of application of requirements of Interest Rate Benchmark Reform—Phase 2—Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.
For a complete list of impacted procedures and FSLIs, please refer to the IFRS Inventory of Procedures report.
Annual Audit Procedures
| Program (PRG) | Procedure Step | Change |
|---|---|---|
| Revision of procedures affected by new and amended accounting standards effective for fiscal years beginning on or after 1 January 2021: | ||
|
C.2.PRG—Develop Audit Plan |
Determine audit strategy and plan (Oct-2021) |
The TeamMate audit step “Determine audit strategy and plan” has been updated to include a trigger to the new procedure “Assess impact of interest rate benchmark reform” that can be found in the Annual Audit Procedures—Supplement cabinet. |
Annual Audit Procedures—Supplement
| Program (PRG) | Procedure Step | Change |
|---|---|---|
| Revision of procedures affected by new and amended accounting standards effective for fiscal years beginning on or after 1 January 2021: | ||
|
F.1.PRG—General Execution Procedures |
Assess impact of interest rate benchmark reform (Oct‑2021) |
NEW Procedure. The procedure is to be used to document the understanding and evaluation of management’s assessment of the impact of interest rate benchmark reform on the entity and the impact on the risk assessment and audit plan. Procedure document |
| Revisions not a result of changes in standards | ||
|
D.2.PRG—Service Organization |
Plan use of service organization—[Insert name of service organization] (Oct-2021) |
Improvements made to Service Organization procedures. Procedure document has been replaced by |
|
D.2.PRG—Service Organization |
Obtain evidence regarding relevant controls operated at service organization(s) (Oct-2021) |
Improvements made to Service Organization procedures. Procedure document has been replaced by |
Updates to Templates and Checklists
The following “Templates and Checklists” have been updated. They can also be obtained on the Templates and Checklists page on the INTRAnet.
FSLI risk matrices
The PSAS and IFRS FSLI risk matrices have been updated to reflect the new and revised procedures in the PSAS and IFRS TeamMate cabinets and new and revised risks relative to each FSLI. The risk matrix is intended to be a quick reference tool which lists the procedures available in the TeamStore cabinet and aligns them to the typical risks for each FSLI by assertion.
- PSAS FSLI Risk Matrix—Oct-2021
- IFRS FSLI Risk Matrix—Oct-2021
Accounting Standards Compliance Checklists
The IFRS Presentation and Disclosure Checklists have been updated to provide links to the latest checklists published by the audit firms.
The PSAS and GNFPO Presentation and Disclosure and Recognition and Measurement Checklists have also been updated to reflect upcoming changes in standards.
The latest checklists can be found on the Templates and Checklists page.
Updates to the Manual
| Section | Section Title | Nature of Changes |
|---|---|---|
| SofQC Sections | ||
|
3011 |
Acceptance and Continuance |
Modified policies with regards to Initial engagement acceptance. |
| Annual Audit Sections | ||
|
6041 |
Use of service organizations |
Minor changes have been made to the Documentation Guidance section in line with the enhanced Service Organization procedures. |
Standards Interpretations
New guidance has been posted on the Accounting Guidance page for the following topics:
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Test Revenue Transactions (Steps 1 to 5) – Audit Procedures User Guide—The purpose of this document is to provide guidance in the design of appropriate, effective and efficient use of the procedures in the IFRS—Substantive Test cabinet when applying IFRS 15.
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Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform and Frequently asked questions relating to the Phase 2 amendments—The purpose is to provide guidance on how to apply the Phase 2 amendments to various contracts and hedge accounting relationships.
Updates to INTRAnet
The Financial Audit INTRAnet pages reflect the changes included in this Methodology Update.