Methodology Update—December 2022
Dec-2022

Target audience: All Attest Auditors

Effective date: The revised methodology is effective upon release with the below exceptions related to CSQM 2.

  • Updates related to CSQM 2 are effective for audits and reviews of financial statements for periods beginning on or after December 15, 2022 and for other assurance engagements beginning on or after December 15, 2022.

Standards: This update reflects up to CPA Canada—Assurance—Update Number 37—May 2022.

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:

  • New and enhanced Policies to comply with CSQM 1 and CSQM 2 requirements.

  • New and enhanced Guidance for Quality Management, with significant revisions relating to

    • Roles and responsibilities for audit quality, to align with CSQM 1

    • Engagement Leader Responsibilities for Audit Quality, to align with CSQM 1

    • Engagement Quality Reviewer Responsibilities to comply with CSQM 2

    • Engagement Quality Reviewer minimum documentation requirements to comply with CSQM 2

  • Updated Templates and Procedures to align with CSQM 1

  • Updated and enhanced the Engagement Quality Reviewer Checklist and Sign‑off to align with CSQM 2

  • Revised the Consultation Template to have one template for all type of engagements.

  • Enhanced the guidance for sub‑account scoping.

THE QUALITY MANAGEMENT STANDARDS

The new and revised quality management standards include the following:

  • Canadian Standard on Quality Management (CSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements

  • CSQM 2, Engagement Quality Reviews

  • Canadian Auditing Standard (CAS) 220, Quality Management for an Audit of Financial Statements

  • Conforming amendments to other CAS and Other Canadian Standards (including CSAE 3001)

When are the standards effective?

These standards do not have the same effective date. As a result, they will impact your audits at different moments in time.

  • CSQM 1 requires our office to design and implement a system of quality management by December 15, 2022. Given we already had a system of quality control in place, the updates related to CSQM 1 should not impact your audit work significantly. All required changes have been reflected in our methodology.

  • CSQM 2—Engagement Quality Reviews addresses the specific requirements for the appointment and eligibility of quality reviewers (EQR) and the performance and documentation of the review.

    • For financial audits, CSQM 2 is effective for periods beginning on or after December 15, 2022. Therefore, the impact of this new standard will be on our 2023-2024 financial audit cycle with the December 31, 2023 year‑end financial audits being the first ones applying CSQM 2.

    • For other assurance engagements such as special examinations or performance audits, CSQM 2 is effective for engagements beginning on or after December 15, 2022, which means

      • other assurance engagements that started before December 15, 2022 should use the quality review requirements pre‑CSQM 2, and

      • other assurance engagements that started on or after December 15, 2022 should use CSQM 2 requirements.

Over the transition period, Audit Services is monitoring the start date of the direct assurance engagements in order to communicate compliance requirements to engagement teams working on engagements that have been assigned an engagement quality reviewer.

As outlined above, there are 3 different scenarios for when CSQM 2 should be implemented depending on the type of engagements and timing. This situation is quite unique and challenging for updating our methodology.

Why? All sections related to our system of quality management in our audit manual are applicable to financial audits, special examinations and performance audits. So, there is one manual section for three different scenarios.

What? Since CSQM 2 is applicable starting December 15, 2022 for Direct Engagements (DE) with an engagement start date on or after December 15, 2022, the audit manual sections have been updated and dated December 2022 to reflect this new standard. As a result, auditors need to be careful when consulting the manual since some sections might not be applicable to them yet.

How: There are only 5 manual sections in the Annual Audit Manual affected by this situation which are provided in the table below. Please consult the table below to see which sections, policies or guidance related to CSQM 2 are not yet applicable to your engagement. If you need to refer to the extant manual sections related to engagement quality review, please consult the Audit Methodology Archives located under the Audit Resources menu on our Intranet.

Updated manual sections for CSQM 2

Matters within the manual section that may not be applicable yet depending on your scenario

Financial audits (period beginning before December 15, 2022) and DE engagements (engagement beginning before December 15, 2022)

1071—Job rotation

All changes to 1071 are applicable to all engagements effective Dec 15, 2022 except for engagement quality reviewer job rotation policies and guidance.

Please consult the archives if you need to consult the extant manual sections related to engagement quality review:

Audit Methodology Archives | OAG INTRAnet

1081—Selection of engagement quality reviews and appointment of engagement quality reviewers.

All changes to 1081 are applicable to all engagements effective Dec 15, 2022 except matters related to the Appointment and Eligibility of the Engagement Quality Reviewer.

1163—Engagement Quality Reviewer: Minimum documentation requirements

All matters covered by this manual section.

3063—Engagement Quality Reviewer Responsibilities

All matters covered by this manual section.

9061—Completion sign-offs

All changes to 9061 are applicable to financial audit engagements effective Dec 15, 2022 except for the guidance on engagement quality reviewer completion sign-off.

Canadian Auditing Standard (CAS) 220, Quality Management for an Audit of Financial Statements. CAS 220 (Revised) is effective for audits of financial statements for periods beginning on or after December 15, 2022. This means that CAS 220 is not effective until our 2023‑2024 financial audit cycle with the December 31, 2023 year‑end financial audits being the first ones applying CAS 220. While CAS 220 requirements extracts were updated throughout the manual, revisions to policies and guidance as a result of CAS 220 were limited to those that supports CSQM 1 requirements. The remaining revisions to policies and guidance to reflect the new CAS 220 requirements will be reflected in a future methodology update.

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
SOQM Sections

1012

Audit quality, including roles and responsibilities for audit quality

New and updated OAG policies and guidance to align with CSQM 1 and CSAE 3001.

1031

Ethical requirements relating to and assurance engagement

Updated OAG policies and guidance to align with CSQM 1, CAS 220 and CSAE 3001.

1041

Applying Professional Skepticism

Enhanced guidance on documenting professional skepticism.

1052

Audit procedures for obtaining audit evidence

Enhanced guidance.

1071

Job rotation

Updated OAG policies and guidance to align with CSQM 1 and CSQM 2.

1081

Selection of engagement quality reviews and appointment of engagement quality reviewers

Updated OAG policies and guidance to align with CSQM 1 and CSQM 2.

Replaced the AAG, Audit Services by the PX of methodology, Audit Services as the individual responsible for approving the selection and appointment of engagement quality reviewers.

1141

Identifying Significant Matters

Enhanced guidance on significant matters.

1162

Engagement leader review: minimum documentation requirements

New and updated OAG policies and guidance to align with CSQM 1 and CSAE 3001.

1163

Engagement quality reviewer: minimum documentation requirements

New and updated OAG policies and guidance to align with CSQM 2.

1171

Assembly of the Final Audit File

Updated guidance on final assembly period extensions.

1191

Retention policies and procedures

Minor enhancements to the guidance.
1192 Confidentiality, safe custody, integrity, accessibility, and retrievability of engagement documentation

2080

Contracted out audits
3011 Acceptance and continuance Updated one OAG policy to align with CSQM 1, enhancing the engagement leader’s responsibilities for the acceptance and continuance of performance audits, special exams and continuing financial audits.
3031 Independence Updated one OAG policy and guidance to align with CSQM 1, CAS 220 and CSAE 3001.
3061 Engagement team: assigning and managing tasks New and updated OAG policies and guidance to align with CSQM 1, CAS 220 and CSAE 3001.

3062

 Engagement Leader Responsibilities for Audit Quality

Updated OAG policies to align with CSQM 1, CAS 220 and CSAE 3001.

Enhanced guidance related to CAS 315 and CSQM 1.

3063

 Engagement Quality Reviewer Responsibilities New and updated OAG policies and guidance to align with CSQM 2.

3065

 Team members Added the concept of "having sufficient time" as required by CSQM 1, CAS 220 and CSAE 3001.

3071

 Review of audit work and documentation Moved 2 OAG policies from 1162 to 3071.

3081

Consultations

Updated one OAG policy to align with CSQM 1.

Enhancements to guidance.

3082

Resolution of differences of opinion

Enhanced the guidance for where differences of opinion may arise.

9081

Post-Audit Surveys

Changes made to delete the option of delivering Post-Audit Survey by Hand.

Glossary

Glossary

Replaced references of CSQC1 by CSQM 1.

Conforming amendments with CSAE 3001.

Changes made to align with engagement quality reviewer definition in CSQM 2.
Annual Audit Sections

4024

Developing the testing strategy

The section Sub-account scoping has been updated with an example following the release of the Sub-Account Scoping template.

9061

Completion sign-offs

Timing of completion sign-offs section clarified.

Updates to the Annual Audit Procedures

The updated procedures related to this methodology update can be found in PROXI document 2077926. There is a total of 2 updated procedures. It is important that teams make sure they have updated their file with procedures found in the PROXI document in order to be compliant with CSQM 1. The Teamstore library will be updated in the coming year,

The following is a summary of all revisions other than editorial revisions.

Action required: Ensure you have the most updated procedure steps and procedure documents moving forward.

Program (PRG) Procedure Step Change

A.1.PRG—Audit Mandate and Client Acceptance and Continuance

Acceptance and continuance and terms of engagement (Dec‑2022)

Added significant new considerations to think through for step 3 when completing the A&C assessment, to align with CSQM 1.

To be used moving forward.

C.4.PRG—Planning Sign‑Off

Engagement leader and team manager—Planning sign‑off (Dec‑2022)

Inclusion of the concept of having sufficient time as required by CSQM 1 under the section Assessment of risks and development of audit strategy and plan.

To be used moving forward.

Updates to templates

The following is a summary of all revisions other than editorial revisions and any actions that need to be taken:

Planning

Acceptance Template

Significant changes were made to align to CSQM 1.

The updated template needs to be used by all audit teams moving forward.

Planning

Engagement Team Competency, Capabilities and Resource Assessment

Revised to align to CSQM 1.

The updated template needs to be used by all audit teams moving forward.

Planning

OAG Risk Assessment Process IT Risks Quick Reference Guide

New template about IT risks to support with the CAS 315 revised implementation.

Optional template
Planning Practice aid—Identifying IT risks relevant to the audit New template about IT risks to support with the CAS 315 revised implementation. Optional template
Annual Audit Templates
Phase Template Name Change Action Required/Impact

General

Consultation Template

The updated Consultation template will now apply for all type of engagements.

The updated template needs to be used by all audit teams moving forward.

General

Engagement Quality Reviewer Checklist and Sign-off (for compliance with CSQM 2)

Changes made to combine the EQR checklist for AA and DE into one procedure using the Smart Lite format. Changes made to align to CSQM 2 requirements.

To be used when performing an engagement quality review under CSQM 2

Updates to INTRAnet

Replaced all of the 11 Intranet pages related to the System of Quality Control (SofQC) by one page that describes the new System of Quality Management (SOQM). In summary, the main Intranet page that described the previous SofQC, including the separate Intranet pages that described each of the elements within the SofQC where all replaced by one Intranet page that provides an overview of the SOQM. A document called Our System of Quality Management with a detailed description of the SOQM and its components will be added to this Intranet page at a later date. 

The Financial Audit INTRAnet pages reflect the changes included in this Methodology Update.