Annual Audit Manual
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101 Annual Audit Manual—Preface
Dec-2022
In This Section
Overview
This topic explains:
- The intended use of the Annual Audit Manual
- Its applicability to audit engagements
- The audit manual structure and its layers of material
- The authority of the audit manual contents
- Language conventions used
OAG Guidance
The OAG audit methodology is called OAG annual audit methodology. This methodology is based on the Canadian Auditing Standards (CASs), with more specific OAG policy and guidance provided where appropriate. The Annual Audit Manual explains OAG’s audit methodology and provides a common audit approach for OAG engagement teams, so that each OAG engagement team understands the approach taken by other OAG engagement teams to an engagement. The audit manual along with OAG’s technology-based audit support tools, templates and content support engagement teams in conducting assurance and related services engagements.
The Annual Audit Manual is a comprehensive reference source on how to perform audits in accordance with CASs and with OAG policies and guidance.
This version of the Annual Audit Manual was updated in 2022.
OAG Guidance
CAS requirements and guidance, as well as OAG Audit policies and most aspects of OAG guidance, e.g., on how we test controls and perform substantive tests, are applicable to engagements documented in the audit working paper software. Accordingly, much of the guidance contained in the Annual Audit Manual is relevant to the planning and conduct of engagements documented in the audit working paper software.
OAG Guidance
The Annual Audit Manual clearly separates the following layers (or categories) of material to distinguish their authority and provide assistance in the effective and efficient application of CASs and OAG methodology:
|
Layer |
Authority |
Language used |
How presented in the Annual Audit Manual |
|---|---|---|---|
|
CAS Objective* A clear statement of the goal of the auditor in the audit area addressed by that CAS. The CAS objectives must be met (unless clearly not applicable) in order to assert a CAS-compliant audit. |
Required Superior to all other layers as it dictates what the auditor is required to achieve in order to perform a CAS-compliant audit. |
CAS wording |
Clearly distinguished by the section header CAS Objective |
|
CAS Requirement* An action required from the auditor in order to support the achievement of the CAS objective. Some of the requirements are conditional in nature (i.e., they are required in certain circumstances only). |
Required It details the actions that the auditor must undertake in order to perform a CAS compliant audit. Superior to all remaining layers. Most of the requirements refer to the “application and other explanatory material” for additional information and guidance. Once a conditional requirement is relevant, its authority is equivalent to other requirements. |
CAS wording |
Clearly distinguished by the section header CAS Requirements |
|
CAS Guidance* The CAS application and other explanatory material explaining more precisely what a requirement means or is intended to cover, or includes examples of procedures that may be appropriate under given circumstances. |
It provides guidance on what actions may need to be taken to meet the requirements of the CASs and provides examples. It is ordinarily expected that audit teams will follow CAS guidance. It supports the CAS requirement layer and may be additionally expanded by all the layers below. |
CAS wording |
Clearly distinguished by the section header CAS Guidance |
|
OAG Policy (see below for details) |
Required (see below for details) |
Similar to CAS requirements, the word “shall” is used to denote the authority. |
Clearly distinguished by the section header OAG Policy |
|
OAG Guidance (see below for details) |
Engagement teams generally follow OAG Guidance (see below for details) |
Language style broadly equivalent to what is used for CAS Guidance. Precise language will depend on the message intended to be conveyed. |
Clearly distinguished by the section header OAG Guidance |
* For further details on the CASs content and guidance on compliance with CASs, refer to OAG Audit 1020.
OAG Guidance
OAG Policy—Something that OAG requires their audit engagement teams to do when performing audits. Policies are internal OAG requirements designed to support compliance with external requirements or to achieve OAG’s quality and risk management objectives. Non-compliance may, but will not necessarily, indicate non-compliance with external requirements.
OAG Guidance—A distillation of the member office’s collective knowledge and experience designed to help engagement teams or individuals perform tasks and reach conclusions more effectively and efficiently, or considered appropriate to assist teams in complying with OAG policy. Guidance is generally more specific than the CAS requirements, and application or other explanatory material. For example, guidance might include testing sizes or rules of thumb, such as materiality rules of thumb, SUM posting level, sample size guidance, accept-reject testing guidance, controls testing guidance or any other specific testing guidance.
It is anticipated that engagement teams will generally follow the Guidance and engagement teams are encouraged to explain a departure from OAG Guidance in their working papers. If audit judgments are significant, CAS 230 requires they be recorded, together with the basis for those judgments. Even if not significant, however, putting the reasons for a departure from Guidance in writing generally helps teams assess whether they are comfortable with the alternative approach and enables them readily to explain their approach if subsequently challenged.
OAG Guidance
The Annual Audit Manual hierarchy, which is shown in the Annual Audit Manual table of contents in the left navigator pane, is as follows:
- Section (e.g., 7000)
- Subsection (e.g., 7070 within section 7000)
- Topic (e.g., 7076 in subsection 7070)
- Subsection (e.g., 7070 within section 7000)
Topics are then broken down into “blocks” that represent smaller subdivisions within a topic. Blocks provide the detailed guidance (e.g., “Disclosure in accordance with the applicable financial reporting framework” block in topic 7076). References within the Annual Audit Manual are mainly provided at the subsection or topic level, however, there may be more specific references to individual blocks within a topic.
Individual topics generally include CAS material presented alongside the related OAG policies and guidance, with all elements of the audit manual separated into different layers (see the table with layers description in the block above).
All CASs, as well as relevant assurance and other standards (e.g., CSQM 1, CSQM 2) are included in a separate section of the audit manual and references are provided to them where appropriate.
The audit manual also includes a glossary of terms, where the definitions of the terms used by the CASs or OAG annual audit methodology are provided.
OAG Guidance
As a convention, the OAG policies and guidance included in the Annual Audit Manual are drafted as being directed towards individual engagement teams or individuals in engagement teams.
When the Guide is reflecting policies and guidance applicable to an OAG engagement team or individual members of an engagement team, it often uses “we,” “us” and “our.”