Annual Audit Manual

COPYRIGHT NOTICE — This document is intended for internal use. It cannot be distributed to or reproduced by third parties without prior written permission from the Copyright Coordinator for the Office of the Auditor General of Canada. This includes email, fax, mail and hand delivery, or use of any other method of distribution or reproduction. 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. Reproduced, with permission, from the CPA Canada Handbook, The Chartered Professional Accountants of Canada, Toronto, Canada.

11013 Testing authorities
Jun-2019

In This Section

General considerations

Potential non-compliance identified

Documentation Guidance

Overview

This topic explains:

  • General considerations when testing authorities.
  • The steps to be taken when a possible situation of non-compliance comes to the attention of the auditor.
  • Documentation Guidance.
General considerations

OAG Guidance

The nature, extent, and timing of testing depend on the authorities mandate of the audit and issues of significance and risk noted in planning. In carrying out testing to assess compliance with authorities, the audit team must follow the general directions set out in the Audit Planning template and complete the specific procedures developed for the detailed audit plans.

Many authorities are related to specific FSLI. Whenever possible, the audit of compliance with authorities is integrated with the other audit procedures relating to the FSLI. Authorities should not be considered a separate, stand-alone aspect of our audit work. The Annual Audit Cabinet contains procedures related to compliance with authorities. If needed, audit teams may add tailored procedures taking into account the specific circumstances of the entity.

Typically, substantive tests of details are often the most appropriate way to test compliance with authorities. However, where there is reliance on internal financial controls for purposes of the audit, components dealing with compliance with authorities should be included in the tests of key controls. OAG Audit 7041

All audit team members share the responsibility for understanding the intent of all authority instruments being tested, and how the planned audit procedures provide assurance in support of the conclusion on compliance.

In testing specific authorities, it is important for auditors to recognize that either the authority has been complied with or it has not. Unlike a detailed test of a transaction, where the valuation assertion may be understated or overstated by a wide range of values, a given authority normally has only two possibilities: compliance or non-compliance.

Potential non-compliance identified

OAG Guidance

Whenever a possible instance of non-compliance comes to the attention of the auditor, the following steps should be taken:

  • the auditor reconfirms his/her understanding of the authority requirement through discussion with the responsible audit manager and/or engagement leader;

  • the facts of the matter are verified with the appropriate entity official(s) and, where appropriate, with other involved parties;

  • the existence of any other evidence pertinent to the matter is confirmed;

  • consultations are carried out with the quality reviewer, if any.

Consultation with Office specialists may also be required. The particular specialist(s) that should be consulted will vary depending on the circumstances, but could include the Internal Specialist—Compliance with Authorities, Legal Services, Audit Services and the Internal Specialist for Fraud.

Documentation Guidance

OAG Guidance

In procedure “Compliance with authorities” from the program “General Execution Procedures” found in the Annual Audit Procedures cabinet, auditors may find the main provisions of Part X of the FAA, and other authorities references for Departments and/or other entities linked to relevant FSLI.

Related Guidance

Consultations—OAG Audit 3081

Using the Work of Internal Audit—OAG Audit 6030

Develop and Execute a Control Tests Plan—OAG Audit 6050

Develop and Execute Substantive Tests—OAG Audit 7000