Performance Audit Manual
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2020 Significance
Nov-2015
Overview
The concept of significance is a matter of professional judgment that is integrated into all aspects of an audit: when selecting performance audits and when performing an engagement (whether it is a performance audit or a special examination) from the planning phase to the reporting phase.
OAG Policy
The audit team shall select issues on the basis of their significance, their relevance to the OAG’s mandate, and shall ensure that significance is considered when evaluating whether the subject matter of the audit is free from significant deviation. [Nov-2015]
OAG Guidance
What CSAE 3001 means for significance
CSAE 3001 requires that the audit team considers the concept of significance when planning and performing the assurance engagement, and also to consider it when evaluating whether the underlying subject matter is free from significant deviation (i.e. when the underlying subject matter does not conform to the applicable criteria).
The audit team’s consideration of significance is a matter of professional judgment and is affected by the perception of the common information needs of intended users as a group. It requires a good knowledge of the audited entity and an understanding of risks.
The concept of significance is considered in the context of qualitative factors (for example, a particular aspect of a program or entity that is significant regarding the nature, visibility, and sensitivity of the program or entity) and, when applicable, quantitative factors (for example, the importance of the budget allocated to a program).
Significance in selecting performance audits
As stated in subsection 7(2) of the Auditor General Act, “the Auditor General shall call attention to anything that he considers to be of significance and of a nature that should be brought to the attention of the House of Commons . . .”
Successful performance audits have considerable impact. They provide information to Parliament that is useful for it to carry out its oversight responsibilities. The audit and their recommendations result in changes by government where improvements are needed (Exhibit 1—Mission for performance audits in OAG Audit 101 Overview of Performance Audits).
OAG Audit 1510 Selection of performance audit topics describes the OAG’s long-range planning process for its audit products and how the OAG selects topics for audit based on its mission to audit significant matters and report what it finds.
Significance in performing an engagement (whether it is a performance audit or a special examination)
The concept of significance must also be considered when performing an audit and should be considered throughout the audit process, from the planning phase to the reporting phase.
During the planning phase of an audit, when the team conducts research to gain an understanding of the entity and subject matter to inform their audit approach and scoping decisions, the team should assess whether the subject matter is free from significant deviation. This is done during the risk assessment. OAG Audit 4020 Risk assessment explains how to assess subject matter risks (to decide on the focus of the audit and approach to be taken) and how to assess and manage the engagement risk (to ensure that the audit team is able to form a reasonable assurance conclusion).
The OAG’s guidance set out in OAG Audit 4042 Audit scope and approach also describes the importance of selecting the significant matters at the early stage of an audit to ensure its efficiency and effectiveness. The guiding principle in scoping an audit is selecting matters of significance that should be brought to the attention of Parliament or to the Crown corporation.
During the examination phase of an audit, the team should always use its professional judgement and remain alert about possible deviation, including omissions while collecting findings. Omissions could be considered significant and could have an impact on the conclusion of the audit report, with the risk of not properly concluding against the objective of the audit. For further information on audit conclusions, see OAG Audit 7040 Audit conclusion.
During the reporting phase of an audit, the team must decide which audit findings are significant enough to report in the audit report. Decisions are guided by the audit objectives and based on the causes and consequences of the findings that are of interest to parliamentarians or to the board of directors of the Crown corporation (OAG Audit 7030 Drafting the audit report).