Methodology Update—Spring 2015
Apr-2015
Effective date: Immediately upon release.
This update highlights changes made to the performance audit and special examination methodology.
In 2014 the decision was taken to merge the performance audit and special examination methodologies. The process was started last year and continues this year. Consistent with this decision the Performance Audit Practice Team (PAPT) and the Special Examination Practice Team (SEPT) are merging into a unified Direct Engagement Practice Team (DEPT).
Due to the number of changes and their timing, the Audit Methodology Update in 2015 contains a smaller Spring 2015 update that will be followed by a complete update later in Fall 2015/early Winter 2016. This Spring 2015 update includes
- changes to the Audit Manual;
- changes to the Independence Confirmation Form and related FAQ; and
- a new audit guide on efficiency titled: “Including Elements of Efficiency Work in Broader Audits.”
1) Audit Manual Changes
The Performance Audit and Special Examination Manuals are now fully merged into one Manual that has been renamed “Direct Engagement Manual.” This revised version of the Manual, which applies to both performance audits and special examinations, reflects the new senior management roles and responsibilities and the fact that the responsibilities of the performance audit product leader are now shared between performance audits’ assistant auditors general (AAG) and the Commissioner of the Environment and Sustainable Development (CESD).
Changes made to reflect new senior audit operations management roles and responsibilities
A complete review of the manual was conducted to align it with the new audit operations senior management roles and responsibilities. In some instances, the assistant auditor general was replaced by the engagement leader (PX); and the engagement leader was replaced by the audit director (DX).
Changes were also made to reflect the fact that the responsibilities of the performance audit product leader are now shared between performance audits’ AAGs/CESD. The product leader specific responsibilities are now transferred to a “second assistant auditor general,” who needs to be consulted from time to time, during the audit process. At the beginning of an audit, AAGs are assigned to a specific audit to play the role of the “second assistant auditor general.” There is no change for the special examination product leader who is keeping his special examinations related responsibilities.
Changes made to sections related to System of Quality Control
All sections related to the System of Quality control have been updated to reflect changes made in roles and responsibilities but further revisions will be necessary this fall to complete this alignment.
Changes made to the title of some sections
The Manual now applies to both performance audits and special examinations unless otherwise specified in a practice-specific box or in the title of the section that clearly identifies which sections are only applicable to one product.
The following sections of the manual were changed to reflect the integration of the performance audit and the special examination methodologies.
|
Current title |
New title |
Applicable to |
|
How to use the Performance Audit Manual |
How to use the Direct Engagement Manual |
Performance audits and special examinations |
|
1011 CPA Canada standards in the context of a performance audit |
1011 CPA Canada standards in the context of a direct engagement |
Performance audits and special examinations |
|
1505 Acquiring and Maintaining Knowledge of Business |
1505 Acquiring and Maintaining Knowledge of Business for performance audits |
Performance audits only |
|
1510 Selection of audit topics |
1510 Selection of performance audit topics |
Performance audits only |
|
2020 Significance |
2020 Significance in performance audits |
Performance audits only |
|
3090 Use of specialists in performance audits |
3090 Use of specialists |
Performance audits and special examinations |
|
4010 Beginning the audit: understanding the entity and subject matter |
4010 Understanding the entity and subject matter in the context of a performance audit |
Performance audits only |
|
4044 Developing the audit strategy: audit logic matrix |
4044 Developing the performance audit strategy: audit logic matrix |
Performance audits only |
|
4090 Entity management’s acknowledgement of responsibility: audit plan summary |
4090 Audit plan summary for performance audits |
Performance audits only |
|
7030 Drafting the chapter |
7030 Drafting the performance audit chapter/special examination report |
Performance audits and special examinations |
|
7040 Advisory committee meeting to discuss the draft chapter |
7040 Advisory committee meeting to discuss the internal draft |
Performance audits and special examinations |
|
7060 Substantiating the chapter |
7060 Substantiation |
Performance audits and special examinations |
|
8017 Chapter content approval and date of the report |
8017 Chapter/Report content approval and date of the report |
Performance audits and special examinations |
|
8018 DM Draft Discussion with the Auditor General |
8018 Transmission Draft Discussion with the Auditor General |
Performance audits and special examinations |
|
8019 Submitting the chapter to the entity: PX draft and DM draft |
8019 Submitting the principal (PX) draft and transmission draft |
Performance audits and special examinations |
|
8090 Preparation for tabling |
8090 Preparation for tabling of performance audit reports |
Performance audits only |
|
9070 Parliamentary committee hearings |
9070 Parliamentary committee hearings for performance audits |
Performance audits only |
|
9090 Monitoring of entities’ progress in implementing audit recommendations |
9090 Monitoring of entities’ progress in implementing performance audit recommendations |
Performance audits only |
Integration of section 10000—Guidance specific to special examinations
Section 10000 that was created on a temporary basis is now integrated into various sections of the Direct Engagement Manual.
The following table illustrates the changes made to the sections previously referred under “Guidance specific to special examinations.”
|
Sections referred under 10000 |
Changes Made |
|
10101 Using the manual in the context of a special examination |
Deleted. Some elements were integrated into section “How to use the Direct Engagement Manual.” |
|
10102 Overview of Special Examinations |
Moved under new section 102 Overview of Special Examinations. |
|
10201 Causing/carrying out and establishing the production schedule |
Moved under new section 1501 Causing/carrying out a special examination, while the production aspect of it was moved under 2010 Project management. Applies to special examinations only. |
|
10202 Communicating with the Crown corporation |
Deleted. Integrated with 2030—Communication with the audit entity: initial and ongoing. |
|
10203 Understanding the entity |
Moved under new section 4011 Understanding the entity in the context of a special examination. Applies to special examinations only. |
|
10204 Selecting essential systems and practices |
Deleted. Integrated with section 4042 Audit scope. |
|
10205 Selecting suitable criteria |
Deleted. Integrated with section 4043 Audit criteria. |
|
10206 Extent of audit effort |
Deleted. Concept captured into 4045 Evidence-gathering methods. |
|
10207 Resources and budget |
Deleted. Integrated with section 2010 Project management. |
|
10208 Potential impact of affiliated entities on the scope of a special examination |
Deleted. Integrated with new section 4011 Understanding the entity in the context of a special examination. Applies to special examinations only. |
|
10209 Special examination plan |
Moved under new section 4100 Special examination plan. Applies to special examinations only. |
|
10210 Advisory committee meeting at planning |
Deleted. Integrated with section 4060 Advisory committee meeting during the planning phase. |
|
10211 Designing audit programs |
Deleted. Integrated with section 4070 Audit programs. |
|
10301 Drafting the special examination report |
Deleted. Integrated with renamed section 7030 Drafting the performance audit chapter/special examination report. |
|
10302 Forming a special examination opinion including the concept of a significant deficiency |
Moved under new section 7031 Forming a special examination opinion including the concept of a significant deficiency. Applies to special examinations only. |
|
10303 Communicating the special examination report to management and to the audit committee |
Deleted. Integrated with renamed section 8017 Chapter/Report content approval and date of the report; integrated with renamed section 8019 Submitting the principal (PX) draft and transmission draft; and also with section 8020 Recommendations and entity responses. |
|
10304 Subsequent events in special examination |
Deleted. Integrated with section 9040 Subsequent events. |
|
10305 Submitting the special examination report to the board of directors and/or to the responsible Minister/Parliament |
Moved under new section 8095 Submitting the special examination report to the board of directors and making it public. Applies to special examinations only. |
|
10306 Responsibilities regarding the requirements to make the special examination report public |
Deleted. Integrated with new section 8095 Submitting the special examination report to the board of directors and making it public. Applies to special examinations only. |
2) Changes to Independence Confirmation Form and Related FAQ
The Independence Confirmation form and related FAQ have been revised to reflect changes to the CPA Ontario and other jurisdictional rules of professional conduct. Most notably engagement team members should be aware of changes to the definition of “related entities” and “engagement team member” and the related impacts to the confirmation process and engagement team member considerations.
When confirming independence, engagement team members should be familiar with the revised definition and scope of the term “related entity.” Additionally, the definition of “engagement team member” has been revised to exclude external experts in a field other than accounting or auditing and to include other persons external to the office who can directly influence the outcome of the assurance engagement.
Note: Changes to the rules of professional conduct underlying our independence confirmation and FAQ are effective for performance audits and special examinations commencing after 15 December 2014.
3) New Audit Guide on Efficiency
A newly approved audit guide titled “Including Elements of Efficiency Work in Broader Audits” is now available that applies to both performance audits and special examinations.
This guide is a tool kit that offers direction on how to consider the Treasury Board of Canada Secretariat’s established expectations for how departments assess efficiency and includes elements of efficiency in broader performance audits or special examinations.
[LINK to Guide]
If you have any questions on methodology for performance audits or special examinations, please contact the new Direct Engagement Practice Team (DEPT) using the new DEPT mailbox.