Audit Methodology Update—Fall 2018
Nov-2018
Target Audience: All Direct Engagement Auditors.
Effective date: The revised methodology is effective upon release, moving forward.
Standards: This update reflects CPA Canada—Assurance—Update Number 18—March 2017.
Copyright: 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.
Prepared by: DEPT
Description of subject: The update includes changes to audit manual guidance, TeamMate procedures, templates and Intranet pages. Significant changes to the methodology are summarized below.
Impact on audit teams: For audits that are currently underway, auditors should apply the revised methodology and tools moving forward.
Questions: Contact DEPT
Key changes are:
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Changes resulting from the Methodology Efficiency Review
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Removed the Policy and steps to conduct an early planning phase advisory committee.
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Improvement of guidance for use of the templates for risk-based planning and scoping. In particular, two templates were combined to reduce work. Identified that some templates or sections of templates are optional. Coaching sessions are optional.
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Audit procedures can be integrated in the ALM or in separate audit programs.
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Removed the post-audit VALAD self-assessment
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T‑Minus—61 weeks rather than 66 weeks.
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Clarified that the exam work can start as soon as the Audit Plan Summary is sent. No need to wait for the response.
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For special exams: The orientation and coaching sessions with DEPT are now optional. No need to send the SE Plans and Reports to DEPT for review.
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Clarified that consultations are as needed.
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Briefing Notes not required anymore.
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New What to Expect Guide for the Territories.
Updates to the Manual
A number of revisions have been made to the System of Quality Control (SoQC) manual sections and the Direct Engagement Manual sections. Revisions to the System of Quality Control manual sections are included in the Annual Audit Manual and the Direct Engagement Manual. The following is a summary of revisions other than editorial revisions. Paragraph numbers have been updated in many manual sections to reflect new numbering in the standards.
SoQC Sections
| Section | Section Title | Nature of Changes |
|---|---|---|
| 3031 | Independence | Updated OAG Policy to remove the wording “before commencing work on the engagement” regarding the timing of independence confirmation completion and review. |
| 3081 | Consultations | For special examinations, clarification that the product leader can be consulted. |
Direct Engagement Sections
| Section | Section Title | Nature of Changes |
|---|---|---|
| 2010 | Project management | Added that T‑Minus is guidance. Streamlined budget guidance. Audit procedures can be integrated in ALM or in separate audit programs. |
| 2030 | Communication with the audit entity: initial and ongoing | Added the What to Expect—Territories. Clarified that we seek acknowledgments at APS stage. Added delegation of authority expectations if documents are not signed by appropriate party. |
| 2040 | Discussions with the Auditor General | Removed references to early planning phase advisory committee. |
| 2050 | Advisory committee meetings | Removed Policy and references requiring an early planning phase advisory committee. Clarified invitations. |
| 4010 | Understanding the subject matter in planning an audit | Added standards application material to further explain requirements. |
| 4020 | Risk assessment | Added standards application material to further explain requirements. Streamlined the text. Changes to reflect changes in templates and their optional nature. |
| 4025 | Internal controls | Streamlined the text. Changes to reflect changes in templates and their optional nature. |
| 4042 | Audit scope and approach | Added references to new Guidance to Integrate Results Measures into Performance Audits. Changes to reflect changes in templates and their optional nature. Removed requirement that Special Exams teams needed to consult DEPT. |
| 4044 | Developing the audit strategy: audit logic matrix | Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| 4045 | Evidence-gathering methods | Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. |
| 4070 | Audit programs | Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs but requirements in 4070 still apply. |
| 4080 | Examination approval | Clarified that we seek acknowledgments at APS stage. |
| 8019 | Submitting the principal’s (PX) draft and transmission draft | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added delegation of authority expectations if documents are not signed by appropriate party. |
| 8020 | Recommendations and entity responses | “Management letter” is now translated as “lettre à l’intention de la direction” (French only) |
| 8090 | Preparation for tabling of performance audit reports | Removed references to Briefing Notes. |
Updates to TeamMate Audit Procedures
A number of revisions have been made to the following TeamMate TeamStores: Performance Audit and Special Examinations. The audit procedures were updated to reflect the changes made to the Direct Engagement Methodology. There were no key structural changes made to either the performance audit or the special examination TeamMate procedures.
Audit teams with audit work currently under way, continue using your current TeamMate file. Update your file to incorporate changes that are effective immediately, using the tables of changes below.
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Import relevant audit procedures, as needed using “Get Programs,” and replace sub-folders and/or audit procedures where work has not yet started.
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Do not make changes to audit procedures that are completed.
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Save the Table of Changes in your TeamMate file under the “Documentation of Significant Judgments” subfolder and link to it as necessary.
Audit teams that have not yet created their TeamMate file, use the new TeamStore for Performance Audits or Special Exams that incorporates the changes.
The following is a summary of revisions other than editorial revisions. Ensure you have the updated procedure step for those steps not yet started.
Performance Audit TeamStore
| Program (PRG) | Procedure Step | Change |
|---|---|---|
| NEW—A.1.PRG—Project Management | CPA Canada Licence Agreement (Nov‑2018) | CPA Canada Handbook sections and excerpts may not be modified, copied or distributed. |
| A.1.PRG—Project Management | Audit Approval (Nov‑2018) | Just need to document approval of audit, removed reference to email from PAPOC’s secretary. |
| A.1.PRG—Project Management | Budget (Nov‑2018) | Clarified approval processes for changes in audits and budgets. Removed references to detailed built-up budget. Removed requirement to discuss 15% budget variances with PAPMC and PAPOC. |
| A.2.PRG—Team Members and Experts | Ethical and Independence Requirements (Nov‑2018) | Removed that independence confirmations and exception reports needed to be signed as soon as joining the team, before beginning work on the audit. |
| A.3.PRG—Entity Communication | Introductory Meeting with Entity (Nov‑2018) | Added the new Guide: What to Expect—Territories. Clarified the text about level expectations for sign offs. |
| A.5.PRG—Engagement Risk Assessment | Engagement Risk (and Team Competency) Assessment (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Removed references to early planning phase advisory committee. |
| A.6.PRG—Early Planning Phase Meetings | DELETED—Early planning phase advisory committee (Nov‑2017) | This requirement was removed from the methodology. Teams can create a step if they still want to proceed with this meeting. |
| A.6.PRG—Early Planning Phase Meetings | Early AG Engagement Meeting (Nov‑2018) | Removed references to early planning phase advisory committee. |
| C.1.PRG—Understanding the Subject Matter | NEW—INSTRUCTIONS—Integration of Results Measures into Performance Audits (Nov‑2018) | Added an instruction step to refer to the new Guidance to Integrate Results Measures into Performance Audits in planning and executing audits. |
| C.2.PRG—Audit Scope and Approach | Functional Risk Identification (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Changes to reflect changes in templates. |
| C.2.PRG—Audit Scope and Approach | Subject Matter Assessment of Risk and Scoping Decisions (Nov‑2018) | Added reference to the new Guidance to Integrate Results Measures into Performance Audits. Changes to reflect changes in templates and their optional nature. |
| C.2.PRG—Audit Scope and Approach | Understanding Controls and Updating Scoping Decisions (Nov‑2018) | Changes to reflect changes in templates and their optional nature. |
| C.2.PRG—Audit Scope and Approach | Audit Logic Matrix (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. |
| C.2.PRG—Audit Scope and Approach | IF APPLICABLE—Planning Phase Advisory Committee Meeting (Nov‑2018) | Moved steps to document choice of external advisors from deleted early planning advisory here. Removed timing of meeting. Teams can decide when is best. Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that minutes are to be prepared only if needed. Disposition of advice is still required. |
| C.4.PRG—Audit Programs | Audit Programs (Nov‑2018) | Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. |
| C.5.PRG—Examination Approval | Engagement Leader—Examination Approval (Nov‑2018) | Removed that entity’s acknowledgements should be received before starting the exam phase. Changed to say that we sought the acknowledgements to make consistent with standards and policy. Changes to reflect that audit procedures can be in the ALM or in separate audit programs. Changes to reflect optional nature of templates. Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| D.1.PRG—Examination Work and Preliminary Findings | INSTRUCTIONS—Work on Audit Programs (Nov‑2018) | Changes to reflect that audit procedures can be in the ALM or in separate audit programs. Removed reference to project reports. |
| D.2.PRG—Internal Draft and Consultation | Prepare Internal Draft and Consult Internally (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience and can be documented in the disposition template or elsewhere. |
| D.2.PRG—Internal Draft and Consultation | IF APPLICABLE—Examination Phase Advisory Committee Meeting (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that minutes are to be prepared only if needed. Disposition of advice is still required. |
| E.1.PRG—PX Draft | Revised PX Draft as Result of Comments Received (Nov‑2018) | Added that there is no requirement to provide a disposition table to the entity and that the updated PX draft is not sent to the entity for further review. Added clarifications on timing and documentation for consultations. Removed that the DX prepares the Checklist—Assurance on the application of reporting standards and policies. The Checklist must be signed off by the PX. |
| E.3.PRG—Report Content Approval | Internal Specialist—Report Content Approval (Nov‑2018) | Clarified that this relates to consultation for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| E.3.PRG—Report Content Approval |
Engagement Leader—Report Content Approval (Nov‑2018) |
Clarified that this relates to consultation for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| E.4.PRG—Transmission (DM) Draft | Revised Transmission (DM) Draft as a Result of Comments Received (Nov‑2018) | Moved the step about sending final version of report if requested from Transmission (DM) Draft to Entity here to match timing. |
| E.6.PRG—Preparation for Report Tabling | Preparation for Tabling (Nov‑2018) | Removed references to Briefing Notes. |
Special Exam TeamStore
| Program (PRG) | Procedure Step | Change |
|---|---|---|
| NEW—A.1.PRG—Project Management | CPA Canada Licence Agreement (Nov‑2018) | CPA Canada Handbook sections and excerpts may not be modified, copied or distributed. |
| A.1.PRG—Project Management | Budget (Nov‑2018) | Clarified approval processes. Removed references to detailed built-up budget. Removed requirement to discuss 15% budget variances with AAG. |
| A.2.PRG—Team Members and Experts | Ethical and Independence Requirements (Nov‑2018) | Removed that independence confirmations and exception reports needed to be signed as soon as joining the team, before beginning work on the audit. |
| A.2.PRG—Team Members and Experts | Team Meetings (Nov‑2018) | The orientation and coaching sessions with DEPT are now optional. |
| A.5.PRG—Engagement Risk Assessment | Engagement Risk (and Team Competency) Assessment (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| C.2.PRG—Audit Scope and Approach | Functional Risk Identification (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Changes to reflect changes in templates. |
| C.2.PRG—Audit Scope and Approach | Subject Matter Assessment of Risk and Scoping Decisions (Nov‑2018) | Changes to reflect changes in templates and their optional nature. |
| C.2.PRG—Audit Scope and Approach | Understanding Controls and Updating Scoping Decisions (Nov‑2018) | Changes to reflect changes in templates and their optional nature. |
| C.2.PRG—Audit Scope and Approach | Audit Logic Matrix (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. |
| C.2.PRG—Audit Scope and Approach | Draft the Special Examination Plan (Nov‑2018) | Removed the step to send the SE Plan to DEPT. |
| C.2.PRG—Audit Scope and Approach | IF APPLICABLE—Planning Phase Advisory Committee Meeting (Nov‑2018) | Removed timing of meeting. Teams can decide when is best. Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that minutes are to be prepared only if needed. Disposition of advice is still required. |
| C.4.PRG—Audit Programs | Audit Programs (Nov‑2018) | Added that it is possible to incorporate the audit procedures in the ALM instead of developing separate audit programs. |
| C.5.PRG—Examination Approval | Engagement Leader—Examination Approval (Nov‑2018) | Removed that entity’s acknowledgements should be received before starting the exam phase. Changed to say that we sought the acknowledgements to make consistent with standards and policy. Changes to reflect that audit procedures can be in the ALM or in separate audit programs. Changes to reflect optional nature of templates. Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| D.1.PRG—Examination Work and Preliminary Findings | INSTRUCTIONS—Work on Audit Programs (Nov‑2018) | Changes to reflect that audit procedures can be in the ALM or in separate audit programs. Removed reference to project reports. |
| D.2.PRG—Internal Draft and Consultation | Prepare Internal Draft and Consult Internally (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience and can be documented in the disposition template or elsewhere. |
| D.2.PRG—Internal Draft and Consultation | IF APPLICABLE—Examination Phase Advisory Committee Meeting (Nov‑2018) | Clarified that consultation is for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added that minutes are to be prepared only if needed. Disposition of advice is still required. |
| E.1.PRG—PX Draft | Revised PX Draft as Result of Comments Received (Nov‑2018) | Added that there is no requirement to provide a disposition table to the entity and that the updated PX draft is not sent to the entity for further review. Added clarifications on timing and documentation for consultations. Removed that the DX prepares the Checklist—Assurance on the application of reporting standards and policies. The Checklist must be signed off by the PX. |
| E.3.PRG—Report Content Approval | Internal Specialist—Report Content Approval (Nov‑2018) | Clarified that this relates to consultation for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| E.3.PRG—Report Content Approval | Engagement Leader—Report Content Approval (Nov‑2018) | Clarified that this relates to consultation for difficult or contentious matters or other matters requiring specialized knowledge or experience. |
| E.4.PRG—Audit Committee Transmission Draft | Audit Committee Transmission Draft to Entity (Nov‑2018) | Clarified communication to Record Operations about date of the assurance engagement report. |
| E.4.PRG—Audit Committee Transmission Draft | Revised Audit Committee Transmission Draft as a Result of Comments Received (Nov‑2018) | Removed that DEPT should be informed of changes. |
| E.6.PRG—Final Report to Board of Directors | Prepare Final SE Report to Board of Directors (Nov‑2018) | Clarifications added about the preparation of the post-audit survey. |
| E.8.PRG—Preparation for Report Tabling | Preparation for Tabling (Nov‑2018) | Removed references to Briefing Notes. |
Updates to Guidance and Templates
A number of revisions have been made to SoQC and Direct Engagement templates and guidance. With the exception of those documents identified as being specific to performance audits or special examinations, all templates and guidance documents listed below apply to both practices. The following is a summary of all revisions other than editorial revisions.
SoQC Guidance and Templates
| Phase | Template or Guidance Name | Change |
|---|---|---|
| General | Independence Confirmation | Updated to reflect changes in the independence confirmation process. |
| General | Independence—Frequently Asked Questions (FAQ) | Updated to reflect changes in the independence confirmation process. |
Direct Engagement Guidance and Templates
| Phase | Template or Guidance Name | Change |
|---|---|---|
| General | Kick‑Off Meeting Checklist | Removed that an independence confirmation form needs to be signed before beginning work on the audit. The forms are still required. |
| General | Letter of Notification and Solicitor Client Privilege (for performance audits) | Revised for clarity and to be inclusive of different entities. |
| General | NEW—What to Expect—An Auditee’s Guide to the Performance Audit Process in the Territories | New Guide created to better reflect the reality of conducting audits in the territories. Done in collaboration with territorial teams. |
| General | What to Expect—An Auditee’s Guide to the Performance Audit Process | Added delegation of authority expectations if documents are not signed by appropriate party. Some editorial changes. |
| General | Auditor General’s Involvement and Advisory Committee Meetings—for Performance Audits | Removed references to early planning phase advisory committee and briefing notes. Updated T‑Minus Dates. Clarifications about invitations and organization of the meetings. |
| General | Auditor General’s Involvement and Advisory Committee Meetings—for Special Examinations | Removed references to early planning phase advisory committee and briefing notes. Clarifications about invitations and organization of the meetings. |
| General | Engagement Risk Assessment (ERAT) | Added a row for considering data mining and analytics questions earlier on for consultations to start sooner. This will help the Internal Specialist plan the required work across all audits. |
| General | Checklist for sign-offs in TeamMate (for performance audits) | Removed the error that Legal Services required to sign off the PX Draft. |
| General | Checklist for sign-offs in TeamMate (for special examinations) | Removed the error that Legal Services required to sign off the PX Draft. |
| General | Quality Reviewer Checklist—Direct Engagements | Revised to reflect changes in templates. |
| General | Special Examination Methodology Change Request—Process and Form | Performance Audit form to request methodology changes was adapted for the Special Exams processes. |
| Planning | Summary of Special Examination Planning Process | General orientation session with DEPT is now optional. Removed references to DEPT review of the SE Plan. This review is not required anymore. |
| Planning | CODI Guidance for OAG Employees | Clarifications added, added content in Q&A and document was edited. |
| Planning | CODI Instructions for Entities Officials | Clarifications added and document was edited. |
| Planning | NEW—Guidance to Integrate Results Measures into Performance Audits | New Guidance was provided in summer. Developed by Strategic Planning to help teams better integrate results measures into the planning, conduct, and reporting of performance audits. The attention that the Office is giving to results measures is taking place within the context of the Treasury Board’s Policy on Results. |
| Planning | Guidance to Integrate Value Added into the Performance Audit Process | Removed references to post-audit self-assessment. This self-assessment is not required anymore. |
| Planning | Functional Risk Identification (FRIT) | Sections other than the ESD are now optional as per the judgement of teams. Consultations are still required for difficult or contentious matters or other matters requiring specialized knowledge or experience. Added a section on data analytics and statistical analysis to encourage earlier consultation. |
| Planning | NEW—Risks And Controls Assessment Template (RCAT) | Replaces the SMART and CAT. Optional template. If not used, there is still a need to document risk and control assessment work. |
| Planning | REMOVED—Subject Matter Assessment of Risk (SMART) | Replaced by RCAT which combines SMART with CAT. See below. |
| Planning | REMOVED—Controls Assessment (CAT) | Replaced by RCAT which combines SMART with CAT. See below. |
| Planning | Special Examinations—Recent Examples of Criteria for Core Systems and Practices: Operations Management | One example was removed. |
| Planning | Audit Plan Summary Letter to the Deputy Head | Revised for clarity and to be inclusive of different entities. |
| Exam | Summary of Special Examination Report Writing Process | Removed the required DEPT consultation on the Audit Committee (Transmission) Report. Added that teams should inform the Records Office of the date of the report. |
| Exam | Finding Blocks Template for Performance Audit Reports | Changed in August to reflect that there is only one overall message. Recommendations not included in “At a Glance”. |
| Exam | Finding Blocks Template for Special Exams | Changed to reflect that there is only one overall message. Recommendations not included in “At a Glance”. |
| Exam | Instructions for Completing the Report Template for Performance Audits | Changed to reflect that there is only one overall message. |
| Exam | Instructions for Completing the Report Template for Special Examinations | Changed to reflect that there is only one overall message. |
| Exam | Independent Auditor’s Report Template | Changed in August to reflect that there is only one overall message. Recommendations not included in “At a Glance”. |
| Exam | Independent Auditor’s Report—Special Examination | Changed in August to reflect that there is only one overall message. Recommendations not included in “At a Glance”. |
| Exam | Independent Reviewer’s Report Template | Changed to reflect that there is only one overall message. Recommendations not included in “At a Glance”. |
| Reporting | Entity PX Draft Audit Report Letter (for performance audits) | Revised for clarity and to be inclusive of different entities. |
| Reporting | Third Party Letter | Revised for clarity and to be inclusive of different entities. |
| Reporting | Checklist for Preparing the Transmission Draft and Final Report | Updated to reflect new T‑Minus dates. Added option to provide changes in tracked changes according to what happens in practice. |
| Reporting | Entity Transmission Draft Audit Report Letter (for performance audits) | Revised for clarity and to be inclusive of different entities. |
| Reporting | Entity Hard Copy Transmission Draft Report Letter (for performance audits | Revised for clarity and to be inclusive of different entities. |
| Reporting | Management Letter | Revised for clarity and to be inclusive of different entities. In French called “lettre à l’intention de la direction” (in French only). |
| Reporting | Checklist—Assurance on the Application of Reporting Standards and Policies | Removed 2 columns of checkboxes. The Checklist must be signed off by the PX to show compliance with reporting standards. |
| Reporting | Entity Translation of Final Audit Report Letter (for performance audits) | Revised for clarity and to be inclusive of different entities. |
Updates to INTRAnet
Direct Engagement INTRAnet pages reflect the changes included in this Methodology Update.
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T‑Minus—will now be on a 61 week schedule.
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Performance Audit Practice Oversight Committee (PAPOC) Terms of Reference—Membership changed and decisions to be documented in the Performance Audit Practice Management Committee (PAPMC) Record of Decisions.