Audit Methodology Update—Summer 2020

Jul-2020

Target audience: All Direct Engagement Auditors.

Effective date: The revised methodology is effective upon release. For audits that are currently underway, auditors should apply the revised methodology and tools moving forward.

Please note that this update does not include the results of the methodology simplification project.

Standards: This update reflects up to CPA Canada—Assurance—Update Number 30—June 2020.

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.

Description of subject: The update includes changes to Audit Manual policies and guidance, TeamMate procedures, templates and Intranet pages. Significant changes to the methodology are summarized below.

Questions: Contact the Audit Methodology Team–Direct Engagements

Key changes are:

• Updated Manual sections to reflect new guidance in the upcoming guideline AUG-50—Conducting a performance audit in the public sector in accordance with CSAE 3001.

• Streamlined guidance in Manual section 4025 Internal Controls.

• New Manual sections on documentation, supervision and review when using technology solutions as part of an audit.

• Consistent with performance and financial audits, removed references to the product leader for special examination in the methodology.

• Special Examinations Toolkit—removed the documents part of the toolkit, with the exception of the Special Examination Audit Approach, to include their content in the Direct Engagement Manual, guidance and templates. An updated Special Examination Audit Approach will be made available soon.

• Removed references to TeamMate and the Direct Engagement Practice Team (DEPT).

Updates to the Manual

A number of revisions have been made to the System of Quality Control Manual sections, the Office-wide 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 or minor revisions.

Section	Section Title	Nature of Changes
System of Quality Control and Office-wide Sections
1081	Selection of engagements quality control reviews and appointment of quality reviewers	Removed reference to the product leader for special examination.
1191	Retention policies and procedures	Updated to reflect current information management process related to audit records.
1192	Confidentiality, safe custody, integrity, accessibility, and retrievability of engagements documentation	Updated OAG Policy to remove reference to TeamMate.
3062	Engagement leader responsibilities for audit quality	Updated OAG Policy to remove reference to TeamMate.
3072	Documentation of work performed using technology solutions as part of an audit	New manual section on documentation of work performed using technology solutions as part of an audit.
3073	Supervision and review considerations when using technology solutions	New manual section on supervision and review considerations when using technology solutions.
3081	Consultations	Removed reference to the product leader for special examination. Updated reference to Internal Specialist for Fraud in the OAG Policy.
Glossary	Glossary	Updated and added several definitions, including statistics related terms.
Direct Engagement Sections
1501	Causing/Carrying Out a Special Examination	Removed reference to the product leader for special examination.
2010	Project Management	Removed reference to the product leader for special examination.
2030	Communication with the Audit Entity: Initial and Ongoing	Incorporated guidance on language requirements for the transmission of specific audit documents. Added clarifications from upcoming guideline AUG-50.
2040	Discussions with the Auditor General	Updated OAG Policy and guidance to remove reference to the product leader for special examinations.
2050	Advisory Committee Meetings	Removed reference to the product leader for special examination.
2070	Use of Experts	Added clarifications from upcoming guideline AUG-50.
3012	Preconditions for a Direct Engagement	Added clarifications from upcoming guideline AUG-50.
4010	Understanding the Subject Matter in Planning an Audit	Added clarifications from upcoming guideline AUG-50. Added a diagram that illustrates a possible sequence of steps that may occur in the planning process.
4020	Risk Assessment	Added clarifications from upcoming guideline AUG-50. Incorporated guidance for special examinations regarding the portfolio-wide risks and subject matter risks to be added to the scope.
4025	Internal Controls	Added clarifications from upcoming guideline AUG-50.
4030	Reliance on Internal Audit	Added clarifications from upcoming guideline AUG-50 regarding the evaluation of the internal audit function.
4041	Audit Objective	Added clarifications from upcoming guideline AUG-50. Added Financial Administration Act requirements for special examination.
4042	Audit Scope and Approach	Added clarification about the period covered by the audit. Added guidance regarding the “core” systems and practices and related standard criteria that should be examined in every special examination.
4043	Audit Criteria	Added examples of suitable criteria provided in the upcoming guideline AUG-50.
4044	Developing the Audit Strategy: Audit Logic Matrix	Added examples from the upcoming guideline AUG-50 to demonstrate the alignment between the audit topic, underlying subject matter, objective, criteria, findings and conclusion(s) in a performance audit. Added diagram of the Special Examinations Scope Model.
4045	Evidence-Gathering Methods	Added procedures from the upcoming guideline AUG-50 to consider before using information provided by entity officials as part of the evidence, and factors to consider in assessing the credibility of information from an external source.
4090	Audit Plan Summary for Performance Audits	Added clarifications from upcoming guideline AUG-50 regarding changes made to the terms of the engagement after the plan was sent to the entity.
4100	Special Examination Plan	Added clarifications from upcoming guideline AUG-50 regarding changes made to the terms of the engagement after the plan was sent to the entity. Removed reference to the product leader for special examination.
7030	Drafting the Audit Report	Updated OAG Policy to refer to Audit Services.
7040	Audit Conclusion	Added diagram from upcoming guideline AUG-50 to illustrate the steps in forming the conclusion, with relevant paragraph numbers referenced.
8017	Report Content Approval and Date of the Report	Added clarifications from upcoming guideline AUG-50 regarding the distinction between the period covered by the audit and the tabling date. Removed the requirement for the audit team to finish the substantiation in order to date the report.
8020	Recommendations and Entity Responses	Removed reference to the product leader for special examination.
8030	Subsequent Events	Added clarifications and examples from upcoming guideline AUG-50 regarding procedures to use to identify subsequent events and actions to take if events occur after the date of the report. Removed reference to the product leader for special examination.
8095	Submitting the Special Examination Report to the Board of Directors and Making it Public	Updated guidance on the electronic reproduction of the final special examination report to reflect current practices. Removed reference to the product leader for special examination.
9070	Parliamentary Committee Hearings for Performance Audits	Updated OAG Policy to include special examination teams and remove the requirement for audit teams to prepare objectives for parliamentary committee hearings. Updated guidance to reflect the current responsibilities of audit teams and Parliamentary Liaison Group in the coordination of OAG participation at committee hearings.

Updates to TeamMate Audit Procedures

Revisions have been made to the TeamMate TeamStores for 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 should continue using their current TeamMate file. Update the file to incorporate changes that are effective immediately, for the procedures not yet started, using the tables of changes below.

• Import relevant audit procedures, as needed using “Get Programs,” and replace sub-folders and/or audit procedures where work has not yet started.

• Do not make changes to audit procedures that are completed.

• If needed, include the changes to TeamMate from this update under the “Documentation of Significant Judgments” subfolder and link to it as necessary.

Audit teams that have not yet created their TeamMate file should use the new TeamStore for performance audits or special examinations that incorporates the changes.

The following is a summary of the revisions to the TeamMate procedures, other than editorial or minor revisions. Ensure you have the updated procedure step for those steps not yet started.

Performance Audit TeamStore

Program (PRG)	Procedure Step	Change
A.1.PRG—Project Management	CPA Canada Licence Agreement (Jul-2020)	Copyright date changed from 2019 to 2020.
A.4.PRG—Information Management	Referencing Hard Copies (Jul-2020)	Removed the Table of Contents for Hard Copies template.
C.2.PRG—Audit Scope and Approach	Understanding Controls and Scoping Decisions (Jul-2020)	Clarified that the evaluation of the design and implementation can sometimes be done and documented outside of the planning phase.
C.3.PRG—Audit Plan Summary	Response to APS from Entity (Jul-2020)	At the request of the Performance Audit Practice, added a step to send the final version of the APS to Report Communications for the preparation of the text to publish on the OAG website.

Special Examination TeamStore

Although instances have not been identified below, the product leader’s references were deleted from TeamMate.

Program (PRG)	Procedure Step	Change
A.1.PRG—Project  Management	CPA Canada Licence Agreement (Jul-2020)	Copyright date changed from 2019 to 2020.
A.4.PRG—Information Management	Referencing Hard Copies (Jul-2020)	Removed the Table of Contents for Hard Copies template.
D.2.PRG—Internal Draft and Consultation	Prepare Internal Draft and Consult Internally (Jul-2020)	Removed link to outdated Instruction for completing the report template for the special examinations.

Updates to Guidance and Templates

Revisions have been made to some 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 or minor revisions.

System of Quality Control Templates

No changes made to SoQC templates

Direct Engagement Guidance

Phase	Guidance Name	Change
Engagement Management	Auditor General’s Involvement and Advisory Committee Meetings (Special Examinations)	Removed reference to the product leader for special examination.
Engagement Management	DELETED—Language Requirements for the Transmission of Specific Federal Performance Audit Documents	The content is included in the Manual section 2030 Communication with the Audit Entity: Initial and Ongoing.
Engagement Management	DELETED—Performance audit methodology—change request process and form	Form deleted to remove unnecessary processes.
Engagement Management	DELETED—Special Examination Methodology Change Request—Process and Form	Form deleted to remove unnecessary processes.
Engagement Management	What to Expect—A Crown Corporation’s Guide to a Special Examination	Changed the “Message from the Auditor General” in the French version to reflect the gender of the current Auditor General.
Engagement Management	What to Expect—An Auditee’s Guide to the Performance Audit Process	Changed the “Message from the Auditor General” in the French version to reflect the gender of the current Auditor General.
Engagement Management	What to Expect—An Auditee’s Guide to the Performance Audit Process in the Territories	Changed the “Message from the Auditor General” in the French version to reflect the gender of the current Auditor General.

Direct Engagement Templates

Phase	Template Name	Change
Engagement Management	Engagement and Solicitor-Client Privilege Letter	Modification to the title of the OAG General Counsel in the c.c. of the letter.
Engagement Management	Independence—Frequently Asked Questions (FAQ)	Removed reference to the product leader for special examination.
Engagement Management	Key dates for special examination reports	Incorporated content from documents of the special examination toolbox.
Engagement Management	Kick-Off Meeting Checklist	Updated to reflect current practices.
Engagement Management	Letter of Notification and Solicitor Client Privilege (for performance audits)	Modification to the title of the OAG General Counsel in the c.c. of the letter. Changed the French version to reflect the gender of the current Auditor General.
Engagement Management	DELETED—Table of Contents for Hard Copies	Removed from the template list.
Engagement Management	What to Expect—An Auditee’s Guide to the Performance Audit Process (Presentation) (Performance Audit)	Updated with the official OAG PowerPoint presentation template and updated to communicate consistent and coherent messages to the entity.
Engagement Management	What to Expect—A Crown Corporation’s Guide to a Special Examination (Presentation) (Special Examinations)	Updated with the official OAG PowerPoint presentation template and updated to communicate consistent and coherent messages to the entity.
Significant Judgments and Quality Review	Checklist for sign-offs in TeamMate (for special examinations)	Updated to reflect current processes.
Significant Judgments and Quality Review	Checklist for sign-offs in TeamMate (for performance audit)	Updated to reflect current processes.
Significant Judgments and Quality Review	Disposition of Advice Received Through Consultation	Removed reference to the product leader for special examination.
Significant Judgments and Quality Review	Significant Judgments	Updated to reflect current processes.
Planning	Audit Plan Summary	Changed the French version to reflect the gender of the current Auditor General.
Planning	Audit Plan Summary Letter to the Deputy Head	Changed the French version to reflect the gender of the current Auditor General.
Planning	Control worksheet	Updated to reflect current processes.
Planning	Memorandum for Advisory Committee Meeting during Planning Phase	Removed reference to the product leader for special examination.
Planning	Coming soon – Special Examination Audit Approach	Coming soon – Annual update of the document, ensuring the criteria and sources are suitable.
Examination	Independent Review Report	Changed the French version to reflect the gender of the current Auditor General.
Examination	Memorandum for Advisory Committee Meeting during Examination Phase	Removed reference to the product leader for special examination.
Examination	Performance Audit Report	Changed the French version to reflect the gender of the current Auditor General.
Examination	Special Examination Report	Updated to include the section Audit Summary and modified the wording in Focus of the Audit. Changed the French version to reflect the gender of the current Auditor General.
Reporting	Entity PX Draft Audit Report Letter (Performance Audit)	Changed the French version to reflect the gender of the current Auditor General.
Reporting	Entity Translation of Final Audit Report Letter (Performance Audit)	Changed the French version to reflect the gender of the current Auditor General.
Reporting	Entity Transmission Draft Audit Report Letter (Performance Audit)	Changed the French version to reflect the gender of the current Auditor General.
Reporting	Third Party Letter	Changed the French version to reflect the gender of the current Auditor General.
Reporting	Transmission of Final Special Examination Report to Board Members Letter (Special Examinations)	Changed the French version to reflect the gender of the current Auditor General.

Updates to INTRAnet

Direct Engagement INTRAnet pages reflect the changes included in this Methodology Update.

• Special Examination: incorporated content of documents part of the “toolkit” in the Direct Engagement Manual, templates and guidance in order to streamline and avoid duplication.
  • DELETED—Defining the Scope for Special Examination
  • DELETED—Special Examinations Scope Model: Core Systems and Practices
  • DELETED—Recent Examples of Criteria for Core Systems and Practices: Operations Management
  • DELETED—Summary of Special Examination Planning Process
  • DELETED—Summary of Special Examination Report Writing Process
• List of Internal Specialists—the list was updated to reflect the changes made through the annual process of Determining Internal Specialist Functions.
• Framework for Developing Internal Specialist Guides—updated to reflect the current process and removed reference to the product leader for special examination.