Prior to 2005, the stated objective of the Canadian Auditing and Assurance Standards Board (AASB) was to harmonize Canadian Generally Accepted Auditing Standards (GAAS) with the International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board. At the same time, the AASB was working to reduce the differences between GAAS and the U.S. Public Company Accounting Oversight Board's standards. However, in November 2005, the AASB issued an "Invitation to Comment" seeking public input regarding a proposed convergence of the Canadian GAAS with ISAs. Following extensive public consultation, the AASB concluded that most of the stakeholders strongly favored the proposal. As a result, a new strategic standard-setting approach was approved during the AASB June 2006 meeting. According to the AASB's March 2008 report "Adopting International Standards on Auditing," once ISAs are adopted, the Handbook Sections covering the audit of financial statements will be called "Canadian Auditing Standards" (CASs) and will form the Canadian GAAS. In its March 2008 meeting, the AASB reiterated its objective to adopt ISAs as CASs effective December 15, 2009. The AASB announced that it intends to adopt ISAs in their entirety, although there may be instances where modifications will be required. The modifications, however, will be clearly identified in the text of the new standards.

General Overview

According to the self-assessment submitted to the International Federation of Accountants (IFAC) by the Canadian Institute of Chartered Accountants (CICA) in 2005, auditing standards in Canada are set by the Auditing and Assurance Standards Board (AASB). The AASB is an independent institution that was established by the CICA and is accountable to the Auditing and Assurance Standards Oversight Council (AASOC) of the CICA. The AASB's mission is to assist the auditing profession by continuously enhancing current guidance and generally accepted standards to reflect best practice and meet the needs of all market participants. According to the IFAC website, the CICA, Certified General Accountants Association of Canada, and Certified Management Accountants are all members of the IFAC.

Prior to 2005, the AASB's standard-setting objective was to base the Canadian Generally Accepted Auditing Standards (GAAS) on the International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board, at the same time eliminating differences with the U.S. Public Company Accounting Oversight Board's standards. However, in November 2005, the AASB issued an Invitation to Comment (ITC) on its proposal to converge Canadian GAAS with ISAs. Following broad public consultations, the AASB announced at its June 27-28, 2006 meeting that it approved its new strategic direction, which includes converging the Canadian auditing and assurance standards with international standards. According to the AASB's March 2008 report on adoption of international standards, the Board will adopt all of ISAs after they have been redrafted under the IAASB's Clarity Project. The effective dates of the Canadian standards will correspond to those of the revised and redrafted ISAs, which are expected to come into force on December 15, 2009. Upon the adoption of ISAs, the Handbook sections covering the audit of financial statements will be called "Canadian Auditing Standards" (CASs) and will form the Canadian GAAS. The 2008 ITC notes that, although the AASB plans to adopt all ISAs, special guidelines have been developed to identify circumstances when the modifications to ISAs are warranted. However, all modifications made to the text of ISAs will be highlighted in the text of CASs.

The CICA 2005 self-assessment indicates that the statutory auditors performing audits for listed companies are appointed for a one-year term. The same report notes that listed entities as well as private and other entities are governed by the 1985 Canada Business Corporations Act. The Bank Act requires auditors of a bank's financial statements to adhere to GAAS as specified in the CICA Handbook, except in cases where the Office of the Superintendent of Financial Institutions (OSFI) demands otherwise. The OSFI also oversees insurance companies and the reporting requirements for insurance companies are the same as those for the banks. The OSFI is a member of the AASOC and participates in the setting of GAAS. Certified General Accountants Association of Canada (CGA), according to its website, disseminates the auditing standards to all stakeholders and assists in developing proposed standards as law or regulation. Furthermore, CGA Canada is involved in conducting auditing research, and drafting exposure draft responses.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 200 and Sections 5090, 5095, and 5100 are "comparable," however, ISA 200 has additional requirements. Under ISA, the auditor is required to establish a financial reporting system that is adequate and will be adopted by management. Further differences include ISA's 200 requirements that the auditor comply with various ethical requirements, which often include parts A and B of the IFAC Code of Ethics for Professional Accountants. Per its 2008 Project Schedule, the AASB plans to adopt ISA 200 in September 2008.

ISA 210 Terms of Audit Engagements (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5110 and IAS 210 are "comparable," except that each standard has a set of additional requirements. As noted above, the AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5030, Quality Control Procedures for Assurance Engagements and IAS 220R are "comparable," except that Section 5030 has, among other things, more requirements related to the audit partner's responsibility for matters such as planning and review of the work; and requires that the audit report not be published until disagreements are resolved.. Per its 2008 Project Schedule, the AASB plans to adopt ISA 220 in October 2008.

ISA 230R Documentation (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5145 and ISA 230R are comparable; however, differences exist. Section 5145, for instance, requires that the audit documentation shows that all the underlying accounting records reconcile with the financial statements and include significant issues along with all major findings. ISA 230 requires the auditor to document any alternative audit procedures that were used to help achieve the objective of the audit. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5135 and ISA 240R are "comparable," although some differences exist. Section 5135, for instance, calls for an "on a timely basis," rather than "as soon as practicable" which is the language used in ISA 240. Further, ISA 240 has a requirement regarding issues evolving around fraud which in the Canadian standards is covered by Section 5751 and hence not repeated in 5135. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5136 and ISA 250 are "comparable," except that the Canadian standard's requirements have procedures that are less specific than those of ISA 250. Per its 2008 Project Schedule, the AASB plans to adopt ISA 250 in June 2008.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5751 and ISA 260 are "comparable," except that Section 5751 is more precise in demanding the auditor to communicate certain matters like the auditor's independence. Another difference is that Section 5751 distinguishes between communications required for audits of publicly accountable companies and audits of other entities. Also, ISA 260 has a requirement regarding the timeliness of communications whereas under Section 5751, timeliness is dealt with in supporting guidance. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5150 and ISA 300 are "comparable," and there are no additional requirements in both Section 5150 and ISA 300. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5141 and ISA 315 are "comparable," with some differences in the standards' requirements. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 320 Audit Materiality (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5142 and AuG-41 are "comparable" with ISA 320. Both Section 5142 and AuG-41 provide more specific requirements than ISA 320. However, the IAASB is currently in the process of updating ISA 320 and it is anticipated that the revised ISA 320 will be consistent with Section 5142. Per its 2008 Project Schedule, the AASB plans to adopt ISA 320 in September 2008.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5143 and ISA 330 are "comparable," but Section 5143 provides stronger and clearer guidance on how to apply this standard. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5310 and ISA 402 are "comparable." There are substantial differences between the two standards. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 500 Audit Evidence (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, Section 5300 and ISA 500 are "comparable," but there are some differences between the two standards. Per its 2008 Project Schedule, the AASB plans to adopt ISA 500 in September 2008.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 501 and Sections 6030, 6560, and AuG-26 are "comparable." However, there are various differences between the two standards. Per its 2008 Project Schedule, the AASB plans to adopt ISA 501 in October 2008.

ISA 505 External Confirmations (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 505 and Section 5303 are "comparable," however there are additional requirements and various other differences between the two standards. One difference stems from the way to obtain audit evidence regarding accounts receivable: Section 5303 requires "the use of confirmation" (p. 18) whereas ISA 505 does not impose such requirement. Per its 2008 Project Schedule, the AASB plans to adopt ISA 505 in October 2008.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, there is no comparable Canadian standard. Some of the ISA 510 requirements correspond to the requirements of Section 5510 and AuG-8. Per its 2008 Project Schedule, the AASB plans to adopt ISA 510 in June 2008.

ISA 520 Analytical Procedures (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 520 and Section 5301 are "comparable." However, there are differences between the standards. One difference is that the wording used for Section 5301 and ISA 520 is not the same, but the material covered remains basically identical. Among other differences, Section 5301 lists matters that the auditor should judge when using an analytical procedure as a requirement, whereas ISA 520 does not. Per its 2008 Project Schedule, the AASB plans to adopt ISA 520 in October 2008.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, there is no comparable standard in Canada. Per its 2008 Project Schedule, the AASB plans to adopt ISA 530 in September 2008.

ISA 540 Audit of Accounting Estimates (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 540 and Section 5305 are "comparable." However, there are additional requirements and various other differences between the two standards. ISA 540, for instance, has more detailed guidance than that found in Section 5305. Among other differences, both standards have guidance concerning approaches an auditor should use to audit accounting estimates, however only ISA 540 presents the information as requirements. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 545 and Section 5306 are "comparable," although differences exist. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 550 Related Parties (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 550 and Section 6010 are "comparable," although there are various differences between the standards. Per its 2008 Project Schedule, the AASB plans to adopt ISA 550 in June 2008.

ISA 560 Subsequent Events (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 560 and Sections 6550 and 5405 are "comparable." The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 570 Going Concern (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 570 does not have a Canadian equivalent. Per its 2008 Project Schedule, the AASB plans to adopt ISA 570 in June 2008.

ISA 580 Management Representations (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 580 and Section 5370 are "comparable." Section 5370 differs from ISA 580 in that the former has a lengthy list of issues that the auditor is required to incorporate in the letter of representation that management will submit. Another difference is that the wording in some of the standards' requirements is different in terms of precision and guidance. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 600 Using the Work of Another Auditor (effective)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 600 and Section 6930 are "comparable." The standards, however, have some differences in terms of requirements and language used. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 610 and Section 5050 are "comparable." Section 5050 has additional requirements that include "not referring in the auditor's report to the use of internal audit work; and actions the auditor must take if internal audit staff provide direct assistance to the auditor" (p. 29). ISA 610, on the other hand, has additional requirements that involve the auditor's need to adequately understand the activities of internal audit and their impact on external audit. Also, the layout and language used in Section 5050 and ISA 610 are different.. Per its 2008 Project Schedule, the AASB plans to adopt ISA 610 in September 2008.

ISA 620 Using the Work of an Expert (effective 2005)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 620 and Section 5049 are "comparable," although differences exist. Section 5049, for instance, requires that the auditor "obtain reasonable assurance regarding the expertise, integrity, and appropriate degree of independence of the specialist..." (p. 30). The same report indicates that Section 5049 is considerably more complete than ISA 620 with regard to the supporting guidance it offers. Per its 2008 Project Schedule, the AASB plans to adopt ISA 620 in October 2008.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 700 and Sections 5400 and 5405 are "comparable." The same report indicates that there are additional requirements under both standards; some of which are: the need for an auditor to take into account changes in accounting principles under Sections 5400 and 5405; and the requirement for an auditor to assess the conclusions reached from audit evidence in making a decision under ISA 700. Per its 2008 Project Schedule, the AASB plans to adopt ISA 700 in September 2008.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 701 and Sections 5400 and 5510 are "comparable," although there are additional requirements in each standard. The AASB plans to adopt all ISAs; however, the 2008 Project Schedule does not indicate the adoption date for this principle.

ISA 710 Comparatives (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 710 and Section 5701 are "comparable," however ISA 710 has further requirements in addition to those found in Section 5701. Additional requirements of ISA 710 include the need for adequate audit evidence regarding the compliance of comparative numbers with the accounting framework, and "the reporting on comparatives in two financial reporting frameworks: corresponding figures, and comparative financial statements" (p. 34). Per its 2008 Project Schedule, the AASB plans to adopt ISA 710 in October 2008.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 720 and Section 7500 are "comparable," however, both standards have further requirements. Per its 2008 Project Schedule, the AASB planned to adopt ISA 720 in April 2008.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

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According to a comparison of Canadian GAAS and ISAs published by the CICA in December 2006, ISA 800 and Sections 5800, 5805, 5815, and AuG-25 are "comparable." However, there are various additional requirements in the CICA Handbook. Per its 2008 Project Schedule, the AASB plans to adopt ISA 800 in September 2008.