What are Canadian Auditing Standards (CAS)?
Canada is adopting the International Auditing Standards in the form of CAS for the audits of financial statements and other historical financial information.
When does CAS become effective?
CAS comes into effect for periods ending on or after December 14 2010.
As a result of CAS, what new standards will have the most impact on my company's audit?
The wording of the existing standard auditors report has been substantially changed. The new wording will clearly outline the auditor's responsibilities and those of company management as well as clearly outline the accounting framework used.
Also the dating of the Auditors report has substantially changed in order to adequately reflect potential subsequent events. This new requirement will substantially increase the required audit work in the subsequent period. As a result, the importance client co-operation subsequent to audit fieldwork is increased to allow for completion the audit as quickly as possible after fieldwork.
What is an audit?
Independent professional public accountants give an opinion that the financial statements of the client are fairly stated and are free of material misstatement. Audited financial statements are used by business to report to shareholders, bankers, creditors and the government.
What is the difference between an audit engagement and review engagement?
A review is not as extensive as an audit and therefore, provides less assurance and credibility to the financial statements. This type of report is useful when a company doesn't need audited financial statements but management or third parties want some assurance that the financial statements are plausible.
What is a Compilation (Notice to Reader) engagement?
A compilation engagement provides no assurance on the financial statements. The financial information provided by the client is compiled to draft the financial statements and required tax filings. A notice to reader report is attached to alert readers that no assurance is being provided on the financial statements. A compilation engagement is appropriate when owners, management, and any third party users agree there's no need for a review engagement to determine plausibility, or an audit examination to ensure fairness. Also, requires less time than a review or audit.
What makes a misstatement material?
A misstatement is material if it would affect the decision of a user of the financial statements.