Did you really transition to Canadian Auditing Standards?
The first of a three-part series by Bridget Noonan on firms and Canadian Auditing Standards
THE fundamentals of risk-based auditing are sound — direct audit work into the appropriate high-risk areas based on users, and increased communications between the auditor and individuals responsible for governance.
However, much as the paperless file looks conspicuously similar to the paper file you scanned to PDF, the appearance is not the reality. Simply put, not all audit practices in Canada have undergone the substantive transition to Canadian Auditing Standards.
It’s no wonder clients find little value in the auditing process. We’re still auditing the way we did decades ago.
CAS shifted responsibility to the auditor. Without understand how or why, some of us take comfort in doing what we’ve always done. Old adages such as “coverage is everything” and “the auditor is not responsible for fraud” are not easily pried from a practitioner’s psyche.
These adages highlight two fundamental issues with CAS adoption: efficiency (recoverability of time) and effectiveness (compliance with the standards).
Efficiencies are hard to find when practitioners are complying with more than 600 CAS requirements and have not let go of a coverage mentality. As for effectiveness, compliance is an issue when practitioners have not bought into the expanded work effort around fraud.
Without that buy-in, the results will always be the same as last year (SALY), as we all revert to what feels comfortable.
For 20 years, we performed substantive audits with limited consideration of processes and related controls. Control risk was defaulted to maximum and the audit team set out to obtain the coveted coverage. Yet CAS-based training seemed to be centralized around reading the new standards and integrating new checklists.
When there are fundamental changes, there will be limited success in the short-term unless practitioners are provided with relevant information to identify practice management and risk mitigation issues.
Providing guidance is an area where the profession is notoriously poor. From the basis of conclusions documents to the profession’s professional development material, the only insight provided is to consult legal counsel.
So that’s the problem. Now it’s time for the solution.
In part two of my column on CAS, I will provide you with “5 ways firms can fully accept Canadian Auditing Standards.”
Bridget Noonan, CPA, CA, is a partner at Clearline Consulting, which provides practitioners and their staff with the tools, training and advice they need to succeed and build thriving accounting firms. To receive our public practice newsletter visit our website or provide your contact information here.